Wheel Tax

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Boone County Highway Department County Option Income Tax (COIT)

The Wheel Tax is officially known as the Local Option Highway User Tax (LOHUT). It passed Indiana's General Assembly in 1980 and is the only OPTIONAL tax specifically for road funding. 

The following 27 (of 92 total) counties have opted to impose LOHUT: Allen, Brown, Clinton, Daviess, Dubois, Fayette, Fountain, Gibson, Hendricks, Howard, Jay, Marion, Monroe, Montgomery, Nobel, Owen, Parke, Perry, Posey, Putnam, Rush, Sullivan, Union, Vanderburgh, Vermillion, Vigo, Warrick.

LOHUT is comprised of two separate taxes that must be passed concurrently. These two taxes are the County Motor Vehicle Excise Surtax (IC 6-3.5-4) and the County Wheel Tax (IC 6-3.5-5).

The County Motor Vehicle Excise Surtax, which is paid annually at the time of registration, applies to automobiles, motorcycles, and trucks under 11,000 pounds. It can either range from 2% to 10% of the excise tax (but cannot be less than $7.50) or it can be a flat amount from $7.50 to $25.00 on each motor vehicle. The Excise Surtax must be the same rate or amount on each applicable motor vehicle.

The annual County Wheel Tax applies to vehicles (including farm vehicles) not subject to the Excise Surtax and includes buses, recreational vehicles, semi-trailers, tractors, light trailers, heavy trailers, trucks and heavy trucks. Wheel Tax exceptions include vehicles owned by the state, political subdivisions, religious organizations, or nonprofit youth organizations. The rate may be between $5.00 and $40.00 per vehicle, and there may be different rates for each vehicle class.

Excise Surtax revenues may be used to construct, reconstruct, repair, and maintain roads (a processing fee of 15 cents per vehicle goes each year to the Bureau of Motor Vehicles). Wheel Tax revenues may be used for the same purposes and may also be used as a contribution to a Multiple County Infrastructure Authority. Assuming a flat Excise Surtax of $20 per vehicle and a Wheel Tax tax ranging from $5.00 for light trailers to $30.00 for heavy trucks, the resulting annual revenues of $911,118 would be distributed as follows: Boone County - $719,856; Lebanon - $99,277; Zionsville - $61,745; Thorntown - $13,180; Jamestown - $6,713; Whitestown - $5,097; Advance - $3,890; Ulen - $1,360.

For LOHUT to be imposed, the County Council must, after giving public notice, concurrently pass an ordinance adopting the Excise Surtax and the Wheel Tax. If there is not a unanimous vote, then it must pass at two different meetings. If LOHUT is passed after December 31 and before July 1, then it will be collected starting January of the following year. If passed after June 30, then it will be collected two years later.

Wheel Tax Speech to Lebanon City Council on Monday, April 14, 2003, 7:30 PM at the Lebanon Municipal Building:

Mayor Acton, President Lewis, members of the Council, my name is Aaron Smith and I reside in Lebanon.

Thank you for the opportunity this evening to (1) present reasons why a Boone County Wheel Tax is unwise at the present time, (2) use Boone County's 2002 Annual Financial Report to show how plenty of money is available for current road maintenance and construction, and (3) discuss how ample funds will be available for future road needs without a million-dollar Wheel Tax.

Please do not hesitate to make a comment or ask a question at any time during my presentation.

Do you have these handouts that I distributed earlier?

Handout number one lists the sources of data for various parts of my presentation.

First of all, why is a Wheel Tax unwise at the present time?

This is one of my favorite books. The title is The Tipping Point. The subtitle is How Little Things Can Make a Big Difference.

Tipping points can be good or bad.

I think the good tipping points that result from adequate road maintenance and construction revenues are obvious to all of us.

However, imposing a million-dollar Wheel Tax is unwise because it would unnecessarily create too many bad tipping points.

Many of your constituents who would pay a Wheel Tax have recently experienced bad tipping points.

Recent and impending tax increases will create more bad tipping points.

Indiana’s Sales Tax increased 20 percent this past December 1st. What this means is that an average family of four with a $25,000 income will pay $152 more in sales tax this year.

Because of new property reassessment rules, some Lebanon homeowners in older, well-kept neighborhoods will have to bear the expense of higher property taxes this year. Some of your neighbors are on fixed incomes and cannot afford the higher property taxes they will receive.

The property tax situation will get worse. Taxes on machinery and equipment used in the production of finished goods, which averages 30 percent of the inventory tax statewide, will be shifted from manufacturers to all other property taxpayers in 2004. The remaining 70 percent of the inventory tax will be shifted in 2007.

The inventory tax shifts will result in a 2.3 percent Property Tax increase for the average Boone County residential homeowner in 2004 and a 7.6 percent increase in 2007. As shown in Handout number two, owners of one hundred thousand dollar Boone County residences will pay an average of 64 dollars more Property Tax in 2004. 211 dollars more will be paid in 2007. Of course, the inventory tax shifts to Lebanon homeowners will be greater than these averages because of all the distribution centers in our midst.

Lebanon homeowners will pay higher property taxes and higher utility costs than necessary if two overbuilt and extravagant projects are constructed as currently proposed. The cost of the marble-floored Lebanon Library addition and renovation may go as high as eight million dollars. The cost of the new Municipal Building, which would be 3.4 times larger than the existing Municipal Building, is likely to exceed 7.5 million dollars.

The million-dollar Wheel Tax proposal is unwise because it would add yet another bad tipping point at a time when Boone County has plenty of money available for current road maintenance and construction.

Handout number three is Boone County's latest Annual Financial Report. Line 4 shows that the Highway Department had a cash balance of more than 2.9 million dollars on December 31, 2002.

Handout number four presents some Boone County Highway Department Data for selected years. Please look at the Handout Data for the Highway Department's 2003 Budget. The estimated cash balance at the end of this year is more than 2.6 million dollars. One million of these reserve dollars could clearly be spent this year without imposing a Wheel Tax.

Ample County Option Income Tax revenue will also be available for future Boone County road needs without a Wheel Tax. Please refer to Handout number five, which presents some Boone County COIT Data for selected years. It is interesting to note that COIT Receipts per Citizen increased from $98 in 1991 to a $345 average from 1997 through 2002. This 252 percent increase was considerably more than the 25 percent inflation increase for the same time period.

When the Boone County Council first passed the COIT effective July 1, 1986, the primary selling point was that this new tax would be used for road improvements. The Boone County Council broke its promise in this year's budget to use COIT money for road improvements. For the first time, no COIT money was given to the Highway Department. This decision does not make sense because plenty of COIT money is available.

The Handout number three Annual Financial Report line 112 shows a COIT cash balance of more than 7.9 million dollars on December 31, 2002. None of this money has been spent this year, and proper use of this cash balance will make COIT funds available for road improvements many years in the future.

Some County Council members would like to use at least 3 million dollars of the COIT cash balance to build a Convention Center at the Boone County 4-H Fairgrounds. Without accounting for increased maintenance costs, the economic payback period of the Convention Center would still be 33 years. The potential Highway Department money that would be spent to build a Convention Center is not worth the imposition of a Wheel Tax. The proposed Convention Center is a project that should be postponed to a future year where the accumulated Innkeepers Tax would provide a greater down payment.

Some County Council members apparently would like to use the COIT cash balance to help buy Boone County Utilities. However, the Indiana Utility Regulatory Commission recently ruled that the Boone County Commissioners are not currently in a position to run and operate the utility. If Boone County Utilities should lose its certificate of territorial authority, its assets should be sold to a reputable private firm. Whatever COIT funds are reserved to buy Boone County Utilities should go to the Highway Department.

COIT revenue is being used to pay off the Jail debt. The last 1,058,310 dollars of this debt will be paid off this year. The 2004 and 2005 COIT revenue that would have been used to pay off the Jail debt has been dedicated to purchase a new radio system for the Sheriff's Department. This leaves the 7.9 million dollar COIT cash balance available to supplement the Highway Department in 2004 and 2005. After 2005, another one million dollars should be available for the Highway Department.

Boone County legal expenses exceeded one million dollars in the 14 months between January 1, 2002, and March 1, 2003. Legal expenses of this magnitude should not be allowed in the coming years. At least 500 thousand of the dollars spent on legal expenses last year should be available each year for future road improvements.

Because the incomes of individuals in the County have declined, Boone County COIT distributions in 2004 will be 3.1 percent, or a little over 419 thousand dollars, less. The COIT cash balance of more than 7.9 million dollars can easily cover this decline and still have plenty of money left over for the Highway Department.

The COIT cash balance is not needed to supplement County General Fund spending. Handout number 3 Annual Financial Report line 1 shows a December 31, 2002, County General Fund cash balance of more than 3.6 million dollars. If the County's 2003 Property Tax revenue is the same as 2002, the December 31, 2003, cash balance will be more than 2.6 million dollars. It is clear there is sufficient County General Fund cash balance without using the 7.9 million dollar COIT cash balance.

Indiana law allows the Boone County Council to provide up to 8 percent in additional homestead credits paid from COIT revenues. This could be as much as 1.7 million dollars a year. Proper management of County spending and the COIT cash balance can result in both a homestead credit increase and sufficient funds for road improvements.

The Wheel Tax would provide a dedicated source of highway funds that is divided between Boone County and its city and towns. A Wheel Tax is not needed as another source of dedicated funds. The County's city and towns should advise the County Council to distribute the road improvement COIT money available now and in the future in the same proportion that would be provided by the Wheel Tax. Also, handout number 3 Annual Financial Report line 6 shows a December 31, 2002, cash balance of more than 1.1 million dollars for current Local Road and Street needs.

Some state legislators would like to use gas tax proceeds for non-highway spending purposes. They think they can demand that counties pass a Wheel Tax instead of receiving the gas tax money that citizens have already paid. Our gas tax was raised three cents on January 1, one cent of which is earmarked for county highway, road and street budgets. I hope we will not meekly let state legislators think they can get away with a Wheel Tax extortion in return for the gas tax money we have already paid.

Some Boone County residents mistakenly believe the Wheel Tax would be used to pave gravel roads. Handout number 4 shows that a total of 77 miles of gravel roads have been paved since COIT was first imposed almost 17 years ago. The Wheel Tax would not be dedicated to paving roads; it would be used to replace the COIT money that has been unnecessarily taken away from the Highway Department. The Highway Department has no schedule of gravel roads to be paved after the imposition of a Wheel Tax.

In summary, a Boone County Wheel Tax is unwise at the present time because it will unnecessarily create too many bad tipping points for too many of your constituents. The Highway Department has a sufficient cash balance to meet current road maintenance and construction needs. The 7.9 million dollar COIT cash balance, and the more than 13 million COIT dollars paid by Boone County citizens each year, provide ample funds for future road needs without a Wheel Tax. Instead of letting County Council members know that you support a Wheel Tax, I hope you advise them to live up to their promise to use COIT revenue for road improvements.

Thank you again for this opportunity to express my opinion regarding the proposed Wheel Tax. Do you have any comments or questions?

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This page was last updated on 03/19/10 .