Question #4: What is the impact of an increase in personal property tax at the rate of 50 cents as provided in the supplemental CIP for a car valued at $30,000 and one valued at $18,000?

FY 2018 Question #4: What is the impact of an increase in personal property tax at the rate of 50 cents as provided in the supplemental CIP for a car valued at $30,000 and one valued at $18,000?

Page updated on Jun 16, 2017 at 9:59 AM

Question:

What is the impact of an increase in personal property tax at the rate of 50 cents as provided in the supplemental CIP for a car valued at $30,000 and one valued at $18,000? Also, please provide the impact of increasing the tax rate by 10 cents and 25 cents?

Response:

The current tax rate for vehicles is $5.00 per $100 of assessed value. If a vehicle has situs for taxation in the City, the City computes the tax by dividing the assessed value by 100 and multiplying the result by the tax rate for the annualized tax. The annualized tax is prorated, if necessary, based on the number of months the vehicle is taxable in the City. For qualified personal use vehicles, the tax bill is then reduced by the Commonwealth’s Personal Property Tax Relief (PPTRA) percentage, to get the total tax amount due by the vehicle owner. Annually, the City recalculates and sets the tax relief percentage to equitably distribute the PPTRA reimbursement of $23.6 million received from the State. The current percentage of personal property tax relief is 100% for vehicles values under $1,000, 58% on the first $20,000 for vehicles valued between $1,001 to $20,000, 48% on the first $20,000 for vehicles valued between $20,001 to $25,000, and 39% on the first $20,000 for vehicles valued over $25,000. However, if the tax levy is increased due to a tax rate increase or growth in the number of qualifying vehicles in the personal property tax base, the PPTRA subsidy levels must be reduced because the City receives a flat State tax relief amount to distributed to all qualifying vehicles.

In general, the PPTRA subsidy amount would need to be reduced by an amount roughly equivalent to the percentage of the tax rate increase.  It is an inverse relationship.  In other words, a tax rate increase of 10 cents represents a tax levy increase of 2%, which means the subsidy amount would need to be reduced by about 2%. Staff will calculate the actual subsidy levels once the tax rate is determined and the tax assessments are complete.  For purposes of this budget question however, this inverse relationship has been assumed.

Table 1 below reflects the impact of tax rate increases of 10 cents, 25 cents and 50 cents, for a vehicle valued at $30,000 would have associated tax increases of $30, $75, and $150.

Table 1: Impact of tax rate increase on vehicle valued at $30,000

  Current Possible Change    
 Vehicle Value           $30,000      $30,000       $30,000       $30,000       
 Tax Rate           $5.00$5.10 $5.25 $5.50 
 Tax on value < 20,000           $1,000.00     $1,020.00       $1,050.00       $1,100.00 
 Tax on value > 20,000          $500.00      $510.00       $525.00       $550.00 
 Annualized Tax           $1,500.00       $1,530.00       $1,575.00       $1,650.00       
 PPTRA relief amount           $390.00       $390.00       $390.00       $390.00       
 Total Tax Amount Due                      $1,110.00$1,140.00 $1,185.00 $1,260.00 
 Tax bill Increase  $30.00$75.00 $150.00 


Table 2 below reflects the impact of tax rate increases of 10 cents, 25 cents and 50 cents, for a vehicle valued at $18,000 would have associated tax increases of $18, $45, and $90.

Table 2: Impact of tax rate increase on vehicle valued at $18,000

  CurrentPossible Change     
 Vehicle Tax          $18,000      $18,000       $18,000      $18,000       
 Tax Rate           $5.00       $5.10       $5.25       $5.50 
 Tax on value < 20,000           $900.00       $918.00       $945.00        $990.00 
 Tax on value > 20,000           $0.00       $0.00       $0.00       $0.00 
 Annualized Tax           $900.00       $918.00       $945.00       $990.00 
 PPTRA relief amount          $522.00       $522.00       $522.00       $522.00 
 Total Tax Amount Due           $378.00       $396.00       $423.00       $468.00 
 Tax bill Increase            $18.00       $45.00             $90.00 



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