By Senator Jeremy Miller
Over the past several weeks, I have been hearing from many constituents sharing their frustration about the cost of their license tab fees. People have been asking why they are higher and why they are not decreasing each year like they used to.
I introduced a bill that would roll things back to what they used to be, but I also thought it was important to share why the fees have increased. It happened as a result of legislation that passed in 2023.
When the 2023 legislative session began, Minnesota had a budget surplus of over $18 billion. I pushed for permanent tax relief, including tax relief for families, small businesses, and the full exemption of taxes on Social Security benefits.
You may also remember that this was during a Democrat trifecta, meaning the House, Senate, and Governor’s Office were all in Democrat control. When one party has full control, it doesn’t matter which party, often you lose the checks and balances that lead to better solutions. This was the case with the surplus as well as the license tab fee increases.
Instead of providing significant relief to hardworking Minnesotans, the entire budget surplus was spent. State spending increased by an unsustainable 40%. And on top of it all, taxes and fees were raised by $10 billion, including license tabs.
Tab fees in Minnesota are based on a percentage of your vehicle’s original manufacturer’s suggested retail price (MSRP). Under the old system, that percentage dropped by 10% every year after the first year. It was consistent. People noticed and were able to plan for their relief.
Two key changes were made in 2023: First, the base tax rate was raised. Second, the depreciation schedule was dramatically slowed. It was a double whammy.
Kelley Blue Book estimates the average vehicle loses about 40% of its value in the first three years. Under the new system, a 3-year-old vehicle is treated as if it is still worth 90% of its original price. In other words, when you register your car, you are paying the state as if your car is worth more than what it would actually sell for.
The new structure also makes Minnesota a major outlier compared to our neighbors. For a typical new car, Minnesota tab fees are now 36% higher than in Iowa, 366% higher than in Illinois, and more than 700% higher than in both Wisconsin and North Dakota.
The bill I’m working on would reverse these changes, but it will take bipartisan support in the House and Senate along with the governor’s signature.
When people stop me at a sporting event, the store, or at the gym to talk about this, they aren’t doing it as Democrats or Republicans. They are just frustrated by what is going on. They want a system that is fair and reflects what their vehicle is actually worth.
The bill I am working on will get us back there, and I’m hopeful we will be able to find bipartisan support to get it done.
Best,
Jeremy
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