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
Anonymous says
Where does Miller want us to believe that money paid for license tabs ends up? Certainly, it must be going to provide such dubious benefits such as sex change operations for rapists and/or murderer illegal immigrants who come here from everywhere but South Africa? Maybe all the money is piled up in front of the State Capitol Building for a huge wiener roast?
By performing a search for the destination of license tab fees, here’s the AI result…
Money raised by the Minnesota vehicle registration tax (commonly known as “tab fees” or license tab fees) is constitutionally dedicated to the Highway User Tax Distribution Fund (HUTDF). This revenue is used entirely to support the state’s transportation infrastructure, specifically for the construction, maintenance, and operation of roads, bridges, and related transportation systems.
The funds are distributed according to a formula set by the state constitution and legislature to the following areas:
Trunk Highway Fund (62%): Used by the Minnesota Department of Transportation (MnDOT) for the construction, repair, and maintenance of state highways and interstates, as well as the operating costs of the Minnesota State Patrol.
County State-Aid Highway Fund (29%): Distributed to all 87 counties for building and maintaining the county state-aid highway system.
Municipal State-Aid Street Fund (9%): Provided to cities with populations over 5,000 for state-aid streets.
Flexible Highway Account/Set-Aside Funds: A portion is set aside for town roads and bridges.
Key Facts About the Spending
Dedicated Funding: The Minnesota Constitution requires that registration taxes be used “solely for highway purposes”.
High Revenue Generation: Tab fees raised just over $1 billion in the 2025 fiscal year.
Recent Changes: The 2023 Legislature updated the formula for calculating fees to increase funding for transportation, as the highway system ages and repair needs increase.
County Wheelage Tax: In addition to the state tax, many counties collect a “wheelage tax” ($10-$20) at renewal, which is dedicated specifically to that county’s road and bridge repairs.
Electric Vehicle (EV) Fee: Electric vehicle owners pay an additional $150 surcharge to account for not paying the gas tax, which also goes into the HUTDF.
With the preceding in mind, for those inquiring minds who want to know more…
Here are a couple of websites that address the preceding: https://www.house.mn.gov/hrd/pubs/mnhwyfin.PDF
and https://dps.mn.gov/divisions/dvs/vehicle/vehicle-fees
How much are you paying for damage to your vehicles due to poorly maintained roads? But doesn’t it feel better if you are paying more for damages to tires, wheels (rims), suspension system and alignment? At least that money goes to a for profit business, rather than the government. If you peruse the linked article, at the bottom of the page, you’ll see that Minnesota ranks only slightly behind Tennessee for having the lowest cost of repairs due to poor road conditions, i.e., $282/year versus $278/year. Minnesota’s lofty ranking didn’t just happen by accident. And no, Elon Musk, Jeff Bezos, Mark Zukerberg, Bill Gates and their ilk did not pay to make this happen. Alternatively, if you moved two states to the east, i.e., Michigan, you could pay an average of $686/year for vehicle damage due to poorly maintained roads, a $404/year increase.
Some states shift more of the burden for road maintenance to fuel tax, which doesn’t stir up as much animus, because its hidden. Most people don’t realize that its there, somewhat like the additional money we’re paying out due to tariffs. That does punish those who must commute longer distances to their place of employment or cannot afford to purchase a more fuel efficient vehicle. Perhaps some states draw upon their general fund to pay at least part of the cost of road maintenance, although that places a burden upon people who don’t even own a motor vehicle.
Presumably, those who can afford to buy, drive and insure late model vehicles might also be able to pay somewhat more for their annual license tab fees, which is the idea behind a progressive income tax as well.
Perhaps Miller would prefer that Minnesotans simply allow their roads/bridges to fall into disrepair, deferring the costs into the future. Perhaps unbeknownst to him, deferring maintenance can oftentimes lead to higher costs in the long run. Simply skipping oil changes may save you money in the short run, but if you wait until your vehicle develops a major problem, you’ll likely be out a lot more money. Maybe Miller would be much happier if the license tab fees were substantially lowered for the most expensive vehicles, with the burden shifted onto those who own much older, less expensive vehicles.
Of course, if you aren’t well to do, but are convinced that the wants of the ultra wealthy are far more important than your needs, you can always dig deep into your pockets and hand them a donation. Just don’t expect them to say “thank you”, since by virtue of being rich, its only what they deserve.
The Good Book tells us that “man cannot serve two masters.” With that in mind, Minnesotans might do well to ask themselves which master Miller serves: the ultra-wealthy or those who are not wealthy, which more likely than not includes you.
Drew Holmes says
Thank you! Please get these reduced!