Gov. Tim Walz' proposed budget would increase Minnesota's gas tax by 20 cents per gallon, from 28.6 cents to 48.6 cents per gallon. The state’s gas tax would then become the fourth-highest in the U.S.
“If Governor Walz gets his way, driving in Minnesota is going to get a lot more expensive,” John Phelan, an economist at the Center of the American Experiment, said.
Minnesota is the 14th-most expensive state to own a car, according to a report by U.S. News and World Report, having the highest rental car taxes in the U.S. Fourteen percent of the state's roads are in poor condition, the American Experiment points out.
Compared to its neighbors, it costs $687 more to own a car in Minnesota than in Iowa, $1,311 more than in Wisconsin, $1,797 more than in South Dakota, and $2,889 more than in North Dakota.
With depreciation factored in, the report lists all costs associated with owning a car in Minnesota. Insurance averaged $791; fuel costs, $1,145; and average repair costs, $385. The report includes the state title fee, license plate fee, and registration tax based on the vehicle’s age and value when new. It also factors in the vehicle property tax of $469.47 and sales tax of $2,347.35.
According to a report from the Tax Foundation, Minnesota’s 14.2 percent car rental tax is nearly triple that of its neighbors – Illinois, Iowa and Wisconsin, which each hold five percent car rental taxes. North Dakota’s is 3 percent; South Dakota’s is six.
Over the past 30 years, excise taxes on car rentals have expanded to 44 states, according to the foundation, in addition to taxes levied by county and municipal governments. The Tax Foundation is pushing for car rental tax reform, arguing the number of taxes and fees levied “make it difficult for consumers to determine how their tax dollars are being used.”
According to a 2017 infrastructure report card produced by the American Society of Civil Engineers, 14 percent of Minnesota’s 140,000 miles of roads are in poor condition, earning a D+ grade. Compared to its neighbors, 13 percent of North and South Dakotas’, and 9 percent of Iowa’s roads are in poor conditions.
According to a Kiplinger state tax study, Minnesota is one of the “Least Tax-Friendly” states. Increased taxes and costs are driving people out of the state, the American Experiment argues. In its The State of Minnesota’s Economy: 2018 report, it found that between 2011 and 2016 Minnesota lost residents in every age group, according to IRS data.
“Minnesotans are already some of most heavily taxed people in America,” Phelan says. “With state revenues at near record levels and a projected surplus of $1 billion in the next biennium, there is no justification for making their driving more expensive. It might well be a luxury in Gov. Walz’ urban electoral heartlands, but try getting by without a car in Greater Minnesota. If ‘One Minnesota’ doesn’t mean this it doesn’t mean anything.”