Marion County drivers could soon be forced to pay higher fees when registering their cars each year to help pay for long-overdue repairs to Indianapolis roads.
A divided Indianapolis City-County Council voted 14-10 July 6 to approve major tax hikes on one annual fee for passenger vehicles and another for larger vehicles like buses and semi-trailers. The changes passed largely along party lines, with four Democrats and six Republicans voting no.
Council Democrats say the new tax revenue, estimated to be around $70 million a year, will ensure Indianapolis secures up to $50 million in new state road funding starting in 2027. They reluctantly approved the plan, saying the money is crucial to make amends for decades of underfunded roads.
“This is not an easy vote. Asking people to pay more never should be,” Councilor Vop Osili, a 2027 mayoral candidate, said before voting in favor of the bill. “But we must fix the issues our city is facing, especially those as important as the state of our roads and infrastructure.”
But the tax hikes aren’t yet a done deal: Democratic Indianapolis Mayor Joe Hogsett opposes them and could reject the changes with a veto in the coming days. That would set up a tight decision in which 17 councilors would need to vote to override the veto at the August council meeting.
Council Republicans are siding with Hogsett, saying the tax hikes aren’t necessary to secure the state road funding.
“Our budget just grows organically every year,” Republican Councilor Josh Bain said. “We just have to have the courage to flatline some of these existing … accoutrements of city government — things that can be nice to some, I disagree with a lot of them, such as a DEI office that we spend over $1 million a year on.”
Here’s what to know about the changes and what could happen next:
How much vehicle taxes will increase
The proposal increases two fees paid annually on vehicles registered in Marion County: the excise surtax on cars owned by everyday drivers and the wheel tax for larger vehicles.
Passenger cars, small trucks and motorcycles will face a flat fee of $100 each year when drivers renew their registration.
The average fee in Marion County is currently about $20, according to the council. Last updated in 1992, the county’s surtax is currently 10% of the pre-1996 state excise rates with a minimum charge of $7.50. The state imposes higher fees on newer, more expensive vehicles.
The wheel tax for large vehicles — buses, recreational vehicles, semi-trailers, tractors, trailers and trucks over 11,000 pounds — will increase to a flat rate of $240. Those charges currently range from $10-40 and vary by vehicle type, with tax exemptions for government vehicles and buses owned by religious groups or nonprofit youth organizations.
Why tax increases were passed now
Council Democrats say the tax hikes are crucial to ensure Indy captures up to $50 million in new annual state dollars for roads starting next year.
In the past two sessions, state legislators passed a pair of laws designed to make amends for years of underfunding urban roads. The state’s road-funding formula allots money largely based on center-line miles and fails to fully account for the additional lanes and traffic on busy urban roads.
House Enrolled Act 1461, passed in 2025, required Indy to raise $50 million to receive a matching state contribution. A follow-up bill passed during the 2026 session, Senate Enrolled Act 179, requires the city to increase its annual match each year, reaching $100 million by 2031, to continue receiving the state’s $50 million.
Democrats say they’re using the tools given to them by state Republicans to fix Indy’s roads, while property taxes fall under Senate Enrolled Act 1 and slash expected revenues. As part of HEA 1461, the state increased Indy’s excise tax cap from $50 to $150 and its wheel tax cap from $80 to $240.
“Like many other communities around our state in this moment, we are being forced to rely more on income taxes and user fees like the wheel tax and surtax to meet basic operations for our city,” Democratic Councilor Andy Nielsen said.
The city must tell the state by Dec. 31 how it will meet the match next year. If the taxes ultimately pass, they will take effect Jan. 1, 2027.
What the new tax revenue will fund
Under state law, all of the excise surtax and wheel tax revenue must be used only “to construct, reconstruct or repair curbs, sidewalks, streets and roads” under the city’s jurisdiction.
Councilors expect the higher taxes to generate about $71 million a year and $355 million over five years. When combined with the state’s annual match and other city dollars set to be budgeted toward transportation, council Democrats say their plan will bring an estimated $855 million toward Indianapolis roads from 2027 to 2031.
While that’s a major windfall, a 2022 report found the city needs an additional $1 billion every year to build up and maintain its roads, bridges and sidewalks.
Why the tax hikes aren’t a done deal
The mayor firmly opposes the tax hikes and could still veto them, setting up a tight council vote to override him.
The Hogsett administration says growth in local income tax revenue could largely fund the city’s $50 million match in 2027. The plan is to allot $20 million in the 2027 budget, allocate $5 million from stormwater fees and direct $25 million more from a 2027 spring spending package, according to Hogsett spokeswoman Emily Kaufmann.
Hogsett has 10 days to sign the council’s changes into law or to reject them with a veto. Kaufmann did not respond to IndyStar July 6 when asked if the mayor will veto the plan.
To override the mayor’s veto, the 25-person council would need a two-thirds majority, or 17 votes.
The council’s 19 Democrats can surpass that margin on their own. But since four Democrats voted with Republicans against the tax hike Monday, the council currently lacks the votes to override a veto.
How each councilor voted on vehicle tax hikes
Democrats
Republicans
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Email Indianapolis City Hall Reporter Jordan Smith at JTSmith@indystar.com. Follow him on X @jordantsmith09 and Bluesky @jordanaccidentally.bsky.social.
This article originally appeared on Indianapolis Star: Indy council passes higher vehicle taxes. How much drivers could pay
Reporting by Jordan Smith, Indianapolis Star / Indianapolis Star
USA TODAY Network via Reuters Connect
By Jordan Smith, Indianapolis Star | USA TODAY Network
