Georgia, Rhode Island repealed car taxes. Could Youngkin’s plan lead to an elimination in Virginia?

As lawmakers consider Gov. Glenn Youngkin’s proposal to provide vehicle tax relief for Virginians and ultimately eliminate the property tax, policymakers can find comfort after repeals in Rhode Island and Georgia. 

All of Virginia’s cities, counties and towns are subject to a personal property tax, which helps fund their respective governments. Municipalities are likely to be impacted by such a relief or repeal proposal, including some, like Chesapeake, that have been grappling with reforming vehicle-related taxes.

On Dec. 18, Youngkin said a family of four in Virginia pays about $290 on their vehicle taxes annually during his address to lawmakers and cabinet members.

“Let’s give Virginia families relief on the most hated tax in America since the tax on tea – the local car tax,” Youngkin said.

While the governor did not include a plan to repeal the tax when he first raised the idea last December, this year he proposed an amendment to the current biennium budget to allocate $1.1 billion into a car tax credit fund to provide income tax rebates to nearly 1.9 billion taxpayers earning up to $50,000 in adjusted gross income for individuals or $100,000 for couples filing jointly. 

Eligible taxpayers would receive up to $150 for individual returns or $300 for joint returns annually for the next three years. After the fund is exhausted, the state would see a permanent reduction of $360 million in tax revenues each year.

If successful, Virginia would join several states and jurisdictions that do not impose a vehicle tax including the District of Columbia, Georgia, Maryland and Rhode Island.

According to a Nov. 7, 2023 legislative report completed in Connecticut, which was studying tax repeals, Rhode Island and Georgia over the past seven years repealed their vehicle property tax either by adjusting tax calculation factors by an increasing amount over a number of years, or enacting it only for taxpayers that perform a triggering action, such as applying for a vehicle title.

Georgia and Rhode Island took different approaches to address local governments’ revenue losses. Rhode Island reimbursed revenue losses from general appropriations and adjusted reimbursements based on sales tax revenues. 

Georgia replaced its state and local annual property and sales taxes with a one-time per owner tax, divided between the state and municipalities.

Last year, West Virginia created a fully refundable tax credit to eliminate the tax’s impact on residents while holding municipalities harmless, which took effect in 2024.

In 1998, Virginia developed a vehicle tax relief program, but the reimbursement rate starting at 12.5% was frozen at 70% in 2021, below the anticipated 100%, due to unforeseen costs as new car values increased substantially faster than inflation.

Virginia lawmakers will start their 45-day session discussing proposed bills and budget amendments on Jan. 8.

This article first appeared on Virginia Mercury and is republished here with permission. Virginia Mercury is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence.