More places get wheel taxes in Wis, but maybe there's a better way to fix the roads

Although it’s not as rapid an increase as we saw in the 2010s, the Wisconsin Policy Forum noted that wheel taxes in Wisconsin continue to go up in the mid-2020s.

Statewide revenues from local option vehicle registration fees – commonly called wheel taxes — totaled more than $70 million in fiscal year 2025. This marks a dramatic increase from a decade ago, when such fees raised less than $10 million for local governments throughout Wisconsin.

These revenues underwent a very rapid period of growth across the state from 2015 through 2021, during which time the number of municipalities, towns, and counties with wheel taxes more than tripled. After 2021, total statewide revenue growth from wheel taxes began to slow considerably.

But then in fiscal year 2025, total statewide wheel tax revenues increased 12%, their largest annual increase since 2019. This is due in part to the fact that more communities have adopted them, as shown in Figure 1. Large cities that recently adopted wheel taxes include Eau Claire, Fitchburg, Oshkosh, Sun Prairie, and Wauwatosa.

We are now at a point that nearly half of Wisconsin's population lives in a community that has a wheel tax, compared to less than 1 in 6 a decade ago.

I will add that the City of Milwaukee was allowed to put in a 2% sales tax in 2023 to add to its revenue-generating abilities, unlike the vast majority of communities in Wisconsin. But most of those Milwaukee sales tax funds can only be used to shore up the City’s pension funds or pay for police staffing (see page 3 of this report for that information).

As a result, Milwaukee has had to turn to wheel taxes as a source of funding for road repairs. And with those local taxes being required by state law to be a flat fee regardless of the type of vehicle or light truck, the Policy Forum notes that keeping the wheel tax at the same amount means that more of Milwaukee’s property tax and other revenues have to be tapped for the rising cost to fix roads.

A look at how Milwaukee’s wheel tax revenue has changed relative to inflation illustrates how the buying power of these dollars recently has eroded. In fiscal year 2022, just after increasing its wheel tax, Milwaukee collected a total of $10.2 million in inflation-adjusted revenues. By 2025, those revenues had eroded to $9.2 million on an inflation-adjusted basis.

With this dynamic at play — and other local revenue options tightly constrained under state law — some communities that previously adopted wheel taxes are now considering raising them further. The city of Milwaukee first imposed its wheel tax in 2008, at $20, then increased it to $30 in 2021. Mayor Cavalier Johnson proposed increasing it in the 2026 budget, and the city’s Common Council ultimately adopted an $11 increase, bringing it to a total of $41.

And it’s not just Milwaukee that is dealing with this concern, as the Policy Forum notes that inflation-adjusted wheel taxes are actually lower than they were 4 years ago.

Relying on flat-fee wheel taxes doesn’t seem to be a sustainable or equitable way for municipalities to pay for transportation and transit costs in our state. While the increase in shared revenues has put off some of the strains for a couple of years, it’s also worth remembering that smaller communities and towns got much larger increases in those funds, while the cities and counties were somewhat left behind, despite being the communities whose local roads and streets are more likely to take on traffic from both residents and non-residents.

Seems like there needs to be some more reforms in how local governments in Wisconsin can raise funds. And the easiest one to me is a variation of something Governor Evers wanted to do in the most recent budget.

Allow counties, other than Milwaukee County, to impose an additional sales tax of up to 0.5 percent and allow municipalities with populations over 30,000, other than the city of Milwaukee, to impose a sales tax of up to 0.5 percent to diversify local revenue sources and better empower local governments to fund police and fire protection, transit, roads, and other important services, if approved by local referendum. This includes the flexibility to allow counties to set their tax rates in 0.1 percent increments from 0.1 to 1.0 percent. Municipalities would also have the flexibility to set their rates in 0.1 percent increments from 0.1 to 0.5 percent.

But the GOP Legislature didn’t go for that, so communities that range in population from Madison to Manitowoc are constrained when it comes to paying for roads and other needs. Which makes it no wonder why those communities are the most likely to turn to wheel taxes on their residents to make up the difference.

So why not allow cities, villages and counties that have a vehicle registration fee to levy a local sales tax of up to 0.25%, with a portion of those sales taxes being designated for the funds that would be raised from those registration fees? In return, those communities would have to end their wheel taxes. I’d then throw in an additional provision where all Wisconsin communities are allowed to levy an additional sales tax of 0.25%, with ½ of those funds used to limit property taxes on a dollar-for-dollar basis.

It also would pass off some of the taxes to pay for local roads and services from community residents to out-of-towners who go to those communities to shop, eat, and visit. That seems like a fairer situation, and since sales taxes are connected to the prices of what is taxed, it also doesn't leave the communities as susceptible to falling behind if inflation picks up.