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Monday, August 23, 2004

Terminator 2: Special Effects Magic at the DMV

Amazing. It’s just amazing. After two weeks the media is still taking the State Performance Review seriously. Perhaps the sound-bite journalists are scared by the size of Volume 4, the 2,500 page body of the Review with its 279 government issues and over 1,200 recommendations. "If it’s that big", the reporters think, "it must be true. And if it’s true, then what’s the point of reading it?"

Recommendation GG #36 sounds like a sure winner. "Implement Biennial Vehicle Registration for Efficiency and Lowered Costs" We can get rid of those horrible lines at the Department of Motor Vehicles if Californians can register their cars for two years at a time, instead of every year. Cut the paperwork in half! Instead of registering 24 million cars every year, register 12 million but make the registrations last twice as long. Sheer genius! And what’s more, the Performance Review says this will save the state’s General Fund $1,259,000,000 over five years. Why didn’t someone think of this before?

But look a little more closely. This just another camera trick from the special effects crew. Those guys know how to morph a fading bodybuilder into a liquid metal Terminator android, so making a tax increase for California drivers look like DMV reform is easy work. If you have the right software, you can even do it at home on your PC.

For those who are interested, here’s how the trick works: Look first at the fiscal effects table in the Report. See how all of the $1.259 billion savings happens in just one year, 2006-07? That’s a sign it’s probably a 1-shot timing gimmick. Then lift the lid of the key explanation paragraph, the one that says:

"The conversion to biennial renewal is envisioned to take place over a two-year period to achieve proper workload leveling and a reduction in transactions. New vehicle transactions, vehicles registering for the first time in California and renewals on which smog certification is due would be subject to biennial registration the first year. The remaining vehicles would be proportionately converted the following year."

Pretend that this paragraph is a little toy mechanical box, with a slot marked "DMV", a switch labeled "biennial registration", and a tiny screen showing "$$$ collected". The instruction booklet for your DMV Registration Toy explains that "biennial registration" means "paying two years taxes up front." Now turn on the toy, get some cars and gradually feed them through the "DMV" slot. You don’t need a California-size fleet of 24 million vehicles to play with, because it works the same with only two. Let’s call them R2 and D2.


At first the screen above the DMV slot shows both R2 and D2 registering each year and paying $100 each, for a total of $200 per year in registration fees. But watch what happens when you turn the "biennial registration" switch. R2 pays $200 in the changeover year, while D2 keeps on paying $100 under the old system. Total for DMV: $300. The next year R2 is already paid up and owes nothing more, but now it’s D2’s turn to be "proportionately converted" and pay the $200. From that point on, each pays $200 in alternate years. When the switch was turned, the DMV got an extra $100, and afterwards kept on getting the same $200 as before.

Of course, R2 and D2 are the losers in this tax speedup. (Hint: there’s no tax refund in the year they are sent off to the junkyard.) And once you start biennial registration, you can’t stop. (The DMV loses $100 if you turn the "biennial" switch back to the "Off" position.) Now close the lid on the registration toy so the batteries won’t run down, multiply by 24 million vehicles and their owners, and there’s the $1.259 billion.

The Review admits that this hidden increase in the car tax may pinch a bit:

"The average renewal customer pays the department $110 for annual registration, and will owe $220 under a biennial program. The lowest priced registrations will increase from $40 to $80. These are manageable figures for most customers, but may be difficult for low-income persons."

The Review carefully avoids suggesting any way to assist them.

Won’t this hurt businesses that own a lot of vehicles? Well, trucks over five tons or hauling interstate will be exempt, so they won’t bear this "unacceptable financial burden". What about auto rental companies? "Not to worry", says the Review, "we’ll just let them stick it to the customers":

"To mitigate these concerns for rental car companies as an example, legislation could reinstate the ability of these businesses to pass on VLF costs to customers as a line item in rental contracts, a provision of law that expired several years ago. With the reinstatement of this so-called "pass-through" device, a single line-item on rental contracts will increase by only a few dollars for customers."


So what did you expect?
Mercy?
From a Terminator?






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