Sticker shock: Vehicle renewal costs jump 20%
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Minnesota's new formula for vehicle registration taxes led to a 22% increase in the amount drivers paid in the first year of the changes.
Why it matters: When state Democrats passed the new tax structure in 2023, it wasn't clear how much it would cost motorists. But an Axios analysis shows it amounted to an increase of $170 million in 2024, most of which was paid by owners of newer vehicles.
How it works: The new law not only increased the tax rate for newer vehicles, it also slowed the rate at which a vehicle's value declines.
- That means people who bought new cars in the last few years are finding that their annual payment isn't dropping like it used to, even though their car is worth much less than what the state says it is for tax calculations.
Context: The average driver paid $178 in registration taxes in 2024, a 20% jump over 2023.
- Yes, but: Nearly half of all vehicle owners paid less in 2024, Greg Loper, vehicle services program director for the state, told Axios. That's because vehicles older than 10 years got a $5 reduction in the minimum fee, which is now $20 instead of $25.
What we're watching: GOP state Rep. Kristin Robbins, who is running for governor, made rolling back the changes a centerpiece of her recently released tax policy agenda. Another GOP candidate, Chris Madel, also criticized the changes.
- "Everyone knows Tim Walz pulled a fast one by artificially slowing down the depreciation on cars when calculating license tab fees," Robbins said, adding that she's heard from constituents who are frustrated with the higher annual fees.
- The Maple Grove Republican declined to specify how she'd backfill the revenue generated by the change, saying she plans to unveil her plans for spending cuts in the future.
The other side: Sen. Scott Dibble (DFL-Minneapolis) told KSTP that the state's gas tax isn't keeping up with maintaining the nation's fourth-largest roadway system.
- All $933 million collected in tab fees goes to the highway tax distribution fund, Loper said.
Torey Van Oot contributed to this report.