State and Local Public Finance: The Future of the Wheelage Tax

The wheelage tax is a $5 user fee/tax on most vehicles kept in a metropolitan county and is levied by the respective metropolitan county board of commissioners.?The Minnesota's?statute?that covers the wheelage tax, specifies that the revenue generated by the wheelage tax must go directly to the county?s road and bridge fund.?

As of December 2012, only the metropolitan counties had the authority to levy such a tax. The seven counties are listed below:

1. Anoka County

2. Carver County

3. Dakota County

4. Scott County

5. Washington County

6. Hennepin County

7. Ramsey County

While the metropolitan counties have the authority to levy the tax, Hennepin and Ramsey County have not imposed this tax on its residents.?In fact in 2011, the Hennepin County Board rejected?the proposition of levying the tax to raise revenue to defray the costs of building the Lowry Avenue Bridge.?Board Chairman Mike Opat said he did not support the wheelage tax because it is a regressive tax that could potentially make the poor even poorer. In this legislative session?H.F 709?and?S.F 583 want to broaden the county wheelage tax authority to all of Minnesota?s 87 counties. Additionally, they seek to eliminate the $5 cap and set a new $20 cap on this tax, beginning in 2014. Supporters of the bills, in a Star Tribune?article, pointed out that Minnesota counties are struggling in keeping up with the road and bridge maintenance costs and increasing and broadening the wheelage tax will allow all counties to generate revenue to pay for these maintenance costs. While local governments have other revenue raising options, the wheel tax is said to be more politically palatable because its funds are collected from the users and these funds stay in the county for county projects, as opposed to other taxes like a state wide gas tax, whose funds do not stay entirely in the county.? As of March 22, 2013, both the House and Senate bills have cleared their respective policy committees and will now be examined in both the Senate and House tax committees. For now, we will have to wait and see if they become law.??? Interestingly, while researching the wheelage tax, I came across a wheelage tax?blog from Jason B, a 2010 State and Local Public Finance student. In his blog, Jason foresaw that the local government aid (LGA) reductions faced by county governments would push the metropolitan counties to raise the wheelage tax from its $5 capped amount.?In our legislative session, Jason?s recommendation is certainly a possibility, and in fact if the bills are passed, they could have even greater impacts since now not only will there be an increase in the fee but also an expansion to all counties.?

Source: http://pa5113.blogspot.com/2013/03/the-future-of-wheelage-tax.html

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