FUNDING TRANSPORTATION

A fuel tax (also known as a gas tax) is a tax imposed on the sale of fuel. You pay both a state and federal fuel tax when you fill up your tank. The state fuel tax can only be spent on transportation – it’s in Minnesota's constitution! The federal fuel tax is also explicitly reserved for transportation spending in law.

The majority of all fuel tax revenue is spent on the roadway system — roads, bridges, sidewalks and on-road bicycling and walking facilities. While 100% of the state gas tax goes to roadways, some federal fuel tax revenue also goes to support transit, rail crossing improvements and occasionally off-road bicycling and walking facilities.

Current Fuel Tax

Historical Fuel Tax Rate in Minnesota

State Fuel Tax Rates

For passenger vehicles, the amount you pay in registration tax is determined by your vehicle's original value and age. Revenue from tab fees (processing fees you pay when you register your vehicle each year) and wheelage tax are also included in this funding category. Revenue from vehicle taxes and fees goes entirely to support the roadway system — roads, bridges, sidewalks and on-road bicycling and walking facilities.

Current law sets a base fee of $10 to register your vehicle, but then adds an additional cost of 1.25 percent of the value of the vehicle. The value of the vehicle is depreciated by 10 percent each year until year 11. For year 11 and on, the minimum amount paid is $35.

Learn more about vehicle registration tax

Motor vehicles sales are exempt from Minnesota’s general sales tax of 6.875 percent (or more in certain cities). Instead, most vehicles are subject to a 6.5 percent motor vehicle sales tax. The tax applies to sales by car dealers and private individuals. All revenue from the motor vehicle sales tax is dedicated to transportation — it's in Minnesota's constitution. The majority of revenue goes to supporting the roadway system — roads, bridges, sidewalks and on-road bicycling and walking facilities. However, it also provides significant support for transit throughout the state.

There is also a motor vehicle lease sales tax, which is a 6.5 percent tax on vehicle leases in Minnesota. Transportation revenue from this tax is split in terms of supporting roadways and Greater Minnesota transit.

Learn more about vehicle sales tax.

Most of Minnesota’s public airports are the responsibility of local units of government. However, they receive the majority of funding for construction projects from federal sources. State sources also contribute to construction projects but are a larger source for airport maintenance and operations activities. At the state and federal level, much of this funding comes from air taxes and fees.

Most port terminals in Minnesota are privately owned and funded entirely through private sources. However, Minnesota’s waterway navigational channels and locks and dams are maintained through the U.S. Army Corps of Engineers. The funding for this work comes from federal waterway taxes and fees like:

State funding for ports and waterways comes from the non-transportation sources and is accounted for in that part of the summary

Minnesota Ports & Locks

Freight railroads are primarily funded through spending by private companies. However, there are a few publicly owned railway that use public funding. The freight rail system is also occasionally supported by public funding through public-private partnership projects.

Existing passenger rail service, Amtrak, is funded partially by public funding, specifically public funding at the federal level. Planning and development of future passenger rail service comes primarily from state funding sources.

In general, most public funding for the rail system is from non-transportation sources and is accounted for in the personal, business & other taxes part of the summary. However, a small portion of rail state funding comes from fees.

In addition to the major funding sources for transportation like the fuel tax, vehicle taxes and fees, and vehicle sales tax, there are a number of smaller sources of transportation revenue. These smaller sources mostly go towards funding roadways and transit. They include:

Not all public transportation funding comes from transportation sources. It also comes from personal, business or other general taxes. For some parts of the system, like railways, this makes up a lot of the funding. For other parts, like roadways, this is a small portion. However, it’s important to note that all parts of the system are funded to some extent by non-transportation sources. Usually, this funding gets to transportation via direct appropriations or transfers from the federal or state general funds.

As an example, Congress transferred $70 billion from the Federal General Fund to the Transportation Trust Fund in 2016 to help pay for the transportation spending bill they passed in 2015. Over $140 billion dollars have been transferred from the Federal General Fund to support transportation — mostly roadways — since 2008.

Learn more about the federal and state general funds: