County tax collectors were told they would start seeing more money rolling in last year after the state Division of Motor Vehicles took on the chore of collecting local vehicle property taxes.
It hasn’t worked out that way so far, Wake County’s tax collector says.
Where car owners once paid DMV fees of $28 to $33 each year, now they must add $100 to $200 to cover the local property tax bill. The idea was that drivers really want those new tags and registration stickers, so they’ll be more diligent about paying those taxes.
Statewide and local numbers suggest instead that drivers may be less willing to write those big checks – and more willing to let their car registrations lapse.
“The new system seems to have perhaps created a little bit of sticker shock,” said Marcus Kinrade, Wake County revenue director.
Wake commissioners were surprised to hear that under DMV’s Tag & Tax Program the county expects to see car tax receipts fall by $1.9 million to a projected $33 million this year.
“This change in the law was supposed to be helpful?” commissioner Caroline Sullivan asked at a February meeting.
DMV and state and local revenue officials say it’s too early to tell whether other counties will see a similar downturn. But DMV numbers suggest that car registration renewals have fallen about 10 percent statewide.
Since September, Kinrade and his counterparts in 99 other counties have received vehicle tax payments through DMV rather than directly from car owners.
Under the old system, car owners paid the county tax about five months after they paid their DMV fee each year. The new system realigns tax payments with the car registration anniversaries.
Double payment for some
In this first year, car owners are making the combined payment to DMV just seven months after having made their previous tax payment to the county.
For some, that also means making two tax payments in a single calendar year, providing a potential bonus for taxpayers who itemize their deductions.
In subsequent years, these combined payments will be a steady 12 months apart.
Wake is one of the fastest-growing counties in the nation. Car registrations here dipped for two years during the recent recession and then grew to nearly 784,000 in 2013, a 31 percent increase over the past decade.
But in the first six months of DMV’s Tag & Tax Program, Wake received tax payments from DMV for only 308,700 cars – a 10 percent drop from the same period a year earlier.
More in default seen
“I don’t think there are fewer vehicles in Wake County this year compared to last year,” Kinrade said. “I think the cut-over to this new system has more people choosing not to renew” their car registrations.
When he drives around Wake County, he notices plenty of expired stickers on cars whose registrations should have been renewed in 2012 or 2013.
“I’m pretty sensitive to it now, and I see them everywhere I go,” Kinrade said. “When I’m in traffic, I’ll look at the license plate in front of me and on either side, and quite often they’re expired.”
DMV registration figures appear to echo the trends in Wake County tax collections. Across the state, drivers renewed their registrations on 3.4 million vehicles from September through February, about 10 percent fewer than during the same six months a year earlier.
Too soon to say?
But Kelly Thomas, the DMV commissioner, said it’s too early to draw conclusions in a state where 2 million drivers are late renewing their registrations each year.
“I can’t draw a conclusion from my data,” Thomas said. “I’m having a hard time, just seven months into this, looking at the numbers. In order to (compare) apples to apples, it’ll have to be somewhere about mid-July.”
The DMV Tag & Tax program was welcomed in many counties, where property tax payment rates often are much lower for cars than for real estate. Counties pay DMV a collection fee but are expected to save more money by cutting their own collection expenses.
Kimberly Simpson, Durham County’s tax administrator, eliminated five staff positions that were dedicated to car tax collections. She likes the new program and says many car owners do, too.
“Half the time they would say they didn’t get their bill, and we were having to freeze their bank accounts and adding $60 on top of the tax bill,” Simpson said.
Kinrade thinks Wake’s car tax collections will return to their 2013 levels in 2015. Drivers will eventually adjust to the new Tag & Tax routine, he said.
“It’s going to take us a good two years before everybody knows what needs to happen and they get caught up with their taxes,” Simpson said.