Could higher MS car tags slow new car sales?

By Danielle Thomas - bio | email

GULFPORT, MS (WLOX) - On Wednesday, Governor Haley Barbour met privately with top state lawmakers to offer his suggestions for revising next year's budget. The governor's office hasn't released any details, but one of the topics may have been how to make up the shortfall in a fund that gives drivers a discount on their car tags.

There is some worry that higher tag fees may hurt the new car business. Since the mid-90s, every new car buyer has paid a two percent tax into a fund that helps offset car tag prices. That is on top of the three percent tax both used and new car buyers pay. When sales slowed, the fund shrank. However, some people say pricey car tags may drive down sales even further hurting the discount fund.

Thanks to great selection and strong federal tax incentives, Jonathan Allen of Allen Toyota in Gulfport says new car sales at the dealership are looking good for April.

"We've had a good start off to this month,"  said Allen. "We do think the consumer confidence is a little higher than it's been. We're optimistic about the future."

State Representative Frances Fredericks says she's not optimistic that drivers won't soon pay more for car tags, although she says how much more will depend on what happens when legislators reconvene next month.

"Hopefully, we will come up with some kind of tax on cigarettes," said Rep. Fredericks. "I know that people are crying they don't want the tax on cigarettes right now. But I don't see any other way at this particular time to get the funds that's needed to keep giving the reduced car tag."

Although it is unclear whether having to pay more for car tags will hurt new cars sales, everyone talked to agreed, it certainly won't help.

"The new car buyer will still be paying the five percent, plus he's going to pay more money for his tag. So he's going to look at that pretty hard," said Fredericks. "If you're paying $800 for a tag now and you buy a car, with the fact that's going to go up by two percent of the car's worth, you could be paying another $700 for that tag making it around $1,500. People are going to look at that."

Jonathan Allen said, "We want what's best for the South Mississippi customer. We think taking the discount away in renewing tags is counterproductive. We think there could be other programs were these monies could come from instead of making our already expensive plates go up in price."

Lawmakers still have time to pass a plan to subsidize the car tag discount. Representative Frances Fredericks says since counties depend heavily on that money for schools and projects, it's important the money collected not be reduced.

©2009 WLOX. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.