Fair Allocation of the Motorboat Gas Tax

By Peter Murray, Wisconsin Association of Lakes
November 1, 2004

The Wisconsin Association of Lakes worked to establish a segregated Water Resources Account in 1987. The account s major funding source is the annual transfer of taxes paid on the estimated amount of fuel purchased for use in motorboats.  Nearly all other fuel taxes go to the Department of Transportation (DOT) to build and maintain roads.

The Water Resources account pays for many of the conservation programs that protect water quality, recreational opportunities, water safety, and scenic beauty in Wisconsin.  These include programs to prevent and control invasive aquatic species, grants for local lake, river, and wetland conservation efforts and funding for state lake, river, and wetland management programs.

Because boat fuel comes from the same pumps as other motor fuels, a formula is used to estimate annual transfers to the Water Resources Account from the DOT.  The current formula multiplies the fuel tax on 50 gallons of gasoline by the number of motorboats registered in the state. This amount is then multiplied by 1.4 to account for motorboat gas purchases by non-resident boaters. The trouble is, the 50 gallons per boat usage estimate was set in 1987 and the formula has not been adjusted since 1991 (when the multiplier was added). Since that time, boat motors have gotten larger, boating days have increased, average boat size has increase and the popularity of high fuel usage personal watercrafts have flourished. In light of these facts we believe it is time to adjust the formula.

In recent months WAL has researched motorboat gas tax allocation programs throughout the region and the U.S., and now has enough evidence to question the validity of the formula, and to suggest that it needs to be changed

The purpose of this study was to assess how states in the Great Lakes region estimate and allocate the taxes on fuels purchased for use in motorboats and then to evaluate whether Wisconsin s motorboat gas tax allocation program compares favorably with other regional programs. To complete this assessment our inquiry sought to answer the following questions:

1)    What portion of state gasoline sales tax revenues are recognized (by law) as attributable to motorboat use and transferred to natural resource-related programs?

  2)    What method(s) have been used to estimate annual motorboat gasoline consumption and what data and assumptions were used to support justification for current motorboat gas tax allocation programs?

  3)    What strategies were employed to successfully establish and improve (increase) allocations to motorboat gas tax allocation programs?

  4)    How does Wisconsin s program compare to programs in other Great Lake states?

Reported here are findings from Michigan, Minnesota, Ohio, Pennsylvania and Wisconsin.

Key findings:

As a percent of total gas tax revenues, Wisconsin s program nets approximately 1.26% of the state s total gasoline sales tax revenue, a lower percentage than Michigan (1.6%) and Minnesota (1.5%) but higher than Ohio (1%) and Pennsylvania (0.18%). In terms of straight revenues Wisconsin nets approximately $11 million annually, falling almost $8 million behind Michigan and $2.7 million behind Ohio, while exceeding Minnesota and Pennsylvania revenues by $4 million and $9 million respectively. Wisconsin is the only state where allocation amounts are not based, in part, on motorboat fuel usage estimates collected within the last 5-10 years.

Demographic statistics such as population and numbers of registered boats figure prominently in state gas tax revenues and motorboat gas tax allocations. Wisconsin s population is 50% or less than that in Michigan, Ohio and Pennsylvania, but slightly higher than in Minnesota. Wisconsin ranks third in the number of registered boats and assesses the highest sales tax per gallon of all states examined.

Also of note are studies showing Wisconsin has a comparably high ratio (more than 2.5 x the next closest state) of non-resident anglers entering the state to fish versus resident anglers leaving the state to fish. If used as a surrogate for boating activity, these data suggest motorboat gasoline purchases by non-residents in Wisconsin are comparably higher than purchases by non-residents in other states.

In summary, motorboat fuel taxes meant for water resources programs are instead subsidizing road improvement and maintenance. All money paid into the system by boaters should be allocated back to boating and water quality improvement programs.

An increase in motorboat gas tax allocations would help provide for severely under funded programs to fight aquatic invasive species, provide education to the public on prevention of invasive species, train volunteer water monitors to leverage the DNR in protecting lakes and rivers, provide assistance to lakeshore property owner to protect the shorelines and therefore the quality of water.