Why Do Our License Plates Cost So Much?

The State of New Mexico just sent me a postcard reminding me that it is time to renew the license plate for my car and that they would offer me a small discount, amounting to a whopping $1.25, if I would do this online.  Knowing that the average turn around on anything you mail the state is over 90 days, I immediately sat down at my computer and renewed my car’s registration.

Sure enough, they gave me $1.25 discount for going online...Then, they charged me $1.55 for paying the registration fee online.

This whole license plate routine has gotten way out of hand.  (Shouldn’t surprise us:  the whole idea of hanging a permit plate on a car started in France in 1893.)  Registration and regulation of cars for the sake of safety may have started out well and good, but over the years, the primary reason for this has become simple greed.   Some states charge outrageously high fees, and while they are pushing everyone towards electric vehicles, many states charge very high additional fees to register electric cars!  In the states that base their fees on the value of your car, you can easily spend over a thousand dollars to hang a license plate on your new Tesla.

These states with ridiculously high fees also usually have state income taxes.  So, as you work to earn the money to buy a car, the state taxes your income, then collects a sales tax on the purchase of the car, charges you a registration fee plus an additional annual fee based on the value of the car, then, finally charges you additional taxes every time you gas up your car.  And while insurance companies don’t like to talk about it, every state collects sales taxes on your car insurance premiums.   At this point, you’re probably wondering why owning a car isn’t mandatory.

I think I might have a partial solution to this problem.

Back in 1915, three men worked together to better the lives of ordinary sailors—particularly the lives of civilians working aboard merchant vessels, where conditions were akin to slavery.  Sailors back then were expected to work long shifts over extended periods of time, with only short breaks, all the while subsisting on poor rations and living in absolutely horrible conditions.  For all of this, the sailor was all too often denied his wages and occasionally was  abandoned in some foreign port.  Robert La Follette, Lincoln Steffins, and Andrew Furuseth were instrumental in passing the Seaman’s Act, sometimes called the Emancipation Act for sailors.

Unfortunately, this act only extended to ships registered in America and flying the American ensign.  All too quickly, shipping companies realized that they could bypass these regulations by registering their ships in countries not covered by those measures.  At approximately the same time, countries starting raising the annual price of registering ships—think of it as license plates for boats.  Some countries, particularly Panama and Liberia, had very low registration fees and didn’t particularly care if a ship’s captain keel hauled his crew daily.  

Over time, these somewhat more malleable countries have made a few demands—a local office, a local bank account, a few employees and so forth—but even with these modest demands, the shipping companies save a fortune.

Two events hastened the re-registering of American ships.  During both world wars, ships registered in neutral countries could trade with any country they chose without fear of seizure.  And during Prohibition, a passenger ship flying an American flag was not allowed to serve alcohol.  With restrictions like this, it is not hard to see why it didn’t take long for over half the merchant vessels in the world to be registered in Liberia, Panama, and the Marshall Islands.  At one time, almost all of the income to the Liberian government came from ships that flew her flag.  

If you doubt that these registries are done just for convenience and economy, I would point out that most of these ships have never come within a hundred miles of the countries whose flags they fly, and the Liberian Ship Registry is run out of offices in Virginia.  

Today, over half the world’s maritime fleet is registered to eleven countries.  About a quarter of the vessels are registered in Panama, followed closely by Liberia, the Marshall Islands, and the Bahamas.  Panama alone has 100 times more merchant ships flying her flag than does the United States.  Mongolia is a landlocked country, yet her fleet of merchant vessels is five times the size of the fleet of the United States!

There is a general term for a ship’s flying the flag of a country for purely economic reasons:  this is called a “flag of convenience”.

Which brings us back to automobiles.  If Exxon oil tankers can register in countries without oil wells…. Well, why can’t my car be registered in a state willing to issue me license plates at a reasonable price?

There are 250 million cars in the United States.  If only 10% of those cars bore license plates from New Mexico at a reasonable price of $50 a year, that would net $1,250,000,000 a year, equal to roughly 15% of the current state budget.

Of course, New Mexico would argue the matter for two decades and appoint a commission to study it, then the commission would spend millions of dollars on legal fees. By the time our state government got around to making a decision, the only cars left would be in museums.  So, let Montana do it:  that $1.25 billion a year is about half of the state budget.

I happen to have a great name for these new and cheaper license plates: “Tags of Convenience”.