JEFFERSON CITY — An unexpected jump this year in personal property tax bills, caused by rising used car values, is focusing renewed attention on one state lawmaker’s proposal to phase out the annual levy on vehicles, boats and campers.
“I think it appeals to anybody who owns a vehicle and doesn’t like to be punished,†said state Sen. Bill Eigel, R-Weldon Spring, in St. Charles County, calling the tax a “significant burden†on working and middle-class people who rely on their vehicles to get to work.
But Eigel’s plan to force down the personal property tax rate as real property tax revenues rise has long faced headwinds from local taxing jurisdictions that currently depend on the revenue.
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For the last two years, the Republican-led Missouri Senate agreed to advance Eigel’s plan only after he narrowed the bill to apply just to St. Charles County.
Eigel, who is weighing a run for governor in 2024, is betting his call draws support from a wide spectrum of working voters turned off by the tax. But concern over the effects to cities, school and fire districts — and their employees — persists.
While some taxpayers would win under the change, others would end up paying more, because the phaseout is tied to increases in real property tax revenue, said St. Charles County Assessor Scott Shipman, a Republican.
“The burden is being shifted to the real estate,†he said.
“If you had higher-valued real estate and lower-valued personal property, your real estate’s going to see an increase,†Shipman said.
Shipman said people who own a car but no house are currently “contributing to the tax burden.â€
If they are no longer required to pay in, “that’s being made up on the real side,†Shipman said. Paying property taxes through one’s rent is “not direct,†he said.
Eigel said he would “disagree strongly†that his bill is “a special gift†to renters, adding he’s “never heard of†a landlord not including property taxes into rent charges.
Sen. Doug Beck, D-south ºüÀêÊÓƵ County, has said the phaseout would shift the tax burden to lower-income real property owners.
Fort Zumwalt Superintendent Bernie DuBray said the district, serving 17,000 students, depends on budget growth. He said the district opposes Eigel’s legislation.
“It would give us no growth. ... I think it would be pretty devastating,†DuBray said. “There’s constantly more expenses that school districts are getting. We’re in the same hiring crunch that everybody else is. Our teachers are needing to be paid more.â€
“He’s right: this would stop the growth of revenues — overall revenues — to his district. He’s right about that, and that is my intention,†Eigel said. “It’s a bigger concern for me, the fact that we’re charging people for owning a car.â€
“This would eliminate an increase in local revenues until the percentage for personal property assessment reaches zero,†according to a fiscal note of Eigel’s proposal this year.
Currently, personal property is assessed at 33.3% of its real value. Local governments then tax that assessed value. The rate depends on where the taxpayer lives. ºüÀêÊÓƵ County, for example, collects property tax revenues for more than 200 taxing districts — including school districts, fire districts, municipalities, the Metropolitan ºüÀêÊÓƵ Sewer District and the Zoo-Museum District — each with its own rate.
In St. Charles County, Shipman said in September that local governments and other taxing entities were expected to see a total increase of more than $22 million this year in personal property tax collections because of higher used car values.
The St. Charles County Council voted to reduce its small share of the overall tax rate.
The Fort Zumwalt School District was expected to receive $5.26 million in additional revenue, Francis Howell was poised to collect $4.65 million, with $3.87 million more expected for the Wentzville School District.
Shipman said in September the windfall should be offset by lower tax rates, but was unaware this month of any other county jurisdictions besides St. Charles County moving to lower tax rates.
DuBray said Fort Zumwalt was planning on growth, so it is receiving about $3 million more than expected because of the increase in personal property tax collections.
Why the increase?
The unusual jump in used car values, which saw the value of many vehicles rise even though they were a year older, was caused by a shortage of vehicles available for sale — the result of chip shortages, supply chain issues and other factors — coupled with high demand as the pandemic eased.
ºüÀêÊÓƵ County Assessor Jake Zimmerman, a Democrat, said he’d never seen anything like that before.
“The numbers are bonkers,†Zimmerman said. “The typical used car in ºüÀêÊÓƵ County is worth something on the order of 20% more than what is was worth last year.â€
He said the median increase in taxpayer bills over last year was 20%, or almost $70.
“I can’t emphasize enough that this is nuts,†Zimmerman said. “Used cars are supposed to go down in value from one year to the next.â€
Zimmerman said unlike real property taxes, the state’s Hancock Amendment doesn’t limit annual hikes to personal property taxes.
“If I doubled the value of everybody’s house, nobody’s tax bill would double,†Zimmerman said. “Instead what would happen is every school district and fire department, by and large, they would have to cut the tax rate in half under the Hancock Amendment.
“In this situation, where the Hancock Amendment doesn’t apply, when the values of these cars go up, what happens is, people’s tax bills go up,†Zimmerman said. “That’s very different from how it works with houses and it really does represent a windfall for all of these taxing districts.â€