Vehicle Registration Taxes - June 10, 2013 - Michigan House of ...
MEMORANDUM
DATE: TO: FROM: RE:
June 10, 2013 House Committee on Transportation and Infrastructure William E. Hamilton Vehicle Registration Taxes
Overview There are two primary sources of dedicated state transportation revenue: motor fuel taxes, and vehicle registration taxes. Discussions of transportation funding issues generally focus on motor fuel taxes, in particular the motor fuel tax on gasoline. However, since FY 2006-07, registration tax revenue has consistently outpaced revenue from the motor fuel tax on gasoline. See Figure 1 on page 3.
Registration taxes, established in the Michigan Vehicle Code (Public Act 300 of 1949), are assessed and collected when vehicle owners obtain new registration license plates, or renewal registration tabs, from the Michigan Secretary of State.
Chapter II of the Michigan Vehicle Code, MCL 257.201 et seq, provides for the registration of motor vehicles and gives authority for the vehicle registration program to the Michigan Secretary of State.
Vehicle registration taxes can be considered more of a "retail" tax as compared to the motor fuel taxes. Registration taxes are collected by the Secretary of State primarily at 131 "retail" branch offices, as well as through on-line and mail-in processing. Section 205 of the Michigan Vehicle Code requires the Secretary of State to maintain an office in the state capitol complex, at least one branch office in each county, and branch offices within certain cities.
Article IX, Section 9 of the 1963 State Constitution dedicates motor vehicle registration tax revenue for transportation purposes. These constitutional requirements are put into effect by statute, 1951 PA 51 (Act 51). Registration tax revenue is credited to the Michigan Transportation Fund (MTF), and distributed to other state transportation funds and programs, and to local road agencies, in accordance with the provisions of Act 51.
Registration Tax Revenue Table 1 shows a thirty-year history of registration transactions and registration tax revenue. As can be seen from the table, total transactions over the period have increased by approximately 1.0 million, a 14.5% increase, while registration tax revenue has increased by $600.5 million, a 252.6% increase. However, more recently, registration transactions have declined in seven of the last ten years, and registration tax revenue has declined in four of the last ten years.
Registration tax revenue peaked in FY 2003-04 at $978.5 million, although that year was atypical in that it included approximately $90.0 million in one-time revenue associated with the change from annual to permanent trailer registrations. Baseline registration revenue, excluding FY 2003-04, peaked in FY 2006-07 at $907.8 million. Average registration tax revenue for the last five fiscal years,
House Fiscal Agency ? Anderson House Office Building ? P.O. Box 30014 ? Lansing, MI 48909 Phone: (517) 373-8080 ? Fax: (517) 373-5874 ? Website: house.hfa
FY 2007-08 through FY 2011-12, was $886.2 million. Registration tax revenue in FY 2011-12 was $905.5 million.1 See Figure 2 on page 5
Registration Tax Rates and Tax Basis Vehicle registration taxes are established under Chapter VII of the Michigan Vehicle Code, and primarily within Section 801 of that Chapter. These taxes are collected by the Michigan Secretary of State when people obtain new registration plates or renew plate registrations.
There are in fact a number of registration taxes. Section 801 of the Michigan Vehicle Code, as well as certain other sections, establish a number of different registration tax categories, with different tax bases and different tax rates. The applicable tax for any vehicle is a function of a number of factors ? vehicle model year, the list price of the vehicle, the weight of the vehicle, the use of the vehicle, and, in some cases, some characteristic of the vehicle owner.
The complexity of the current registration tax system makes it hard to estimate the impact of any proposed changes to tax rates. The complexity also increases opportunities for tax-avoidance, increases administrative errors, and increases the administrative costs of collecting the tax.2
The largest registration tax category is the ad valorem tax on passenger cars, model year 1984 and newer, motor homes, pickup trucks, and vans. The tax rates for this category are based on manufacturer vehicle list price. While the tax rates for these vehicles have not changed since 1984, revenue from this ad valorem tax has tended to increase as vehicle list price (the tax base) has increased over time.
The registration tax for most large trucks ? trucks in excess of 8,000 lbs. Gross Vehicle Weight (GVW) ? is based on Elected GVW. For this tax category, both the tax rate and tax base are effectively fixed. The tax rates for the Elected GVW category have not changed since 1997. And truck GVW (the tax base) is effectively fixed by state truck weight limitations.
As described in Exhibit 1, on page 6, there have been three major registration-related amendments to the Michigan Vehicle Code since 1983.
1 Note that the amounts shown for vehicle registrations include revenue from title fees collected under the authority of Section 257.217 of the Michigan Vehicle Code. Although revenue from vehicle title fees does not appear to be constitutionally restricted, title fee revenue has historically been credited to the MTF. Title fees generate approximately $30.0 million per year. 2 See Office of Auditor General Audit 231-0200-08, May 2009, Performance Audit of the Michigan Secretary of State, Cash Receipts and Branch Office Customer Service.
House Fiscal Agency
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6/10/2013
Millions
Figure 1 MTF Revenue History Detail Motor Fuel and Vehicle Registration Taxes
$1,200
$1,000 $800 $600
$736 $647
$904 $714
$931 $759
$922 $803
$933 $825
$939 $877
$936 $893
$979 $932
$922 $896
$906 $899
$908 $884
$895 $849
$872 $846
$870 $842
$888 $832
$905 $819
$909 $826
$400
$200
$118
$135
$143
$133
$143
$157
$141
$146
$149
$144
$140
$118
$120
$126
$127
$129
$86
$0
State $.19/gal Gasoline Tax
Fiscal Year State Diesel Fuel Taxes
Vehicle Registration Taxes
House Fiscal Agency
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Table 1 Michigan Vehicle Registrations Thirty-Year Transaction and Revenue History
Year 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total Plate Transactions
7,170,009 7,239,982 7,613,439 7,731,703 7,899,197 8,016,022 8,034,293 8,113,037 8,158,657 8,237,762 8,338,188 8,557,796 8,683,193 9,072,739 9,128,800 9,275,870 9,506,006 9,703,991 9,757,968 9,886,498 9,925,534 9,691,986 8,695,195 8,506,283 8,545,661 8,287,413 8,230,616 8,194,367 8,222,654 8,208,000
Difference Prior Year #
(9,307) 69,973 373,457 118,264 167,494 116,825 18,271 78,744 45,620 79,105 100,426 219,608 125,397 389,546 56,061 147,070 230,136 197,985 53,977 128,530 39,036 (233,548) (996,791) (188,912) 39,378 (258,248) (56,797) (36,249) 28,287 (14,654)
Percent Change -0.13%
0.98% 5.16% 1.55% 2.17% 1.48% 0.23% 0.98% 0.56% 0.97% 1.22% 2.63% 1.47% 4.49% 0.62% 1.61% 2.48% 2.08% 0.56% 1.32% 0.39% -2.35% -10.28% -2.17% 0.46% -3.02% -0.69% -0.44% 0.35% -0.18%
Registration Tax Revenue $237,724,622 255,862,631 286,683,713 299,980,206 315,941,648 363,183,844 397,038,510 409,819,989 420,162,272 441,775,914 461,490,637 492,050,220 523,579,795 563,513,809 593,994,084 664,526,913 709,128,908 757,426,707 776,742,152 824,832,980 847,504,982 934,299,437 862,073,602 864,242,867 875,341,967 848,719,710 837,087,931 838,540,486 823,343,157 838,214,130
Change from 1983 to 2012 1,037,991
14.5%
Source: Michigan Secretary of State, "Summary of Fees Collected" Annual Report Note: Registrations include cars, trucks, trailers, and motorcycles.
Difference Prior Year $ $24,193,614
18,138,009 30,821,082 13,296,493 15,961,442 47,242,196 33,854,666 12,781,479 10,342,283 21,613,642 19,714,723 30,559,583 31,529,575 39,934,014 30,480,275 70,532,829 44,601,995 48,297,799 19,315,445 48,090,828 22,672,002 86,794,455 (72,225,835)
2,169,265 11,099,100 (26,622,257) (11,631,779)
1,452,555 (15,197,329)
14,870,973
$600,489,508
Percent Change 11.33%
7.63% 12.05%
4.64% 5.32% 14.95% 9.32% 3.22% 2.52% 5.14% 4.46% 6.62% 6.41% 7.63% 5.41% 11.87% 6.71% 6.81% 2.55% 6.19% 2.75% 10.24% -7.73% 0.25% 1.28% -3.04% -1.37% 0.17% -1.81% 1.81%
252.6%
House Fiscal Agency
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Revenue % Change Compared to
Transaction % Change 11.46% 6.65% 6.89% 3.08% 3.15% 13.47% 9.09% 2.24% 1.96% 4.17% 3.24% 3.99% 4.94% 3.14% 4.79% 10.26% 4.23% 4.73% 1.99% 4.87% 2.35% 12.59% 2.55% 2.42% 0.82% -0.02% -0.69% 0.61% -2.16% 1.98%
6/10/2013
Millions
Figure 2 MTF Revenue History Vehicle Registration Tax History
$1,200
$1,000
$800
$600
$647
$714
$759
$803
$825
$877
$893
$979
$896
$899
$908
$895
$872
$870
$888
$905
$909
$400
$200
$0
Fiscal Year Vehicle Registration Taxes
House Fiscal Agency
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6/10/2013
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