
DATE: Saturday, November 29, 1997           TAG: 9711290242

SECTION: FRONT                   PAGE: A1   EDITION: FINAL 

SOURCE: BY LEDYARD KING, STAFF WRITER 

DATELINE: RICHMOND                          LENGTH:  138 lines

CAR TAX IS A TOUGH KNOT TO UNTIE

The virtual repeal of Virginia's unpopular car tax is looking more and more like a wallpaper job: relatively simple from the outside but devilishly complicated once you start.

Legislative analysts have discovered that scraping away one of the state's oldest and most intricate taxes is more a matter of careful tearing than wholesale gutting.

Some 260 counties, cities and towns apply different tax rates based on different values and on different schedules. Norfolk's rate is $4 for every $100 of value on the car and is assessed once a year, while Roanoke city car owners must pay the tax based on a $3.45 rate.

It's not that the analysts don't think the car tax can be taken apart. The issue is how to do it and how much it's going to cost.

As the General Assembly session approaches, legislators say they have not received vital details from Gov.-elect James S. Gilmore III, who swept into office on a pledge to strip the tax.

Senate Finance Committee staffers say the price of phasing out the unpopular tax over five years could run anywhere from $2.1 billion to $2.8 billion, depending on which options Gilmore and the legislature choose.

Those options could make winners of some communities and losers of others.

Gilmore campaigned on a promise to do away with the tax on personal cars, trucks and motorcycles valued at $20,000 or less. Owners of vehicles whose value is greater would have to pay taxes only on the portion above $20,000.

As part of Gilmore's proposal, the state would reimburse localities ``dollar for dollar'' for the revenue they'd lose.

But local governments worry it's not that simple - and that distilling their individually crafted tax structures into a one-size-fits-all configuration will cost them flexibility and money.

``There's a tendency to think uniformity is better,'' said Betty Long, director of fiscal policy for the Virginia Municipal League. ``But if you do, it raises questions about all sorts of things.''

One overriding question: Will the legislature go along with Gilmore and guarantee full reimbursement to localities or will it try to redistribute proceeds based on need?

And there are other more technical but equally crucial issues to address:

TAX RATES

In deciding how local governments should be reimbursed, the state has to consider the spectrum of tax rates assessed by counties, cities and towns.

From the 20-cent rate per $100 of value that Bath County charges to the $7.07 rate levied by Galax, the personal property levies vary widely.

To complicate matters, 23 counties and cities reduce the rate by assessing vehicles based on a fraction of their value.

Bedford County, for example, lists a personal property tax rate of $6.50. But car owners effectively pay a $1.30 rate because the county assesses the car well below their full value.

And that kind of manipulation can be found from Bristol to Virginia Beach.

Owners of a 1994 Ford Taurus would pay substantially different taxes depending on where they live.

In Arlington County, they pay $406. In Harrisonburg, the bill is $205. And in Culpeper County, the taxes come to $308.

For Long, the concern again is whether the state will recognize such individual manipulation or ignore it to some communities' detriment.

BUSINESS VS. PERSONAL

Gilmore only promised tax relief to owners of personal cars.

But local officials who assess and collect the tax have never made the distinction between business vehicles and personal ones. They've never had to because the same rate is paid on all types of vehicles.

Assuming the legislature approves some version of Gilmore's plan, localities will have to re-program computers to distinguish between cars for personal and business use.

Roanoke County Commissioner of Revenue Wayne Compton calls it a ``programming horror'' that will eat up at least two full weeks of staff time.

Long said it might cost as much as $100,000 for some cities to make the monitoring and assessment adjustments necessary to accommodate the change. And that doesn't count the cost the state will have to shoulder to make sure localities get what they're owed.

Then there are those car owners, like Sen. Richard L. Saslaw, D-Springfield, who might want to work the new system to their advantage.

The owner of two service stations, Saslaw pays personal property taxes on three vehicles titled to his business. Under the Gilmore plan, Saslaw said he and other small business owners would put company vehicles in their own names to avoid taxes.

``I'd have to be crazy to leave it in my business. I'd be better off putting it in my name,'' Saslaw said during a Senate Finance Committee retreat last week. ``Therein lies the potential danger to this whole calculation.''

And leased cars? Legislative analysts aren't even sure whether they qualify as business or personal vehicles.

THE VALUE OF VEHICLES

Cities and counties use three different values when determining how much car, truck and motorcycle owners must pay annually for their vehicles.

The retail value counts as 100 percent of the vehicle's current value. The trade-in value counts for 83 percent of the retail value, and the loan value counts for 75 percent. The assessment, coupled with the tax rate, determines what a car owner owes the government.

Most local governments use the loan value (75 percent) when assessing vehicles, including Norfolk, Virginia Beach, Suffolk, Chesapeake and Portsmouth.

At issue, analysts say, is whether some localities will suffer if the legislature bases its reimbursement on one universal rate. So if you're basing your locality's assessments on 100 percent, as Bedford County does, you could lose money if the state assesses at the loan value.

PAYMENT SCHEDULES

Then there are differences between how often car tax payments are required.

Most cities and counties send tax bills once or twice a year. But others prorate annual bills on a monthly basis.

If the state wants to apply simple, uniform rules for reimbursement, it likely would go with annual or biannual payments to localities.

But Long said annual reimbursements would hurt those localities relying on monthly levies. They tend to collect more taxes because they don't give new residents or new car owners grace time before paying personal property taxes.

Those kinds of issues could dramatically affect a city or county's ability to budget, potentially delaying pay raises, road improvements or other local improvements.

``One of the reasons that it's not a nice, clean little package is because it's a local tax . . . that's been developed based on local needs,'' Long said. ``There's a lot of fine print there.'' ILLUSTRATION: A TRICKY ROAD AHEAD

Some issues being considered:

TAX RATES

Personal property levies vary widely in localities across

Virgina. If the state ignores cities' and counties' manipulation of

rates, it could be to the detriment of some of them. .

BUSINESS VS. PERSONAL USE

A distinction has never been made between business vehicles and

personal ones. Localities would have to re-program computers to

distinguish between the two. Also, people could avoid the tax by

putting their company's cars in their names.

THE VALUE OF VEHICLES

Localities choose from three different methods of assessing