Johnson County Council to consider vehicle excise, wheel tax increase

Nobody likes a tax increase, but the Johnson County Council is leaving all options on the table to fund $390 million in road work over the next five years.

At their Monday meeting council members discussed a potential increase of the county’s wheel tax and vehicle excise tax.

The vehicle excise and wheel tax are taxes charged on license plates. The vehicle excise tax is charged for cars, trucks, motorcycles and small trailers, while the wheel tax is charged for large vehicles like dump trucks, semis and buses.

The county first established this tax in 2008 and it is up for another renewal this year, as the tax is set up to sunset after 60 months unless the council takes action to renew it.

The vehicle taxes were originally on the council’s budget as a simple renewal. The ordinance before the council had one change – a reclassification of small trailers to be charged under the vehicle excise tax rather than wheel tax.

Given the county’s road funding needs, several council members said they would like the highway department to present them an option to raise the tax. That’s possible because a state law passed in 2017 allows counties to raise the tax rates to double the previous maximum rate, which was $40.

Luke Mastin, the county’s highway supervisor, did not originally present an increase because the tax has been unpopular in the past.

“I currently have no problem with raising the rates, but the issue that we’ve had with this revenue source is that it is a somewhat regressive tax. It has the potential to hurt those that are below the median average income,” Mastin said. “I will take as much money as you’re willing to offer but this hasn’t been a popular revenue source. Unfortunately, it is the only local statutory revenue source we have.”

The county’s taxes are stacked on top of the state’s vehicle taxes, which generally makes up the larger portion of annual registration fees. The county currently charges $7.50 for motorcycles, $15 for trailers, $25 for cars and trucks and $40 for large vehicles.

According to data complied by the highway department, county residents paid $4.24 million in vehicle taxes in 2021. Of that, $1.78 million was distributed to the county.

If the county doubled the rates, that would double the money for roads. Several council members said that is something the county has to consider, especially when the next best option is raising income taxes.

“I agree it (raising the taxes) could disproportionately affect some, but it seems like it, kind of, is the solution to some of what we are facing,” said Rob Henderson, county council member. “Not in lieu of an EDIT (income) tax but in lieu of a higher rate. This is more of a user rate because you are using the roads.”

However, other council members were opposed to the idea of raising the tax.

Council member James Ison expressed concerns with the idea of stacking new taxes. He said he would rather see the county raise income taxes, while leaving vehicle taxes alone.

“I support an EDIT but I think we need to prioritize. We are facing the steepest inflation we have faced in three decades. As Mike Reuter (the county’s financial consultant) said we are brinking on another recession,” Ison said. “I don’t think it is fair for us to try to make up for all of this at once on the back of taxpayers who are hurting.”

Council member John Myers said the tax would disproportionately affect seniors, who he speculates use county roads less than others.

“My thinking is that there are seniors out there who drive very little on our roads who we would be doubling what they pay (to the county) to drive their car,” Myers said. “I feel like this isn’t a fair tax to them.”

Before making a decision, council members say they need more information. They want to know who an increase would affect the most, so consensus was given for Mastin to look into the demographics of county residents who pay the taxes. The council also asked Mastin to look at how the county would stack up to others if the tax was doubled or increased.

The council will need to take some action later this year on the vehicle taxes, whether to raise them or keep them the same. Council members voted unanimously to renew the vehicle tax ordinance on first reading.

The council may still raise the taxes if they choose to edit the ordinance before the second reading. Mastin said the council should target their September meeting for the second reading to have the fee in place for next year.

The council also talked about other ways to make up the road funding shortfall. Those include an income tax increase and repurposing tax revenue collected by the public safely local income tax that was approved to fund the county jail expansion. These are both ideas that were imagined in previous meetings of the council on road funding.

Henderson presented scenarios that would involve moving half of the county’s jail expenditures to the general fund and moving all of the jail expenditures to the general fund. In both scenarios, the county would still lack the funding it needs for immediate road needs, such as the planned reconstruction of Smith Valley Road at the future Interstate 69 corridor. Henderson said the funding for that project likely wouldn’t be available until 2029.

Council members also debated the merits of using any or all of the jail tax increase to fund roads, given that the tax was raised for criminal justice expenses. For example, the tax increase could fund the jail and a community corrections or mental health facility in the future if the county does not repurpose it for roads.

The Daily Journal requested to see numbers attached to the scenarios, but Shena Johnson, the county’s attorney, said the documents could not be disclosed because they are deliberative materials.

No specific information about how much the income tax increase would be if it were to be approved was made available at the meeting.