An Illinois state lawmaker said he wants to get legislation passed during the veto session to repeal the $10,000 cap on vehicle trade-in allowances.
That $50 million tax increase would be replaced with higher taxes on private vehicle transfers.
The tax increase from the $10,000 cap on trade-ins will help pay for statewide infrastructure projects. It was included in the $45 billion Rebuild Illinois capital plan shortly before it passed at the end of the session. Gov. J.B. Pritzker enacted the measures.
The Illinois Automobile Dealers Association wants it repealed. The association said it would increase the cost of the typical vehicle trade-in transaction by $600 and hurt the industry.
State Rep. Ryan Spain, R-Peoria, filed House Bill 3891 to repeal the cap.
“It would be important to our auto dealers, a continued interest in making sure that we are encouraging people to purchase new vehicles throughout the state of Illinois,” Spain said.
The Illinois Automobile Dealers Association said replacing the tax cap with higher taxes on private transfers would make the proposal revenue-neutral.
“There will be another bill that’s introduced that will likely become the more likely vehicle to move forward on this which would actually replace that revenue,” Spain said.
In private transactions, vehicles over $15,000 are taxed starting at $750. The tax goes up from there. For vehicles worth less than $15,000 in a private transfer, the age of the vehicle determines the tax with different rates for each year.
The Illinois Automobile Dealers Association’s proposal would increase the tax by $75 in every bracket for private transfers below $15,000. The tax would increase $100 in every bracket for transfers above $15,000. Both would be in exchange for repealing the trade-in tax above $10,000.
Marc Passoni, president of Sports and Imports in Springfield, opposes both the trade-in tax and the proposed replacement. He said increasing private transfer taxes would raise serious questions.
“Who’s going to monitor that? Who’s going to justify the amount and say ‘nope, that is exactly what it went for and exactly what it sold for?’” Passoni said.
Passoni said increasing private transfer taxes would affect consumer choice.
“That’s not right,” Passoni said. “I think that is going to push people to be forced to go to the dealership. Some people don’t [want to go to a dealership]. They say buying a car is compared to getting a root canal.”
Can the repeal and replace get done before the end of the year? Spain said he thinks so.
“I would argue that we have a little bit of time,” Spain said. “That revenue is included to be related to some of the vertical infrastructure needs in the capital bill and we still have some time to deploy those things.”
The trade-in tax is set to start on Jan 1. Lawmakers have six session days scheduled before the end of the year.
Lawmakers are back for the fall session Monday.