Talk in Sacramento is that a deal on the budget deficit has advanced along these lines: Return the vehicle license fee (the car tax) to the former level of 2% from the current tax on a car’s value of two-thirds of 1% and put a population/inflation spending cap on the ballot.
Since the tax goes up before the voters have a chance to vote on the spending cap (probably in June; perhaps March) there is a risk that taxes will be increased but spending will not be capped. Spending interests will surely try to defeat a spending cap measure.
To off set this problem, any tax increase proposed as part of the budget solution should carry a sunset provision in case the spending cap fails at the polls. The sunset could occur at an agreed upon set time following the spending cap election.
As to the car tax increase, the car tax is equivalent to the property tax. Known as the vehicle license fee, the car tax is actually a levy that is collected in lieu of property taxes. Property taxes were collected on cars prior to 1935. According to Dave Doerr in his book, California’s Tax Machine, "Critics complained of unequal assessment of the same type of cars in the same county."
Therefore, the VLF was created in lieu of the property tax in 1935. Proposition 13 set the property tax rate in California at 1%. The people are satisfied with this tax rate. It would be logical to set the VLF, or car property tax, at the same 1%. This would be consistent with the people’s desire to have a firm and reasonable tax rate on all taxed property, which is consistent across the board. While still a tax increase, it would not be the shock to car owners that an increase to 2% would bring, nor would it do as much damage to the suffering automobile industry.
Any tax increases during these tough economic times will be a set back for economic growth, which California needs to escape our budget problem. But, hoping that Washington will come to the rescue is a long shot at best.
A spending cap is needed in California. And, a sunset on any taxes should be part of the bargain.