Two years ago, Gov. Walz proposed raising Minnesota’s gas tax by 20¢– a 70 percent increase. Fortunately, this effort yielded no results and the proposal failed to pass. However, a new proposal has emerged to raise the gas tax by 5¢ over the next 4 years – an 18 percent hike.
House Democrats’ transportation funding bill would raise the tax on a gallon of gas by 5 cents over the next four years. It also increases the motor vehicle sales tax and directs the Metropolitan Council to add a half-cent sales tax in certain Twin Cities communities to support transit. The bill would change how tab fees are calculated and add a luxury vehicle surcharge.
Currently, on average, Minnesotans pay the 30th highest gas tax in the nation According to the Tax Foundation. If raised, Minnesotans will potentially pay, approximately, 33.60¢ –outranking all of our neighboring states.
While lower than Walz’s 70% tax hike of 2 years ago, this new proposal is certainly not without cost. For one, gasoline is an essential input in economic activity. Raising the gas tax will raise the cost of providing numerous goods and services; costs that will be passed down to consumers through higher prices. Additionally, Minnesotans will also pay more at the pump, with low-income individuals paying more in taxes as a proportion of their income.