Car tags went up and here’s the reason
Madison countians who have renewed a car tag since July have probably noticed a rate increase, but it’s not permanent, officials say.
The 1.5% increase in tag prices is not due to any local tax increase or one passed by the Legislature, but rather is the result of a change in a state credit on car tags that fluctuates from year to year.
Clerk Lisa Duval at the Madison County Tax Collector’s Office said the price change went into effect July 2020 as the result of a tag credit percentage drop from 6.5% to 5% in July 2020.
“Since it started last July, the questions began immediately,” Duval said of people renewing their tags. “Every month when the notices go out, if somebody has not already renewed the tag since July, then they are kind of surprised that it is more this year.”
The means of calculating the tag credit is explained on the Mississippi Department of Revenue’s website.
“In order to provide a tax break to the registered owners of Mississippi motor vehicles, the 1994 Mississippi Legislature authorized a credit to the owners in the amount of 5% of the assessed value of the motor vehicle,” the website states. “This credit eased the tax burden of the individual. However, it created a loss in revenue to the local governments.”
To reimburse local governments for the loss of revenue, the Legislature created the Motor Vehicle Ad Valorem Tax Reduction Fund.
“The revenue generated from the sales tax on motor vehicles goes into the fund,” the explainer states. “The tax loss created each month from vehicle registrations provides the figures used to reimburse the local governments each month. Every year the Department of Revenue must calculate the credit percentage based on the balance in the fund, the estimated sales tax revenue and the estimated tax loss to the local governments for the coming year. The intent of the Legislature was to maintain a minimum balance in the fund and a maximum credit to the owners.”
Therefore, the Legislative Tag Credit fluctuates from year-to-year.
The Mississippi Legislative Tag Credit was reduced from 6.5% in fiscal year 2020 to 5% in fiscal year 2021 which began last July, according to Jacob Manley, a communications specialist at the Mississippi Department of Revenue.
For fiscal year 2019, the credit was 5.75%; for 2018 it was 5.5%; and for 2017 it was 6%.
County Tax Collector Kay Pace said the county’s millage rates have not changed in the past year and the increased automobile tag prices are due solely to the reduction in the Legislative Tag Credit.
“The state allows so much legislative credit toward the purchase price of each vehicle and that percentage may remain the same or it may not,” Pace said.
“So, this year, it was lowered by the state which means that the amount of credit towards a purchase of a license plate is less and makes the license plate higher. There have been no millage changes.”