6 Things To Know About Michigan's Gasoline Tax Debate

By David Eggert, Associated Press

LANSING (AP) - Time's running short if Michigan is going to raise a lot more money to improve bumpy roads — a long source of frustration for drivers.

Lawmakers plan to be in session just a few more days before turning their attention to the August primary. And if nothing's done next week, the likelihood of legislative action before the November election is slim.

Here's a look at the issue that's led to hours of recent closed-door meetings in the Capitol:

The Problem

Michigan spends less per driver on roads than any other state. It ranks 33rd in spending per lane mile and 47th per vehicle mile traveled, according to a state Transportation Department review of 2012 Federal Highway Administration Data.

Yet Michigan also has some of the country's highest taxes at the pump, about 10 cents-a-gallon above the national average. That's because the 6 percent sales tax is also applied to motor fuel but mostly goes to schools and local governments under the state constitution.

Contributing Factors

Flat per-gallon fuel taxes — 19 cents for gasoline, 15 cents for diesel — are faulted for declining state transportation revenue as people drive less and with more fuel-efficient vehicles. The gas tax was last increased, by 4 cents, in 1997. Though vehicle registration and title revenue is up, it hasn't offset the drop in fuel tax revenue — a problem given inflationary construction cost increases.

House Solution

The Republican-led House last month voted to tax fuel at 6 percent of the wholesale price and effectively keep the 19-cent rate intact to start. If fuel prices rise from one year to the next, the tax could rise by whatever is less — 1 cent, 5 percent or the annual change in highway construction costs.

Gas and diesel taxes could ultimately go as high as 32 ½ cents a gallon, though it could be decades before the ceiling is hit.

Senate Plan

There's concern that the House plan won't raise enough money to keep roads from falling further into disrepair. So Republican Senate Majority Leader Randy Richardville of Monroe proposed more than doubling fuel taxes within four years.

The wholesale tax would start at 9.5 percent in 2015, increasing the per-gallon tax to 26 cents. It would rise to 11.5 percent (32 cents) in 2016 if prices stay intact, 13.5 percent (37 cents) in 2017 and 15.5 percent (43 cents) in 2018.

Trouble

Few in the GOP-controlled Senate want to vote for the big gas tax hike. In a repeat of last year — when Republican Gov. Rick Snyder's proposed hike in fuel and license plate taxes died — some senators are floating alternatives such as asking voters to increase the 6 percent sales tax to 7 percent and dedicate the increase to roads.

Senators also could propose no longer assessing the sales tax on motor fuel.

Richardville said a new bill and constitutional amendment are being drafted that "may or may not see the light of day" next week, but are at least worth exploring. One possibility is approving a gas tax increase and then letting voters decide if they prefer that or a higher sales tax.

Reaction

Senate Democratic Leader Gretchen Whitmer of East Lansing said tax hike would disproportionately hurt lower-income residents, "both devastating after three years of Republican tax shifts from corporations to people." For Democrats to help pass a tax increase, they want corresponding tax relief targeted to lower-income residents.

In turn, Republicans aren't ruling out tying road funding to legislation that would repeal a law guaranteeing better wages on government construction projects, which could draw GOP votes but turn off Democrats.

Republican Sen. Bruce Caswell of Hillsdale said raising the gas tax will hurt the poor who can barely afford to drive to work and have older, less fuel-efficient cars. His working-poor constituents would prefer a 1 percentage-point sales tax increase, he said.

"They have very little left to go out and buy things that they would pay the one cent tax on," Caswell said. "Many of them have repeatedly told me: 'That would be a much better solution, because I don't have that much money to buy things as it is.'"

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