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Raising Sales Tax For Roads, Schools A Longshot

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By DAVID EGGERT, Associated Press

LANSING (AP) - Gov. Rick Snyder and legislative leaders are still talking about a sales tax increase to fix roads and boost education spending, but it’s a longshot that a deal will be reached in time to put a proposal before voters in November.

“I think that’s very, very unlikely,” Senate Minority Leader Gretchen Whitmer told reporters Wednesday.

Raising the 6 percent sales tax can only be done if voters approve a constitutional amendment. Two-thirds of the Republican-led House and Senate would first have to agree by Sept. 6 to place such a measure on the November ballot.
Two earlier deadlines for the May and August elections came and went with no agreement.

While various ideas are being discussed, it appears there’s some consensus among negotiators that all taxes drivers pay at the pump should be used to fund roads, bridges and other transportation infrastructure. Michigan is among just six states to collect a sales tax on gasoline and is the only one to dedicate none of it to roads, according to the road builders lobby.

K-12 schools and local governments would lose $850 million a year if the sales tax on fuel is designated for transportation. From a strategic standpoint, it’s believed legislators could have an easier time convincing voters to pass a sales tax hike if it were sold as a way to “save schools” or even increase education funding instead of improving deteriorating roads.

One complicating factor is how much to raise the sales tax.

Increasing it to 7 percent would generate an additional $1.3 billion in the first year. Depending on how much of the extra revenue went to road funding, the sales tax possibly would have to be increased above 7 percent to ensure a significant net gain for education sought by Democrats, whose votes are just as crucial since some or many majority Republicans won’t favor a sales tax increase.

“I’d like to fix the roads. I’d like make sure there is a real investment in K-12, which has taken an enormous hit over the last couple years under the Snyder administration,” said Whitmer, an East Lansing Democrat who also is pushing to cover tuition costs for Michigan high school graduates.
Senate Democrats have said their tuition proposal can be funded by closing tax “loopholes.” They aren’t saying publicly how much of an education funding increase should be guaranteed in a roads deal.

Upon hearing Whitmer’s prediction that an agreement on a ballot proposal is unlikely by early September, a spokesman for Republican House Speaker Jase Bolger of Marshall, expressed disappointment.

“It’s only unlikely if the Democrats continue to make unreasonable demands and insist on seeing a tax proposal that doubles the cost to Michigan families,” Ari Adler said.

He said another option being floated is lowering the sales tax and expanding it to cover services.

Michigan’s main transportation fund is at its lowest level in 30 years when adjusted for inflation because people are driving less and with more fuel-efficient cars while the flat 19-cents-per-gallon gasoline tax is the same as it was 15 years ago.

In his February budget proposal, Snyder called for raising fuel taxes and vehicle registration fees by $1.2 billion. But the politically unpopular plan wasn’t embraced in the Legislature, and legislators instead took $230 million in unexpected one-time tax revenue and earmarked it for roads.

“It would be an overstatement to say we are on the cusp of an agreement,” said House Minority Leader Tim Greimel, an Auburn Hills Democrat. “We certainly believe that education funding is every bit as important or more important than additional road funding. But we also want to make sure we’re not unduly burdening middle-class and low-income working families with additional taxes and fees after the governor and legislative Republicans have already increased taxes and fees over the past two years.”

In exchange for putting a sales tax proposal before voters, Democrats also want a repeal of a law guaranteeing better wages on government construction projects taken off the table.

House Transportation and Infrastructure Committee Chairman Wayne Schmidt, a Traverse City Republican who supports a road funding increase to get highways up to par and create jobs, said lowering the sales tax and broadening the base was poisoned by the ill-fated passage and repeal of a tax on services in 2007. He doesn’t think it will gain much traction.

“The real question comes down to: Are there votes to do the sales tax increase?” Schmidt said.

(© Copyright 2013 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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