A Porsche 911 will cost you $209 in yearly vehicle registration fees. But a Ford F-150? Try $329.

Why the difference?

It’s because Hawaii is one of 13 states that collects an annual vehicle registration tax based on weight. So the 2,244-pound difference between the Porsche and the Ford means the truck owner will pay roughly $120 more in fees each year.

Hawaii is in the minority of states that base a car owner’s automobile tax on weight alone. Thirty states have a flat rate; three states consider weight and age, two consider age only, and one state each considers horsepower, value only, and value and age, according to a 2009 report by the Office of Revenue Analysis in Washington, D.C.

Evaluated alongside other taxes in Hawaii, the motor vehicle tax can be viewed as another example of a regressive tax structure that takes a higher percentage of taxes from lower income earners than their wealthier counterparts.

County property taxes and the general excise tax (GET) tend to favor the well-off. And the state’s cigarette tax, one of the highest in the nation, has been found to hits poorer residents harder because a greater proportion of lower income residents smoke.

“A weight tax is very likely regressive,” said James Sallee, an assistant professor at the Harris School of Public Policy at the University of Chicago who conducts research in the area of public economics, with an emphasis on taxation and environmental policy. “And more regressive than would be a gas tax.”

A tax based on engine size — which is closely linked to weight — is more regressive than taxes based on gas or mileage, a 2002 study published in the Journal of Economics found.

Since engine size and weight correlate so closely, a weight tax is most likely regressive as well, said Sallee.

Tax Rationale: Heavier Car, More Road Damage

Hawaii’s vehicle tax is based on the rationale that the heavier the car, the more damage it does to the state’s roads, said Lowell Kalapa, director of the nonprofit Tax Foundation of Hawaii. So drivers of heavier cars should pay more to maintain those roads, he said.

“The road taxes are not necessarily measured on the ability to pay,” Kalapa said. “It’s how much wear and tear you make on the state’s or county’s roads. You could be a multi-millionaire and have a Mini Cooper because that’s your preference, whereas I see a lot of people who live in poor neighborhoods with huge SUV’s and monster trucks. It was their choice to purchase a monster truck or Mini Cooper.”

The weight tax is one of three fees Hawaii car owners pay the state annually. The other two are a vehicle registration fee and a fuel tax, the latter of which is based on the number of miles driven.

The state weight tax rate is 0.75 cent per pound for cars weighing up to 4,000 pounds, 1 cent per pound for cars between 4,000 and 7,000 pounds, 1.25 cent per pound for cars between 7,000 and 10,000 pounds, and $150 for cars over 10,000 pounds.

Car Make/Model Weight (pounds) 2010 registration cost (Honolulu County)
Honda Civic DX 2,630 $187.18
Porsche 911 Carerra 3,075 $208.55
Mercedes E350 Sedan 3,825 $244.18
Toyota Sienna 4,586 $292.00
Ford F-150 XLT 5,319 $328.50

Car owners must pay additional weight taxes to their home county. In the City and County of Honolulu, the tax rate is 2.5 cents per pound for commercial vehicles and 2 cents per pound for passenger and non-commercial vehicles weighing up to 6,500 pounds. There is a $12 minimum.

In Hawaii County, the rate is 1 cent per pound for commercial vehicles and a half-cent per pound for passenger vehicles, with a $6 minimum.

Maui County’s tax rate is 1.5 cents per pound for commercial vehicles and 1.25 cents per pound for passenger vehicles, with a $6 minimum.

And in Kauai County, it’s 2 cents per pound for commercial vehicles and 0.75 cent per pound for passenger vehicles

Cars are a Matter of Choice, in Many Cases

So does a weight-based tax disadvantage a lower income family with a heavier but less valuable car to pay higher taxes than a millionaire who drives a lighter but pricier vehicle?

Kalapa says no, because it’s up to the consumer what car they buy.

“It wouldn’t make a lot of sense if you don’t have a lot of money to buy these (heavy) vehicles because you’re going to pay more in weight taxes and fuel taxes,” he said. “It’s not a matter of unfairness as it is a matter of choice. It’s your choice to smoke, it’s the same thing with vehicles.

“If you want to drive a heavier vehicle, it’s your choice and you’re going to pay for that privilege. If you’re going to impose a heavier burden than someone driving a lighter vehicle, you’re going to pay for it.”

Other tax experts point out that while it’s possible for a lower income family with a heavy clunker to be hit harder by the tax than a millionaire with a convertible, it’s not black and white.

“The relationship between weight and household income is not consistent,” said Sallee, who teaches courses on U.S. tax policy. “Wealthier families tend to own SUV’s these days, which are heavy. Some sports cars are certainly light, but so are economy cars that are owned by lower income folks. Add to this that pick-up trucks tend to be owned less by the wealthiest, and you start to see that the picture is not totally clear.”

Transportation Taxes Not Based on Equity

Unlike income taxes, which are typically based on one’s ability to pay, transportation taxes tend to be based on benefits received, said Fred Giertz, an economics professor at the Institute of Government and Public Affairs at the University of Illinois and former executive director of the National Tax Association.

“It depends on how you make your judgment about equity,” Giertz said. “If you think fees for autos should be based on ability to pay, a poor family should pay less than a rich family. That’s typically how we do it for income tax. But most states don’t do that with regard to transportation. They treat transportation as a benefits-received tax – the more you use a road or facility, the more you pay. The argument is if you drive a lot, you should pay more than if you don’t drive a lot.”

The tax is earmarked for special fund solely dedicated to highway maintenance and construction, Kalapa said. The vehicle weight tax represents a small sliver — about $100 million — of Hawaii’s $5.4 billion in total tax revenue, he said. That’s about 2 percent.

But the difference in road damage caused by a small car versus a large car is miniscule compared to the difference between that caused by heavy cars and big rig trucks – which do far more damage to roads than any passenger vehicles, Giertz said.

“An SUV is bigger and causes more damage but not a huge amount more,” he said. “But a big truck does a lot more damage.”

The General Excise Tax Still Takes the Cake

House Rep. Marcus Oshiro, chair of the House finance committee, said that he’s heard little outcry about the tax from his constituents in the 39th District, but acknowledged that a weight-based tax may burden large families that need bigger cars.

“To a degree, it’s somewhat regressive on those who have larger vehicles, trucks, vans, SUV’s and larger families,” he said. “Our constituents spend a lot of time on the road getting from home to work in Honolulu and taking their kids to soccer, church, shopping. We know that for a lot of them, having a large vehicle is a necessity.”

Rep. Sharon Har, who last year opposed a bill that would’ve raised all state vehicle fees, including the rate of the state weight tax, said the tax may be somewhat regressive, but not as regressive as the general excise tax.

“I try to keep it in context,” Har said. “You can make the argument it is regressive, but it’s relative. You can make the argument that people from disadvantaged demographics may not be able to afford a two-door convertible. But in my district, there are a lot of families who fit in the affordable housing bracket. Most of them drive Corollas, Civics, very fuel efficient cars.”

The Highways Modernization bill SB 1611, introduced in the state Senate in 2009, proposed the following:

  • Raise the state fuel tax from 17 to 27 cents per gallon
  • Raise the state vehicle registration fee from $25 to $45
  • Raise the state vehicle weight tax from ¾ cents to $2.75 per pound for cars up to 4,000 pounds; from 1 cent to 3 cents per pound for cars between 4,000 and 7,000 pounds; from 1.25 cent to 3.25 cents per pound for cars between 7,000 and 10,000 pounds; and from $150 to $450 for cars weighing more than 10,000 pounds.
    Raise the rental car surcharge tax permanently to $3 per day. Currently, the tax is $3 per day, but is supposed to go back to $2 after Aug. 31, 2011, according to a measure passed in 2008. (Act 226, Session Laws of Hawaii 2008)

The proposed increases to fees and taxes were to support a six-year plan to modernize the state’s highways. It passed in the House and Senate but died in committee.

DISCUSSION: *What do you think of Hawaii’s tax policy to charge vehicles by weight instead of value? Chime in!

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