If nobody else will say it, we will: Lowering the Vehicle License Fee (VLF) was a stupid move when Gov. Wilson did it in 1998 and it was an even more stupid move when Gov. Schwarzenegger did it again in 2003. The VLF, while it is technically a regressive tax in that lower income people tend to pay proportionately more as a percentage of household income than the rich, is still based on choice. Like the sales tax, it is based not on how much one earns but on how much one spends. If you want to pay a lower fee, buy a cheaper car.
What most people don’t know about the VLF—which mostly goes to pay local cops and firefighters—is that if you itemize, you can deduct most of it from your federal taxes. According to the California Budget Project, 40 percent of Californians—primarily those in upper income brackets—do just that.
Money VLF provided to local governments in 1998—$3.8 billion
Money VLF will provide to local governments 2004—$1.3 billion
Money VLF provides to state (excluding VLF on trailer coaches)—$0
Average portion of budget VLF represents to city governments—10%
Average portion of budget VLF represents to county governments—25%
VLF rate in 1998—2% of a vehicle’s value
VLF rate today—.65% of a vehicle’s value
Value of average car in California (2002)—$10,153
Average VLF 1998—$214
Average VLF today—$66
1998 VLF on a $40,000 car purchased in 1998—$800
2004 VLF on that same car, with depreciation—$153
2004 VLF on new, $40,000 car—$260