Falling revenues have plagued governments of sizes small and large in the past years, but perhaps those hardest hit are counties small in population but large in size. Maintaining roads and bridges in a metropolitan county with a large tax base (and small area) such as Ramsey County in Minnesota or in Minnehaha County in South Dakota is less of a financial challenge than in its rural counterparts. The “wheel” or “wheelage” tax has, in recent times, been counties’ answer. The wheel tax adds a flat fee per unit (wheel) of a vehicle, typically with motorcycles exempt and a limit on the number of taxable wheels (conveniently limited to 4 in many cases). The tax/fee is added to the host of charges that make up the annual licensing fee for motor vehicles, but unlike the other charges, is earmarked for the county instead of a larger state general or special fund. Thus, rather than pushing for a statewide gas tax increase to bolster the highway fund coffers, counties can turn to wheel taxes to boost their own highway budgets.
In Minnesota, the 7 metro counties have had the authority, since 1972, to levy a $5 per vehicle wheel tax although until 2007, it had last been used by Hennepin in 1975. Now, however, all of the metro counties except for Hennepin and Ramsey utilize their ability to levy the tax. For fiscal year 2008, over $4.5 million was raised from the $5 tax with administrative costs of $86,501 to the Department of Vehicle Safety. The $4.5 million represents approximately 9/10ths of 1% of total motor vehicle revenue.
In my home state of South Dakota, wheel taxes have been a common revenue source since their allowance in 1986. Currently 38 of the 66 counties levy the tax. In Beadle County, where I grew up, the issue of raising the wheel tax from $2 a wheel to the maximum allowed $4 a wheel is currently waging. With a population of only 17,000, the county struggles to maintain its 573 miles of paved roads, and 140 bridges (2/3rds of which are over 70 years old). The county hopes to raise an additional $200,000 from the tax increase if it passes in the June election.
While the wheel tax can be considered a regressive tax, the ease of its administration and relatively small amount makes it a great tool of county governments to fund transportation maintenance. In Minnesota, increasingly common LGA reductions may be partially offset by increasing wheel taxes.