Minnesota transportation funding plan includes fuel tax increase, and more

By Keith Goble, Land Line state legislative editor | 3/27/2013

A $3 billion transportation funding package under review in Minnesota would increase the state’s fuel tax rate by about 10 cents over multiple years. It includes provisions that would also boost the license-tab fees and extend the state sales tax to all vehicle parts and services.

The state’s tax rate on gas and diesel is 28.5 cents per gallon.

Sponsored by Rep. Ron Erhardt, DFL-Edina, the bill would increase the tax rate by 9.5 cents to 38 cents per gallon over four years. Specifically, the tax would increase 5 cents the first year and 1.5 cents for each of the next three years.

Speaking on the issue during a recent transportation hearing at the state capitol, Edina, MN, Mayor Jim Hovland testified that there’s always resistance to increase the fuel tax.

He urged lawmakers to take the steps necessary to help usher in a “Golden Age of transportation for Minnesota.”

Critics say that while the intentions of the bill are good it would hurt too many people. One lawmaker highlighted truckers, delivery drivers and cab drivers.

“It would be devastating for many businesses. It would wipe out their (profit) margins,” Rep. Jim Newberger, R-Becker, told lawmakers.

Gov. Mark Dayton has said he doesn’t think it’s the right time to increase the fuel tax.

A separate provision in the bill would increase license-tab fees for passenger vehicles by at least $10.

The general sales tax would also be extended to include vehicle repairs and service. The new revenue would be routed to transportation. Revenue from the vehicle lease sales tax would also be dedicated for roads and bridges.

Local governments would also be able to raise new revenue for road and bridge work.

Currently, seven counties in the Twin Cities area are authorized to charge a wheelage tax. Typically, it is a flat tax on each vehicle in a county.

The bill would expand authority to collect a wheelage tax statewide.
Counties in Greater Minnesota could also levy a local sales tax for transportation, without voter approval. State law now requires voters to sign off on local taxes.

The bill – HF1449 – is in the House Transportation Finance Committee.

To view other legislative activities of interest for Minnesota, click here.

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