Report: Wheel tax revenue rises rapidly, tripling in four years

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Revenue collected from wheel taxes in Wisconsin has tripled in the last four years as more local governments adopt the additional charge on drivers to offset stagnant state aid and restrictions on property-tax increases, according to a report released on Wednesday.

The nonpartisan Wisconsin Policy Forum finds the amount local governments raised from wheel taxes rose 12.1% in the past year, marking the seventh straight year of double-digit growth. In 2017, Wisconsin drivers paid $20.7 million in total in wheel taxes. In the latest fiscal year, those fees had risen to $62.8 million.

A decade ago, only four Wisconsin municipalities had a wheel tax. By next year, 44 local governments will have the charges in place.

Cities, counties, villages and even one town have turned to local wheel taxes to offset stagnation in state aid, which has remained flat in recent years, and tight restrictions imposed by the state Legislature on property-tax increases. Local governments have largely enacted the fees to pay for road work and transportation projects but have also used the revenue to offset property taxes.

“If the state continues to limit other sources of new revenue for local governments in Wisconsin, they may turn increasingly to vehicle registration fees to help cover the growth in their ongoing costs,” according to the report. “Currently, state law provides local governments with few options in how to impose and administer those fees.”

The Policy Forum report finds that the growth in wheel-tax revenue may slow in the short term, thanks in part to government budgets that have fared better than expected during the pandemic, federal COVID-19 aid and other contributors.

In recent years, local governments have also explored enacting a “transportation utility fee” to help pay for road construction. The village of Buchanan in Outagamie County and the city of Neenah, for instance, have each enacted fees on property owners for such purposes.

Because of fees on both the city and county level, vehicle owners in Milwaukee and Madison each pay about $150 a year in registration fees. The state, meanwhile, increase its yearly registration fee for most vehicles to $85 in 2019 as part of a plan to spend more on transportation.

“Without significant changes at the state level, more motorists in Wisconsin will likely find additional charges when future vehicle registration renewals hit their mailboxes,” according to the report. Follow @natebeck9