ST. PAUL — With just a few days left of the 2023 Legislative session, Democratic-Farmer-Labor lawmakers are considering raising Minnesota’s gasoline tax and creating a new fee on deliveries to help fund transportation.
Many of the bills forming the upcoming state budget have passed or have been signed into law, but House and Senate lawmakers continue to negotiate on the transportation bill. As they try to find sources of ongoing revenue for transportation, the delivery and gas taxes have emerged as potential new moneymakers for the state.
A proposed new gas tax would tie the state per-gallon tax on gasoline to the rate of inflation, raising it beyond the current charge of 28.5 cents a gallon in the future. The proposal has not been finalized and exact figures are not yet available.
Asked about the tax at a Thursday Capitol news conference, Senate Majority Leader Kari Dziedzic emphasized the proposal’s role in paying for infrastructure upkeep.
“First of all, I would call it a road maintenance fee,” Dziedzic said. “So we'll just clarify that it is to help improve road maintenance.”
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A 75-cent state fee on most retail deliveries is also on the table as DFL lawmakers continue to debate taxes. The House version of the tax bill would include that fee on deliveries like food and Amazon shipments. Items like medication would be exempt.
Early estimates say it would bring in about $175 million a year starting in 2025.
House Speaker Melissa Hortman said House Transportation Chair Frank Hornstein and Senate transportation chair Scott Dibble, both Minneapolis Democrats, have hinted both will be part of the final transportation package.
DFL lawmakers have said the 75-cent delivery fee was an alternative to raising the gas tax, which is generally an unpopular option. Colorado recently enacted a delivery tax of 27 cents.
When asked by reporters on separate occasions this month on whether he’d support the gas tax hike and delivery fee, Gov. Tim Walz said he supports creating new sources of ongoing revenue for the transportation system. Walz in 2019 pitched a 20-cent tax hike on gas.
Republican lawmakers say the state shouldn't have to raise any fees or taxes considering the state has a historic $17.5 billion budget surplus.
"Fees, fees, fees is what's going on," said Senate transportation minority leader John Jasinski, R-Faribault, when asked Thursday about the transportation budget process. "We have not seen any of the language on the revenue increases or the new taxes. ... We've done some policy changes, some good things, but there's a lot of bad increases out there."
DFLers argue much of the surplus is one-time money and the state needs dedicated ongoing revenue streams.
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A gas tax increase and the delivery fee are just two new taxes transportation conference committee lawmakers continue to mull as they craft their final bill.
Transportation bills passed by both the House and Senate included increases to motor vehicle registration tax. The House version of the bill is expected to bring in more than $700 million in the next four years.
The current tax is $10 plus 1.25% of the base value for a passenger vehicle. House legislation calls for that to increase to 1.915% for vehicles purchased before November 2020, and 1.95% for vehicles purchased after then. Senate legislation calls for a slightly lower increase, 1.54%.
In 2022, the average price of a new vehicle was $48,000, according to auto valuation and research publication Kelley Blue Book. The House version of the legislation would increase the average registration of a new $48,000 vehicle from $610 to $946.
Vehicle registrations in Minnesota drop down each year for 10 years after the purchase until the fee is $35.
Both the Senate and House transportation bills raise the vehicle sales tax from 6.5% to 6.875%. It’s expected to bring in more than $200 million in additional taxes in the next four years.
Lawmakers must conclude their business by May 22.
Follow Alex Derosier on Twitter @xanderosier or email aderosier@forumcomm.com .
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