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Minnesota has the highest car rental taxes in America

If Governor Walz gets his way, driving in Minnesota is going to get a lot more expensive. His revised budget, released last week, retains a 70%, 20 cent per gallon hike in the state’s gas tax, from 28.6 cents per gallon to 48.6 cents. Gas taxes in our state would rise from 28th nationally to 4th.

I mentioned this at a talk I gave in Rochester recently. Someone in the audience, a former state employee, said that that ranking of 28th understated things. If you factored in insurance and other fees, he argued, Minnesota would rank higher.

The data seems to support this argument. Last year, U.S. News & World Report ranked the ‘50 Most Expensive States to Own a Car‘. As Figure 1 shows, Minnesota came in 14th nationally, with an annual cost of owning a car of $12,835. Compared to our neighbors, that was $687 more than 29th ranked Iowa ($12,148), $1,311 more than 37th ranked Wisconsin ($11,524), $1,797 more than 42nd ranked South Dakota ($11,038), and $2,889 more than 48th ranked North Dakota ($9,946).

Figure 1: Annual cost of car ownership, 2018

Source: U.S. News & World Report

As U.S. News & World Report reported,

Insurance costs in Minnesota are on the high side, at $791. You can also expect annual fuel costs of $1,145 and average repair costs of $385. The state collects a title fee of $8.25 and a flat fee of $6 for the license plate, plus a registration tax (separate from the sales tax) based on the vehicle’s age and its value when new. The state’s registration tax table shows that a new vehicle worth $36,113 would cost $461 if registered in December of 2017. Minnesota will also collect $469.47 in property tax and $2,347.35 in sales tax. Altogether, with depreciation factored in, a year of ownership in Minnesota costs $12,835.

Another example comes from the Tax Foundation. As Figure 2 shows, they rank Minnesota’s car rental tax rates the highest in the United States.

Figure 2: Car rental taxes

highest car rental tax rates in your state? rental car taxes, rental car excise taxes, peer-to-peer car-sharing

Source: The Tax Foundation

Perhaps we’re paying for quality? Or perhaps we aren’t. The American Society of Civil Engineers reports that 14% of Minnesota’s roads are in poor condition. The figure is 13% in North and South Dakota and just 9% in Iowa with their lower car ownership costs.

“If you drive a car, I’ll tax the street”, as The Beatles sang. Minnesotans are already some of most heavily taxed people in America. 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.

John Phelan is an economist at the Center of the American Experiment. 

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