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Taxation, License Fees, and New Car Registrations

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  • John H. Beck
  • Randall W. Bennett

Abstract

The structure of taxes and license fees on motor vehicles varies widely across the states. In 1997, automobile owners in 12 states and the District of Columbia paid only a fixed license fee independent of the age or value of the vehicle. But statewide license fees in 15 states declined as the value of the car declined, and fees in 6 states declined as the age of the car increased. Furthermore, local personal property taxes based on value applied to automobiles in 17 states. Taxes and license fees based on age or value raise the user cost of newer automobiles compared to older cars. Therefore, people are expected to substitute older model cars for new cars. The authors test this hypothesis by estimating a regression with the ratio of new car registrations to total registered automobiles as the dependent variable, using cross-sectional data for 1997 car registrations. The empirical results confirm their hypothesis.

Suggested Citation

  • John H. Beck & Randall W. Bennett, 2003. "Taxation, License Fees, and New Car Registrations," Public Finance Review, , vol. 31(5), pages 487-509, September.
    • Handle: RePEc:sae:pubfin:v:31:y:2003:i:5:p:487-509
    DOI: 10.1177/1091142103253747
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    References listed on IDEAS

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    1. Tim Pritchard & Larry DeBoer, 1995. "The Effect of Taxes and Insurance Costs On Automobile Registrations in the United States," Public Finance Review, , vol. 23(3), pages 283-304, July.
    2. James Berkovec, 1985. "New Car Sales and Used Car Stocks: A Model of the Automobile Market," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 195-214, Summer.
    3. Ronald C. Fisher, 1980. "Local Sales Taxes: Tax Rate Differentials, Sales Loss, and Revenue Estimation," Public Finance Review, , vol. 8(2), pages 171-188, April.
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    Cited by:

    1. David Feldman & Robert Archibald, 2009. "Revealed preferences for car tax cuts: an empirical study of perceived fiscal incidence," Applied Economics, Taylor & Francis Journals, vol. 41(12), pages 1495-1500.

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