Who Adopts a Wheel Tax and Why?

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Michael R. Ford
June 12, 2026

In the 1990s, Wisconsin, like many states, began placing restrictions on the ability of local governments to raise revenues as they see fit. At a macro level, the proliferation of property tax levy limits, Taxpayer Bill of Rights amendments and other similar initiatives are framed as taxpayer revolts. At the micro level, however, the fiscal restrictions placed on local governments have forced local government leaders to seek out new revenue options.

The Wisconsin wheel tax is an illuminating case study of how local governments react to fiscal restrictions over time.

First, some context. Wisconsin municipalities are, under state law, only able to increase their annual property tax levy by a percentage equal to net new construction in their community. Meaning, if there is no new construction of taxable property, a municipality cannot increase its levy. Another major source of funding, user charges, is restricted in that most new user charges must be offset by a corresponding reduction to the property tax levy. All of this is to say Wisconsin municipalities do not have all that much control over their property tax levies.

Placing restrictions on the revenue side does not magically reduce expense pressures. Hence, municipalities have been incentivized to pursue other revenue options. Examples include funding portions of positions through utility fees, utilizing special assessments and turning to unpopular options like the wheel tax.

The Wisconsin wheel tax is an annual local vehicle registration fee added to the annual state registration fee. The wheel tax is imposed by local ordinance. Local governing bodies determine the amount of the fee and the revenues must be used to fund transportation-related expenses. Local governments have had the ability to enact the fee since 1967; however, it was rarely used until 2015. In fact, just four cities enacted a wheel tax prior to 2015. I am speculating as to why, but I am guessing the primary reason not to impose the tax was that it is unpopular.

But the changing financial realities of Wisconsin cities have altered the cost-benefit calculus. Twenty-seven additional cities have adopted an annual wheel tax since 2015. The amounts vary between $10 and $40 and include cities both large and small. Cities obviously adopted the tax because they wanted or needed the revenue, but are there other factors at play?

To answer that question, I examined 23 years of data to determine what fiscal and structural factors lead to municipal adoption of the wheel tax in Wisconsin.

I found (via a Cox regression model predicting adoption, for the methodologically inclined) that cities with a professional manager were three-and-a-half times more likely to adopt a wheel tax than those without a professional manager. Given the unpopularity of the wheel tax, it is not surprising that cities with an elected executive would be more likely to avoid a wheel tax. In addition, the policy diffusion that occurs within the professional management community supports the notion that members of a common network would share approaches to addressing revenue challenges.

I also found that cities with higher levels of existing transportation funding from the state were less likely to adopt a wheel tax. This too makes sense given the wheel tax must be used for transportation expenses. Somewhat surprisingly, the ideological makeup of cities had no bearing on the adoption of a wheel tax.

Just as interesting is what happens after a city adopts a wheel tax. Does spending go up? Or is spending just redistributed? I personally was on a City Council in Wisconsin that adopted a wheel tax to eliminate special assessments for street repairs, so I was curious whether others were doing the same.

In the year a wheel tax is adopted, cities adopting the tax collected an average of $12.74 per capita in special assessments. The year after adoption, that number dropped to $9.85 and then to $9.25 the following year. That does suggest cities are using the wheel tax to offset other costs.

However, total operating and capital expenditures per capita also go up the year after cities adopt a wheel tax, from an average of $1,212.66 to $1,337.75. Thus, cities may be offsetting some expenses with new revenues, but overall are increasing expenses after adoption of the tax.

What the data alone cannot capture is the creativity of local government leaders in adapting to state revenue restrictions. I refer to this as federalism whack-a-mole, where the state imposes a new restriction, local leaders find a workaround, which leads to more state restrictions, which leads to more workarounds.

Lost in the game of federalism whack-a-mole is government performance. If financial policy decisions are primarily motivated by tension between levels of government, we are not focused on performance, and it is the citizen who pays the price.

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Author: Michael R. Ford is a professor of public administration and the director of the Whitburn Center for Governance and Policy Research at the University of Wisconsin Oshkosh.

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