At one time the tax Hoosiers most loved to hate, the motor vehicle excise tax is an annual charge on the value of automobiles, motorcycles and light trucks. The payment schedule varies by 17 classifications of vehicle price when new, and ten classifications of age. Revenue is collected by the Bureau of Motor Vehicles and its license branches, and distributed to all local units based on property tax rates. A taxpayer's excise tax payment is distributed among the local units in which he or she lives in the same proportions as the taxpayer's property taxes.
All local units receive the tax, including school corporations.
It is a general revenue source, not a tax devoted to road repair and construction. The tax was especially disliked by Indiana taxpayers, perhaps because it was a lump-sum annual payment out of current income, and because it made registering newer, more expensive vehicles more costly in Indiana than in most states. In 1996, however, the state cut excise tax rates for the average vehicle almost in half. This tax cut has probably taken the edge off the objections to this tax. Now, however, local governments are unhappy.