LANSING (WWJ/AP) – Michigan voters will be asked to pass a sales tax increase as part of a $1.3 billion transportation funding deal approved early Friday by lawmakers, who settled on an all-or-nothing statewide vote to fix deteriorating roads.
“May the 5th is now the magic date,” said WWJ Lansing Bureau Chief Tim Skubick. “This is an opportunity for Michigan voters to put their money where their mouth is. They’ve been grumbling about the roads for years. Now, this will be a once in a lifetime opportunity to do something about it.”
The ballot initiative will propose hiking the 6 percent state sales tax to 7 percent, dropping the sales tax on fuel and ensuring that school aid fund revenue goes only to K-12 districts or community colleges – not universities. Transportation funding would rise by $1.3 billion a year, giving a big boost to the $2 billion now collected through fuel taxes and license plate fees. And $11.8 billion in annual school funding would jump by at least $300 million, the equivalent of $200 per student.
The Republican-dominated Senate voted 26-12 to back the constitutional amendment early Friday morning, hours after it was approved 94-16 by the House.
“Basically what happens here is under this proposal, the six percent sales tax that they now collect at the pump, that money goes to local governments and to schools. This would change that. It would direct the sales tax, which would increase one penny [on the dollar], into the roads,” said Skubick. “So the question is, what about the schools and local governments? The rest of the package has money for them through increased registration fees and other portions for new revenue that would be earmarked for local governments, they get about $100 million, and the schools would get $200 per pupil.”
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 the state Transportation Department.
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 sales tax is also applied to fuel, but mostly goes to schools and local governments under the state constitution.
“We’re going to see pothole season come. But hopefully with a `yes’ vote on the ballot, we’ll have a lot more resources to make it start turning around,” Gov. Rick Snyder told reporters at the Capitol.
Snyder acknowledged that a ballot-only road funding fix is “challenging” because voters could defeat it, but said: “Isn’t it good we asked our citizens to participate in the process in a constructive way?”
Skubick said polling data over the last few years suggests that the sales tax to fix the roads is popular with the majority of voters.
“But, we should caution that poling was done prior to any anti-campaign by the anti-taxers to kill this thing,” he added. “They will be putting some money into this and it will come down to two elements: Money and messaging. It’s a war of money and words. The opposition is going to frame this as a $1.8 billion tax increase. The governor and his friends will say that this is only a couple of pennies at the pump. I’m not sure which one of those messages will resonate.”
After midnight, the House began passing 11 related bills that won’t take effect unless voters approve the ballot measure – the centerpiece of the plan.
Those bills include converting the flat taxes of 19 cents a gallon on gasoline and 15 cents per gallon on diesel to taxes that could rise with wholesale fuel prices, to help address declining revenue as people drive less and with more fuel-efficient vehicles. The base fuel tax would more than double to around 42 cents, though it wouldn’t be a net tax hike at the pump – at least initially – because the sales tax on fuel would go away.
Low-income earners who lost part of a tax break in a 2011 GOP business tax overhaul would see it reinstated, a $260 million budget loss equaling an average $300 gain for qualifying families.
Other bills, not tied directly to the ballot proposal’s fate but that would yield at least $50 million more, would force Amazon and other online retailers to collect sales tax on Internet purchases in the state.
If the ballot proposal is approved, vehicle registration fees would rise by $95 million – partly through a change that would freeze license plate fees so they no longer decline in the first few years after a car is titled. Electric and hybrid vehicle owners would also be assessed extra fees.
“The main message I got was, `Just fix the damn roads,”‘ said Senate Majority Leader Randy Richardville, a Monroe Republican. “I find it hard to believe that enough people won’t come out and say, `Yeah, we need to do this.”‘
But some advocates of increased transportation funding criticized the Legislature for not putting a tax hike in place in case voters reject the sales tax measure. The Senate voted last month to significantly increase per-gallon fuel taxes without a ballot plan, yet that met resistance in the House, which favored no tax hike.
Detroit Regional Chamber President and CEO Sandy Baruah said the group preferred the Senate’s approach, “that more closely tied the cost of fixing the roads to the users of the roads – and prevented an increase in the sales tax and the cost of a ballot initiative.”
Senate Minority Leader Gretchen Whitmer, an East Lansing Democrat, said she had hoped for a legislative solution to go with the ballot plan.
“But in this climate, that was not to be,” she said. “I am of the opinion that the worst thing we could do is to leave without doing anything.”
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