Alabama car dealers say their industry can’t handle the extra mileage demanded by Gov. Robert Bentley’s proposal to double the sales tax on their transactions.
The industry was just beginning to recover from the economic breakdown of recession, they say.
Bentley announced his $541-million plan to fix the state’s General Fund on Friday, and it included a proposal to double the automotive sales tax, from 2 percent to 4 percent, and increase taxes on car leases and rentals. About 43 percent of the money the governor hopes to generate would come from those car taxes. Both state associations of car salesmen and local dealers feel they’d be unfairly burdened by the new taxes, which they say could have a chilling effect on consumer spending.
Sen. Dick Brewbaker, R-Montgomery, owner of Brewbaker Motors, wasn’t surprised by the suggestion to increase car sales taxes. Such an increase hasn’t happened in the 12 years he’s been in the Legislature.
“I just wasn’t expecting him to double it,” he said Monday by phone. “You’re doubling a tax that consumers pay directly. That’s a pretty big bite.”
Tom Dart is president of the Automobile Dealers Association of Alabama, an organization representing roughly 300 new car and truck dealerships in the state.
He also thinks increasing taxes on motor vehicles — which he pointed out includes mobile homes, RVs, boats, airplanes and motorcycles — will have a negative effect on consumption.
“It’ll be a little bigger hit on the consumer,” he said by phone. Alabamians will “either buy less, choose to get a less expensive car, or delay the purchase” altogether.
“Things are so competitive right now,” said Chad Pearson, a sales manager at Cooper Chevrolet. A sale can be made or lost at the Anniston dealership on as little as $100, he said.
Pearson thinks an increase in taxes — translating into an increase in the amount to be financed for most buyers — will make banks ask customers to make higher down-payments.
Randy Jones, executive director of the Alabama Independent Automotive Dealers Association, said most who buy cars have to finance the purchase.
Jones’ organization represents used car dealerships. He said increasing taxes could also increase the amount of interest people pay on car loans.
But Alabama’s tax on car sales is 2 percent, comparatively lower than many other states.
Pokey Brimer, owner of two used car dealerships in Anniston and Oxford and member of a national group of dealers, said that’s a good thing.
“It makes it much easier to operate a small business,” he said. “It makes it easier for people to buy a car.”
“We don’t need to be going up, we need to go down,” said Jones, who acknowledged Alabama’s budget shortfall needs fixing.
But Jones and many other car dealers said it would be better to solve the state’s money problems by cutting back on government spending, rather than relying on a single industry to bear the brunt of a General Fund fix.