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Higher car prices have Virginia localities weighing tax options

used car sales
Marta Lavandier
A line of cars are for sale at a Hyundai dealership used car lot, Tuesday, Feb. 1, 2022.

Local governments across Virginia are trying to figure out how to handle the rising value of used cars. What they decide will influence how much tax you pay.

The value of used cars typically goes down year after year. But this year something different is happening. The value of all those automobiles driving around Virginia streets is actually going up – 20% or even 30% in some cases.

"I have never seen a market distortion like this," says Phil Kellam, who's been commissioner of revenue for Virginia Beach for 25 years. He devised a system for the local government there to collect a ratio of the personal property tax they collect on automobiles.

"The City Council decided on a ratio of 75%. So in essence all personal property tax bills in Virginia Beach were reduced by 25%," he explains.

Henrico County is taking a different approach. Sheila Minor is director of finance there.

"We're using a brand new piece of legislation that was just passed by the General Assembly," says Minor. "And that piece of legislation allows localities to declare a surplus and provide a credit to our taxpayers basically giving back that surplus."

As local governments across Virginia balance their books, they'll need to figure out which option works best for them – collect a ratio like Virginia Beach, offer a rebate like Henrico or just collect the taxes on the higher value of used cars and rake in a windfall like the city of Roanoke is considering.

This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.

Michael Pope is an author and journalist who lives in Old Town Alexandria.