State Supreme Court upholds local portion of the car-tab tax

Herald Staff and News Services

The state Supreme Court ruled Thursday that the local portion of the hated car-tab tax remains in place despite Initiative 695 and the Legislature’s repeal of the state portion of the tax.

The ruling reinstates up to a third of the motor vehicle excise tax in all or part of 28 counties, including Snohomish and Island counties.

The court’s decision was prompted by local transit authorities and workers who challenged the state’s decision to stop collecting the local tax when the state tax was repealed, arguing that lawmakers hadn’t specifically repealed it.

"At very best, the evidence points both ways," Justice Susan Owens wrote for the majority in the 5-4 decision. "This is insufficient to excuse this court from enforcing the people’s laws."

Gary Nelson, chairman of Community Transit’s board of directors, said if the state starts collecting the excise tax again, the board might consider reducing the sales tax increase local voters approved in September to make up for funds the transit agency lost due to I-695.

However, the Legislature may trump the court’s ruling. The Senate has already passed a bill repealing the tax. Its fate in the House is less certain. House Speaker Frank Chopp, D-Seattle, blocked action on similar measures last year.

The state car-tab tax was first repealed in favor of a $30 fee by the passage of Initiative 695 in 1999. When I-695 was declared unconstitutional a few months later, Gov. Gary Locke and lawmakers moved to repeal the tax anyway. But they neglected to specifically repeal the portion of the tax that went to local transit authorities, and the Washington State Transit Association and the Amalgamated Transit Union sued to save it.

The transit authorities got as much as .725 percent of a car’s value, or $145 on a $20,000 car. That added up to about $200 million a year.

Community Transit lost more than $18 million a year. It eliminated 120 positions, and service was reduced 30 percent. But when a local sales tax increase started on Jan. 1, CT was able to restore Sunday and holiday service and to plan for some additional service increases in September.

Other transit agencies were hurt as well. Pullman Transit may be on the verge of going out of business.

What the ruling means exactly for transit districts and vehicle owners is unclear. Theoretically, vehicle owners could owe more than two years of back taxes. However, the high court didn’t order collection of back taxes or give any guidance for how the tax would be collected.

Thurston County Superior Court Judge Gary Tabor ruled against the state last year, dismissing arguments that the repeal of the local tax was implied.

Sponsors of I-695 now are pushing a new initiative that would specifically repeal the local portion of the tax. Monte Benham, one of I-695’s sponsors, argues that the intent of the voters was clear.

"This would never have happened if the greedy transits had not taken the issue to the courts," Benham said. "They knew that the people did not want to pay the motor vehicle excise tax. It’s another instance of taxpayers’ money being used against the taxpayers."

The tax has not been collected since the beginning of 2000, and restarting it could be an administrative nightmare, said Brad Benfield, a spokesman for the Department of Licensing.

The tax was never collected on a per-vehicle basis. Instead, it functioned as a credit to the state tax, so the state would effectively kick back part of its collections based on the total tax collected on vehicles within the transit authorities’ boundaries.

"We don’t have a plan in place right now," Benfield said. "It is going to be a difficult task, and it’s going to take some time."

Local authorities might ask county auditors to collect the tax as they do for the separate excise tax levied on vehicles within Sound Transit’s boundaries in Pierce, King and Snohomish counties.

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