Sunday, December 02, 2001

Ohio weighs tax change on leases

Lump sum would be paid up front

By Kate Macek
Enquirer Columbus Bureau

        Ohioans looking to lease new cars may soon find it more expensive to drive off dealers' lots.

        State lawmakers hoping to plug a $1.5 billion hole in the state's $44.9 billion two-year budget are debating a proposal that would “accelerate” a tax on auto leases. The measure would bring a one-time estimated $170 million into state coffers through 2003.

        Instead of the tax being paid in monthly installments, it would be consolidated into a lump sum that is paid up front.

        Car dealers and leasing agents say that change would hurt Ohio's automobile industry, consumers and ultimately the economy. Greater Cincinnati auto dealers worry about losing customers to Kentucky dealers.

        Sen. Mark Mallory, D-Cincinnati, calls the idea a tax increase, saying it “defies the whole concept of leasing.”

        “The very structure of leasing is that you can get more car for less (money) and little or no out-of-pocket expense,” Mr. Mallory said.

        Ohioans won't necessarily find a better deal in Kentucky. That's because Ohio residents must pay the sales tax no matter where they buy their cars.

        Ben Sawyer, assistant vice president of Greater Cincinnati Auto Leasing, said having to pay the tax up front would dissuade consumers from leasing.

        If leasing companies or individuals would not be able to shell out the extra cash up front, dealers said they will be forced to finance the tax within the lease. The interest on the tax would raise monthly payments.

        Another problem with the measure could arise if leases are terminated early. Consumers would not be credited for those months that cars were not in their possession.

        John Betagole, vice president of National Fleet Leasing at Mike Albert Leasing in Cincinnati said lawmakers' quick-fix plan would be detrimental to the state budget in the long run because it eliminates a steady monthly stream of tax payments from auto leasers.

        “What are they really getting out of the deal?” he said.

        Supporting lawmakers see a fast way to boost much needed tax revenues while avoiding raising taxes on businesses.


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