February 29, 2008
Last week I filled you in on the revenue increases included in the transportation bill working its way quickly through the legislature. Here’s an update with the final revenue elements of the bill that was approved on Monday after the House and Senate succeeded in overriding the Governor’s veto. More details are available on the web.
First, two items to highlight:
Low-income motor fuels tax credit. The bill provides a $25 refundable income tax credit for individuals and families in the state’s lowest income tax bracket (in 2009, income limits are estimated to be $32,720 of taxable income for married filing jointly and $22,390 for single filers). The House also added an amendment that requires individuals to be a U.S. citizen or lawfully present in the US in order to be eligible for the credit. Since the gas tax is regressive, we think it’s a positive sign that policymakers included a mechanism to try to lessen the impact on low-income families.
Dedication of motor vehicle lease sales tax adds to General Fund deficit. The bill increases the fee on vehicle rentals and short-term leases from 3 to 5 percent of the sales price. Revenue from this sales tax is gradually redirected away from the general fund - first to pay for the low-income tax credit, and the remainder to transit, roads and streets. With the state facing a $935 million deficit, it’s unfortunate that the funds to pay for the low-income credit come at the expense of the general fund - the total loss to the general fund will be about $68 million in the 2010-11 biennium.
The other provisions:
Gas tax. A 2 cent increase in the gas tax is effective April 1 and another 3 cent increase is effective October 1. There is also a gas tax surcharge to pay back trunk highway bonds. This will phase in starting on August 1 with a half cent, increasing up to a cap of 3.5 cents.
Motor vehicle registration. The bill eliminates the cap on the motor vehicle registration tax (”tabs”), but accelerates the depreciation schedule. People will not see an increase in their tabs on their previously registered vehicles.
Local option sales tax. Allows counties in the seven-county metropolitan area to impose a 0.25 percent sales tax and a $20 excise tax on vehicles sales. No referendum is required and the funds are directed to transit projects. In Greater Minnesota, counties could impose a tax of up to 0.5 percent and a $20 excise tax on vehicles sales. The increase would require a voter referendum and funds would go to a specific project.
-Christina Wessel
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Posted by Christina Wessel
February 20, 2008
See my update on the transportation bill!
I’ve been tracking the transportation bill through the House (HF 2800) and Senate (SF 2521). This isn’t a comprehensive analysis, but here are the major revenue components which together would raise several hundred million dollars each year for our state’s transportation needs:
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A 2 cent increase in the gas tax effective (roughly) the first day of the month after enactment and another 3 cent increase as of September 1, 2008.
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A surcharge on the gas tax (capped at 3.5 cents) to recover debt service needed to repay trunk highway bonds.
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Eliminates the cap on the motor vehicle registration tax, but accelerates the depreciation schedule. People will not see an increase in their tabs on their previously registered vehicles.
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Provides a $25 refundable income tax credit for individuals and families in the state’s lowest income tax bracket (in 2009 income limits are estimated to be $32,720 of taxable income for married filing jointly and $22,390 for single filers).
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Increases the fee on vehicle rentals and short-term leases from 3 to 5 percent of sales price. Gradually redirects the motor vehicle lease sales tax away from the General Fund. The funds are first used to pay for the low-income tax credit, then the remainder is distributed with 50% going to Greater Minnesota transit, 25% to metro area transit, 17.25% to county state-aid highway fund and 7.75% to municipal state-aid street fund.
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Allows counties in the metropolitan transportation area (I think potentially 18 counties) to opt-in by resolution of the county board to a half-cent sales tax increase and an excise tax of $20 per vehicle (decreases to 0.25% after June 30, 2028). The funds would be used 50% for transit, 25% for trunk highways or local roads of regional significance and the remaining for any purpose (including up to 5% for pedestrian programs, bicycle programs and pathways). This provision will expire October 2, 2008 unless at least one county in the 7-county metro area imposes the tax.
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Allows any county outside of the metropolitan transportation area to impose the half-cent sales tax and $20 motor vehicle excise tax if approved at a general election referendum. The funds raised would be dedicated exclusively to covering the costs of a specific transportation project or improvement and the tax would terminate oncde the project was completed. (The Senate amended the bill this morning to say “up to” a half-cent tax increase.)
The bill also originally indexed the gas tax to inflation beginning July 1, 2010, but this provision was removed as part of a compromise.
-Christina Wessel
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Posted by Christina Wessel
