The automotive industry may be bigger than you think – a new study from the Center for Automotive Research (CAR) has determined that around 13 percent of all state tax revenue comes from companies and people in the automotive sector.
Completed by CAR's Sustainability and Economic Development Strategies group, the study looked at the financial tax impact of the state and federal governments. CAR determined the tax impact of the automotive industry to include "taxes and fees collected due to sales, employment, and business operations, as well as the use of the automobile." The main four contributing pieces, according to CAR, are sales taxes on motor vehicles; personal income tax of automotive employees; vehicle use taxes, licenses, and fees; and business taxes. In total, the auto industry contributed some $91.5 billon to state government tax revenues and more than $43 billion to the federal government tax revenues in 2010 alone. For frame of reference, the federal government had 2010 tax revenues of roughly $2.1 trillion – making the automotive sector to be about two percent of the total federal tax revenues.
The breakdown shows off some pretty large numbers: the sales tax collected by states in 2010 for new and used vehicles, and parts and services came to a grand total of $30,021 million, with California, unsurprisingly, raking in the most of any state. The majority of this revenue (51 percent) came from new car sales tax; a third came from used cars and the remaining 14 percent from service and parts. Vehicle sales tax doesn't contribute to the federal revenue because sales taxes vary between states.
Although a smaller piece of the pie, the personal income tax of automotive employees brought in $15,197.2 million, with all but $860.1 million going to the federal government. Michigan led all other states with the most amount paid in auto-related personal income tax, unsurprising thanks to the strong presence of the automotive industry in the state. Interestingly, workers at parts suppliers and dealers paid roughly twice as much in personal income taxes to both the feds and the state than their counterparts at automakers.
Another source of revenue which varies by state is vehicle use taxes, license, and fees. A total of $88,905.1 million was raked in by both the state and federal governments in 2010; $59,905.1 million by the states, and a $29,000 million by the federal government. States with high gas taxes and various registration fees brought in the most tax revenue here – some of the top earning states include California, Texas, Florida, Pennsylvania, and Washington.
It's not just people who are helping to fill the various governments' coffers: a sizeable chunk of tax revenue in the automotive industry comes from business taxes. Some $753,565,347 was paid in taxes and license fees my automakers, suppliers, and dealerships in 2010. Unsurprisingly, given its high car-to-person ratio, California brought in the most revenue from dealerships ($64,115,677). The top three states to rake in taxes from the automakers and suppliers should be no shock either: Michigan ($52,042,501), Indiana ($47,660,809), and Ohio ($39,840,510) – all of which are manufacturing hotbeds for both domestic and foreign manufacturers.
Also, it's worth noting that CAR did not include any data on the tax revenues from the retail aftermarket sector – which is estimated to have more than $150 billion in total sales across the country.
The totals are staggering: $30 billion is generated in sales taxes on vehicles, $874 million from direct employment – although, CAR points out that "this number increases to over $4 billion when taxes from intermediate and spinoff jobs are included" -- $89 billion from use fees and taxes, and $750 million from business taxes.
Source: Center for Automotive Research