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Ky. lawmakers advance bill to avoid vehicle tax spike

Legislative Research Commission

Kentuckians would get some relief from surging car taxes under a bill that advanced in the Legislature on Tuesday.

Vehicle property taxes are set at the beginning of each year and Kentuckians generally pay them when they renew their license plate tags during their birth month each year.

The taxable value of cars leapt by about 40% between 2021 and 2022 because Kentucky uses national car value estimates to decide how much people will be taxed and used car prices skyrocketed during the pandemic.

But underHouse Bill 6, the tax would stay at last year’s level for 2022 and move to an average appraisal in the future.

Rep. Sal Santoro, a Republican from Union and sponsor of the bill, said people who have already paid the higher taxes this year should watch for a refund in the mail if the measure passes.

“They are going to get it back. I don’t know what way they’re going to get it back, but most of the time it’s probably going to be thrown in the junk mail, they’ll throw it in the trash,” Santoro said.

Since 2009, Kentucky has usedNational Auto Dealers Association estimates for car values to set vehicle taxes. But the method didn’t create widespread problems until this year.

Used car valuesskyrocketed over the course of the coronavirus pandemic as automakers struggled to find computer chips and other essential materials because of supply chain disruptions.

Under the proposal, starting next year a car’s average trade-in value would be used to set the amount, which Santoro said would generally lead to a lower taxable value for vehicles.

Rep. Angie Hatton, a Democrat from Whitesburg, said she’s been getting calls from constituents blaming lawmakers and the governor for the tax hike.

“I think a lot of people think the Legislature took some sort of action that raised everyone’s taxes or there was some sort of executive branch order that raised taxes, but in fact it’s market fluctuations,” Hatton said.

Rep. Jason Nemes, a Republican from Louisville, said lawmakers need to shield people who weren’t prepared for the jump.

“We’ve got to make sure we’re protecting taxpayers here. This is something that’s coming, it's not their fault,” Nemes said.

The measure passed unanimously out of the House Appropriations and Revenue Committee on Tuesday and will likely pass out of the full House in the coming days.

Correction: This story has been updated to reflect that the taxable value of cars increased, not the tax rate.

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