New Minnesota transportation law includes fuel tax increase
A new Minnesota transportation law includes regular fuel tax rate increases.
Gov. Tim Walz has signed into law a two-year, $1.3 billion transportation budget that creates new revenue to repair roads and bridges.
The state has not increased transportation revenue since 2008. The action followed the Interstate 35W bridge collapse in Minneapolis.
Nearly two decades later, the Minnesota Department of Transportation says there is a $27 billion gap over the next 20 years that must be addressed.
Tax and fee increases
The legislature voted along party lines to send to the governor the two-year spending plan that permits the state to address road, bridge, and transit needs.
Included in the new law, HF2887, is a 50-cent fee for retail deliveries in the state that total more than $100. The fee will be collected on everything from Amazon deliveries to food deliveries.
The delivery fee is estimated to raise $59 million annually.
Small businesses with sales below $1 million during the previous year are exempt from collecting the fee.
Also included in the final version is a 0.75% metro area sales tax increase to cover Twin Cities transit improvements. The tax is expected to generate about $920 million over two years.
Another provision routes vehicle repair and replacement parts purchases to the state’s road fund. The money now is sent to the general fund.
Most vehicle registration fees, driver’s license fees, and new vehicle sales tax will also increase.
Most new taxes and fees take effect on Jan. 1. The delivery fee will begin collection on July 1, 2024.
Fuel tax
The most controversial provision in the new law is a fuel tax increase that is estimated to raise $155 million over the next two years. The tax increase was added to HF2887 near the end of the regular session.
The provision allows the 28.5-cent excise rate on gas and diesel purchases to be indexed to inflation. There is a 3% cap on annual increases.
The change is estimated to increase the excise rate by a nickel over four years.
Critics say it was wrong to add the provision to the bill at the last minute without allowing both chambers to fully discuss the option. They add that the tax and fee increases are unnecessary because the state has a $17.5 billion surplus.
Other notables
The new law also includes a requirement to study speed cameras. Starting Aug. 1, holding a cellphone while driving will also be prohibited.
One more provision clarifies that drivers must move over for any vehicle stopped along the roadside with lights flashing. If lights are not flashing, the move over requirement would still apply when at least one person is “visibly present outside the vehicle on or next to a street or highway having two lanes in the same direction.”
State law now applies the protection to stopped emergency vehicles with flashing lights activated. Vehicles covered under the rule are ambulance, fire, law enforcement, maintenance, construction vehicles and tow trucks.
The move-over rule revision takes effect July 1. LL