Jump in DMV fees adds to a regressive NC system for collecting revenue

The New Year brought another regressive state tax, this one disguised as DMV fees.

As of Jan. 1, fees for driver’s licenses, ID cards, car registrations and other documents went up about 30 percent. The new costs are not terribly high – an eight-year license renewal will jump from $32 to $40 – but the reason is high-handed. Fees should support the actual costs of providing services, but in this case they are simply a quiet way for the Republican-led legislature to collect more revenue while Republican leaders boast about cutting taxes.

Overall, the hike in DMV fees will cost motorists and vehicle owners an extra $150 million a year. The increase is needed to help offset income tax cuts that will cost the state at least $700 million when fully implemented in 2017. The bottom line is that middle- and low-income people lose on the shift. The pauper and the millionaire will both spend an extra 30 percent in DMV fees, but the millionaire will get a vastly larger savings than the pauper from the income-tax cuts.

This inequity will be piled upon another in March. That’s when the 6.75 percent sales tax in many counties is extended to cover car repairs and installation and maintenance services. With the new tax, a $750 repair will cost the customer $800.

It’s one thing to cut taxes in a way that genuinely gives the great majority of earners more money to take home. It’s another to give low- and middle-income earners a token tax savings that’s less than what they’ll pay in higher fees and expanded sales taxes.

This story was originally published January 3, 2016 at 4:12 PM with the headline "Jump in DMV fees adds to a regressive NC system for collecting revenue."