A part of the massive tax increases, proposed by Governor O’Malley, includes a 20% increase in the tax you pay to title a vehicle. Maryland already taxes its residents more than most states when it comes to the fees to title and tag a vehicle. This is because Maryland taxes the total sales price of a vehicle before any rebates, incentives and most importantly the trade-in are deducted from the price. Maryland is one of only five states that tax the total sale price instead of the trading difference. Now, the Governor wants to raise that tax to 6%. All of this is in addition to some of the highest tag and title fees in the nation.
When I first got into the car business, temporary tags were fifty cents. The cost for a title application was two dollars and Maryland Tags cost twenty dollars a year. The fee for a lien for the lender was two dollars for a total of $24.50. The title tax was 4%. To title a $20,000 vehicle would cost $824.50 if you financed the vehicle. By comparison, under the Governors new tax proposal, you would pay a 6% title tax, twenty-three dollars for the title, twenty dollars for the lien, sixteen dollars for the temporary tag, and you will pay one hundred and eighty dollars for two years of tag fees if you buy a SUV. The cost to title a $20,000 SUV under the Governors new tax plan is $1,439.00.
It is important to note that the fees for titling vehicles go into the Maryland Transportation Trust Fund. This trust funds the construction of Maryland highways, roads and mass transit operations. Maryland is the only state in the union that funds two mass transit operations. The Trust has been operating at a deficit because of the cost of the mass transit requirements. The state also often borrows money from the Transportation Trust when the general fund is depleted. The primary source of funds for the trust used to be highway taxes. Last year, title tax and fees from registering vehicles surpassed gasoline taxes as the largest contributor to the Transportation Trust Fund. The fund has to get additional funding to stay solvent. Those of us in the automobile industry feel that gasoline tax is a more equitable way to solve the problem since there is a direct correlation between gasoline sales versus population, and the geographic need for highway improvements. Of course we would prefer that there was no tax increase of any type, but the alternative is to reduce highway spending, something not likely to happen.
The Maryland Automobile Dealers Association, (MADA) has recommended a plan that would increase the title tax to 6%, but would tax only the trading difference. This would put Maryland on par with most states in the union. Delaware taxes at 3.5% of the trading difference. It is important to note that you pay tax based on where you live, not where you purchase your vehicle. If someone in Delaware purchases a vehicle in Maryland, we collect the Delaware title tax not Maryland’s. The same is true if you purchase in Delaware. You would have to pay the Maryland tax when you title the vehicle. If Maryland adopted the MADA plan, the title tax remitted to the Transportation Trust would increase by approximately $750 million annually.
Maryland automobile dealers employ approximately 20,000 Marylanders. As an industry they are among the largest collectors of tax, payroll tax, and contributors to charities. Statistically this is the worst year in automobile and truck sales in Maryland in 12 years. This is not the time to burden the industry with additional taxes that could discourage Marylanders from purchasing new, more fuel efficient and environmentally friendly vehicles.
