Local Vehicle Registration Surcharge: Tax Or Fee?

One of the more interesting debates occurring on the Assembly September 10 centered on what constitutes a tax.

A bill, narrowly sent to Gov. Arnold Schwarzenegger on a partisan 41 to 22 vote, would allow counties to continue assessing a $1 surcharge on vehicle registrations to help pay for vehicle theft prevention. The authority to impose the fee was scheduled to expire in 2010. Under the bill, AB 286, the authority is extended until 2018.

Republicans and one of the bill’s opponents, the California Taxpayers Association, contend the fee is actually a tax.

“This is a tax. It’s an extension of a tax,” said Assemblyman Martin Garrett, a San Diego Republican.

And because it is a tax, added GOP Assemblyman Roger Niello of Sacramento, voter approval is required.   

The taxpayers association contends the there is no nexus for the surcharge, the necessary threshold for a “fee.”

Because counties do not register vehicles, the $1 registration “fee” will not be used for that purpose. Instead, it will be used for combating local auto thefts and, therefore, constitutes a tax that requires two-thirds voter approval under the provisions of Proposition 13.

Democratic Assemblywoman Mary Salas of Chula Vista, the bill’s author, countered that the $1 surcharge is not a tax.

“A specific amount of money (is) collected from a specific part of the population…

that is deposited in a specific fund for a specific activity,” Salas said, noting that counties have had the authority to levy the surcharge since 1992.

Noting that numerous local police and sheriff departments favor the bill, Salas said:

“How are the people willing to vote ‘no’ able to stand there and say with a straight face they support law enforcement?”

Assemblyman Juan Arambula, a Fresno independent, said the surcharge is voluntary.

“It’s at the discretion of local government. It allows them the option, if they so choose.”

Of California’s 58 counties, 47 assess the $1 surcharge. Over the past 17 years, the costs of anti-theft programs, such as Los Angeles County’s Taskforce for Regional Auto-theft Prevention, have increased at a far higher rate than the number of registered vehicles. In Los Angeles, for instance, the taskforce’s staff has been reduced even though since its 1993 inception 20,000 vehicles have been recovered.

In 2007, the Los Angeles County Sheriff sponsored a measure to allow counties to increase the surcharge from $1 to $2. Schwarzenegger vetoed the bill despite saying the money is spent on a good cause.

““I cannot support the doubling of the vehicle registration fee paid by

motorists as proposed by this bill,” the GOP governor said in his veto message.

“On numerous previous bills attempting to raise registration fees, I have held that fees such as these should be approved by a vote of the people.  This measure does not include such a provision.”

Salas introduced a bill in 2008 that would extend the 2010 “sunset” date for the program but not boost the surcharge.

The governor vetoed the measure along with numerous others because of the historic delay in passing the budget for the fiscal year beginning July 1, 2008. Salas’ bill received the same generic veto message as the other bills he refused to sign.

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