Yesterday, the Michigan House of Representatives passed a road funding plan that will add $1.2 billion to transportation funding through a phase-out of the six percent sales tax placed on fuel and an increase in the wholesale gas tax. Over the next six years, one percent of the sales tax on fuel would be eliminated, while one percent of the wholesale gas tax would be added. This adds another proposal to the debate over how the state should fix its ailing infrastructure.
With only Republicans voting in favor of the measure, this new proposal fixes the long standing public policy dilemma that Michigan has faced for decades of adding sales tax to its motor fuel, but not giving any of that money to improving our state’s infrastructure. Currently, the revenue generated by the sales tax on motor fuel goes mostly to education, with some going to local units of government. This new plan would make sure that every cent of tax being collected at the pump would go into our transportation network in Michigan.
The major question coming from opponents of the measure is how the hole for education and local units of government would be filled. Right now, education receives approximately $750 million from the sales tax on motor fuel annually, and local units of government receive about $150 million. The House passed plan relies on future economic growth in the sales tax to make up for the lost revenues to those two entities. The House also approved an amendment that says if state spending on schools and local governments fell below that of the previous year, the sales tax phase-out would be repealed, and the six percent would automatically be put back on fuel purchases. This automatic repeal would not directly impact the proposed wholesale gas tax.
This new proposal is another step in a long legislative process. In contrast, the Senate passed a measure that would simply raise the wholesale gas tax to increase transportation funding by approximately $1.5 billion. This new House plan now goes back to the Senate for their consideration. The House move now sets up negotiations between legislative leaders before a final product is passed and placed on the Governor’s desk for signature. The one thing that is becoming clear is that the Legislature is bound and determined to pass a road funding package that adds at least $1.2 billion more to transportation before they go home for the holidays. There are several details in each plan that still need to be ironed out, and MITA staff will be aggressively monitoring all activity and will be actively engaged in the process during these last two weeks.
For any questions or concerns, please feel free to contact MITA Executive Vice President Mike Nystrom or MITA Vice President of Government Affairs Lance Binoniemi at (517) 347-8336.
