Car Tag Proposal Would Mean No More Tag Deductible

State Question 691 is on the ballot next Tuesday and if it passes it would lower the cost of Oklahoma car tags. But the savings might not be as great as they seem, if you itemize deductions on your tax return.

Almost everyone will save on car tags under the proposed state question 691. If it passes the most expensive tag would cost $85 dollars. However, there is another cost buried in the details -- a change in itemized deductions.

Under the new law, the tag fee would no longer be deductible, because it's considered a flat fee instead of a property tax. "Your car tags will no longer be deductable on your income tax as they always have been, said state representative Todd Hiett, (R) Bristow. “You will no longer be able to deduct that expense, so although a few people will save on excise and everyone saves on their tag, they'll pay more in income taxes."

The difference may seem subtle, but figures from the State Office of Finance indicate it's a $19 million dollar difference. 28% of Oklahomans itemize. Last year, just in tag fees, they deducted $14.5 million on federal and $4.6 million on state returns.

If the state question passes, tag fees will drop, but the itemization will also disappear. Supporters of the question are nearing the end of a television blitz and now have a high profile supporter. Governor Keating announced he voted for the question by voting absentee.

Hiett, the main opponent of the state question, says he wasn't surprised. "If you look at Governor Keating's best interest, he can afford to buy new cars,” he said. “I've said all along if you buy new cars this would benefit you and maybe you should vote for it." But Hiett says the people he represents buy used cars, the same people most likely to pay more excise taxes if the state question passes.

All but $20 of current tag fees is deductible for each of the 2.5 million cars currently registered in Oklahoma.