The Department of Revenue estimated that in 1999, vehicles owned by local units of government and school buses owned by school districts consumed a combined 51.9 million gallons of fuel and sent approximately $13.5 million in local funds back to the state to pay the state’s gas tax.

During the recent fuel price increase, the Wisconsin Department of Administration requested and was granted a supplemental $327,000 for unanticipated motor fuel price increases in fiscal year 2000. The Bureau of State Tax Policy estimates that inflation in fuel prices and other costs may push the state gasoline tax from 26.4 cents per gallon to 30.3 cents per gallon as of April 1, 2001.

Local governments fund increased motor fuel costs out of reserves otherwise used for emergencies, having no alternative funding sources.  

The Problem

It is not good practice for one level of government to tax another. It's even worse when the state provides local governments with general transportation aids to improve and police local streets and highways and then taxes the fuel consumed by the street department trucks and police cars used to perform those services.

Since 1978, the federal government has exempted local units of government from paying the federal gas tax. The state does not apply the gas tax to gasoline or diesel fuel sold to the federal government.

 The Solution

During the 1999-2000 legislative session, 50 state representatives and 10 senators recognized the absurdity of one government taxing another, co-sponsoring AB 405, to exempt local units of government and the school districts from the state gas tax.

The 2001 Legislature should exempt local units of government and school districts from the state gas tax.