KY lawmakers promise to curb rising car taxes. They could have ended the tax long ago.

Max Faulkner/Star-Telegram Archives
·3 min read

There are nearly a half-dozen bills pending in the General Assembly to shield Kentuckians from a jump in property taxes on their motor vehicles this year, fueled by the booming fair cash value of used cars.

No one can say for sure how those tax-relief bills will fare.

But 22 years ago, in a little-remembered chapter of Frankfort history, the legislature had the opportunity to repeal that unpopular tax altogether — and it chose not to.

“What it came down to, it was just a source of revenue that our state had grown accustomed to,” recalled Tom Kerr, who was a state representative from Northern Kentucky during the 2000 General Assembly.

In 1998, the legislature put on that November’s statewide ballot Constitutional Amendment 2, asking voters if they wanted lawmakers to have the authority to repeal the annual property tax on motor vehicles.

That fall, 78 percent of voters told lawmakers to nix the car tax.

(Constitutional Amendment 1, incidentally, was a proposal to change from biennial to annual legislative sessions. It would narrowly fail that year but finally pass two years later.)

In 2000, the General Assembly returned to the Capitol and filed several different bills, sponsored by Democrats and Republicans, to either repeal the car tax or phase it out over three years.

But none of the bills went anywhere. Not even one House bill that had 27 sponsors, more than one-fourth of the House membership, including the full sweep of House Democratic leadership.

And when advocates of repealing the car tax finally tried to attach several such amendments to an unrelated tax measure on the House floor, they were repeatedly turned back.

According to news reports at the time, lawmakers were dismayed to realize that repealing the car tax would mean they would get about $75 million less to spend in the fiscal year 2002 budget. In addition, school districts, cities and counties warned lawmakers that they, too, collected tens of millions of dollars from the car tax.

Even the slow-motion, phase-out approach meant $28 million less for lawmakers to spend in the 2002 budget, according to the state budget office.

“The leadership and the budget committee would always kill these bills because of the impact on the state budget, because of the loss of state revenue,” Kerr said Tuesday.

By that point, Kerr had been a proponent of abolishing the tax for 15 years. He signed onto several of the failed bills in 2000.

“That was the biggest complaint I heard when I first ran for office in 1984,” Kerr said. “People paid a sales tax on the car when they bought it, and then they paid a tax on it again every year in order to renew the registration. They just hated that.”

Kentucky is possibly even more dependent on the car tax today. For just the first six months of the current fiscal year, the state reported $73.1 million in property tax collections from motor vehicles, up nearly 3 percent from the same period one year earlier.

Unless lawmakers act this winter, those numbers are expected to be much higher a year from now.

The fair cash value of used cars — the legal basis for the property tax — is up as much as 40 percent at present. Problems with the global supply chain have made it difficult for buyers to find new cars, driving up demand, and therefore prices, in the used car market.

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