Kentucky Drivers Face Higher Tag Prices Due to Rising Value of Used Vehicles

Unless Kentucky's government intervenes, higher used car prices will continue to drive license plate tag prices higher in the state, officials said this week.

The state uses the National Automobile Dealers Association book values to set the values of used cars, which is used to calculate the percentage of the car's value to determine what residents have to pay in taxes on the car, according to the Lexington Herald-Leader.

"Overall, the 2022 valuation increases for vehicles compared to vehicles the same time last year is up approximately 40 percent," Kentucky Department of Revenue director of valuation Cathy Johnson said in a January 6 letter to county property value administrators.

For example, a 2014 Ford F150 was valued at $9,400 last year and the tax would have been around $133. Its value now is $15,800 and the tax would be about $193, Fayette County Property Value Administrator David O'Neill told the newspaper.

The values for used cars are set by the state in December, when Car and Driverreported that the average used car in the U.S. had risen in value by nearly 35 percent since January 2021.

Supply chain shortages that have slowed the production of new cars have also skyrocketed the prices of used cars over the past year, leading to situations like the one in Kentucky where the amount residents pay in taxes has also increased.

However, legislation has been introduced in the state to address the issue by altering the standard the state uses to determine car values or using valuations from previous years to keep the taxes from rising too much.

Used Car Price Increase Pandemic Taxes
Due to supply chain shortages caused by the pandemic that have slowed the production of new cars, the prices of used cars have skyrocketed over the past year. Above, used cars are displayed on a sales lot on June 9, 2011, in San Rafael, California. Justin Sullivan/Getty Images

The Kentucky constitution says the state has to set values based on fair cash values that come from a standard manual.

"It's unfortunate," said O'Neill. "I am hoping the legislature will be able to address this by possibly using valuations from two years ago."

A House bill would allow the revenue department to use a different standard to determine a car's value than the current method. The bill also would allow people who already paid car tags to get a refund for overpayment. The measure was introduced by Republican Representative Patrick Flannery and several other House members.

A Senate bill would direct the revenue department to use last year's vehicle property values to determine car tax rates in 2022 and 2023. The bill was filed by Republican Senator Jimmy Higdon.

Governor Andy Beshear said Monday that there was an effort on social media to blame his administration for the increase in vehicle taxes. The administration has no control over the value of used cars, he said.

"This administration has not increased vehicle tax rates," Beshear said. "That's not what is happening. What has happened is your car is worth more."

The Associated Press contributed to this report.

As the value of used cars increases due to the pandemic, Kentucky vehicle property taxes are increasing also. In this photo, Nissan cars are displayed at a dealership on July 25, 2019 in New York City. Getty