Wheelage tax: a decision best made locally
Minnesota’s 87 counties are divided as to whether or not they opt for a wheelage tax, the placement of an additional fee on license tabs that’s used strictly for county road and bridge funds.
It’s an unusual, and these days a much needed, example of how at times well thought out political differences are not a bad thing.
More than half of the state’s counties employ the tax, but a sizable share of them chose not to have one. If you look at a county-by-county map, much of the story can be illustrated through geography.
Almost every county from the southwestern corner to slightly north of the Twin Cities metro area has one. Two of the exceptions are Blue Earth County (which includes Mankato) and Winona County. They’re both Minnesota State Colleges and Universities four-year college sites, and also have large county seat cities.
In most of west central and northern Minnesota, the handful of counties that have wheelage tax are located in or near the Red River Valley. They’re primarily rural farm counties, with property tax bases strongly supported by agricultural land.
The Association of Minnesota Counties keeps its member counties up-to-date on the option to use wheelage taxation by reminding those that haven’t enacted one that they must do so by a yearly deadline or wait an additional year.
AMC’s notice led to a very well-rounded look at the pros and cons during a recent Yellow Medicine County Board of Commissioners meeting in Granite Falls. On one hand, it was pointed out that overall county taxes would not necessarily have to be raised, not if the new revenue was matched with a reduction in general property tax levy.
It was also noted, however, that a wheelage tax would still become an additional way to tax citizens. Over time, with predictable inflation-based increases in operating expenses, it’s likely that at least one and maybe both tax amounts would have to climb unless options could be found to provide all needed services at less of a cost.
State lawmakers impose a limit on wheelage tax at 20 percent of each license fee. Counties, in turn, have usually placed self-imposed limits on the tax by having less of a percentage. Area counties such as Lyon County, Lincoln County, and Murray County, all have less than a 20 percent total.
It all comes down to what seems most fair in terms of how to distribute the tax burden for road and bridge maintenance.
A wheelage tax means that all vehicle owners pay some kind of a tax for county roads. It includes any vehicle that’s primarily housed in the county, even if the owner buys license tabs somewhere else. Some exemptions are allowed; such as motorcycles, ATVs and collector cars.
People who are affected by both property tax and vehicle license related tax often see very little difference. For others, especially households who own more than two taxable vehicles, there’s a greater tax burden. Others, such as retirees who still own property but only have one or two cars, are likely to get some tax relief.
Every driver does use local roads, at least almost every driver. At the same time, a fairness question comes into play with places where population is concentrated in only one area. An example would be St. Louis County, which stretches from Duluth to the Boundary Waters.
Many people might pay a little more for roads they’ll realistically never use. The response would be that they could use them if necessary or if they just felt like going out for a drive. Each county road is a service available to everyone.
Neither tax option directly affects visitors, tourists, or drive-through traffic. To do that, there would a need for a toll road, a turnpike like the Jersey Turnpike, the Ohio Turnpike, and the Kansas Turnpike.
That state-imposed option does virtually guarantee revenue from drivers who go any sizable distance, since extra gas costs and extra time would outweigh a reasonable turnpike fee.
Again, as with any other kind of tax, there has to be consideration for the potential downside. Drivers with an eye on their overall budgets might respond by not eating out or not shopping as much.
Whatever conclusion each county might reach, the wheelage tax reflects a situation that’s not “one size fits all”.
Minnesota has more geographic and economic diversity than almost any other state. Wisconsin and Michigan are similar as neighboring Northern Great Lakes states. Texas is the only other state I can think of that has the same sort of mix involving industry, agriculture, mineral resources and ports.
It’s good that all 87 counties have a chance to address part of their road-related tax code on their own. It’s one of those decisions that’s best left to local government units.