Municipalities are constantly looking for ways to fund improvements in local infrastructure. Wheel taxes have been around for more than 50 years, but not many Wisconsin municipalities currently take advantage of them. Could a wheel tax be the right funding option for your community?
What is a wheel tax?
A wheel tax is a local, annual vehicle registration fee. Wisconsin law allows counties and municipalities to levy wheel taxes, which are added to a driver’s $75 annual state registration fee. The Wisconsin Department of Transportation collects the fee and pays it to the county or municipality, less an administrative fee.
Wisconsin requires municipalities to spend wheel tax revenue for “transportation-related purposes” only. If necessary, communities may offset wheel tax revenue by reducing property tax funding of transportation projects. This frees municipalities to allocate more property tax revenue to other purposes.
Wisconsin communities with wheel taxes commonly charge between $10 and $30 annually, but $20 a year is the most common wheel tax charge. While residents won’t likely rejoice at the idea of paying a wheel tax, the Wisconsin Department of Transportation reported that, even including a $20 municipal wheel tax, Wisconsin has lower vehicle registration fees and gasoline taxes than Illinois, Iowa, Michigan, and Minnesota.
Why are wheel taxes popular?
A small number of Wisconsin cities and villages, 20 out of about 600, and counties, 9 out of 72, impose wheel taxes. However, Wisconsin Policy Forum reported that only four communities imposed wheel taxes in 2011. Wheel taxes’ popularity has skyrocketed in the past eight years.
Residents notice the negative impact of deteriorating community roads. Between constituent demands, property tax levy limits, and falling inflation-adjusted state transportation funding, wheel taxes can be an attractive solution to funding necessary road improvements that may otherwise go unresolved. Wisconsin law doesn’t limit wheel tax increases.
The Wisconsin Legislature has discussed changes to require voter referendums for wheel taxes. The legislative outlook is currently unclear for Wisconsin wheel taxes, but as of now, any municipality can choose to impose a wheel tax without feedback from residents.
Questions on whether a wheel tax is the right move for your community? Please contact an expert at R/M today.
About the Author
Edward F. Maxwell
Edward joined Ruekert & Mielke, Inc. (R/M) in 2017 as a financial analyst. Before joining R/M, he worked in private-sector finance, analyzing capital investments, forecasting expenses and revenue, and crafting department budgets. At R/M, he creates financial solutions for all clients, from municipalities to corporate businesses.