Americans for Prosperity-Michigan

Lansing to Try to Increase Gas Tax

According to a report by the Michigan Department of Transportation, our state could stand to lose a portion of $1 billion in federal road funding. The problem is the Michigan Transportation Fund will not have sufficient revenue to match these construction dollars. This is money Michigan motorists sent to Washington as part of their federal gas tax. Now, we must pay a ransom to have our money returned. Read more.

In 2007, the state created the Transportation Funding Task Force to “examine alternatives to the fuel tax, analyze their feasibility, and suggest or recommend transportation revenue options.” The task force, comprised of 13 members, recommended a litany of tax and fee increases to raise more money for transportation infrastructure. They include the following:

• Increasing vehicle registration fees
• Raising the 19-cent-per-gallon gas tax
• Raising the 15-cent-a-gallon diesel tax
• Increasing the state’s 6 percent sales tax to 7 percent

However, Michigan residents and visitors already pay the fifth highest gas tax in the country. See map. Without transparency in state government, it is impossible for the average tax payer to see where his money is being spent.

The Legislature is now considering several options to secure the necessary matching funds, though no one actually knows what those options are. The House sent “shell bills” to the Senate last week. They contained no proposals; they were merely designed to fulfill the legislature’s procedural rules. Essentially, the House punted. They asked the Senate to make the tough decision, not want to be blamed for another tax increase in the midst of a recession.

Let’s consider the possibility that another approach may generate the additional funds. Even though we pay the fifth highest gas tax in the country, our roads and bridges do not reflect that fact. Could the reason be that when gas is four dollars a gallon only 56% of the taxes we pay at the pump actually get to our roads?

The largest diversion of tax dollars from our state highways and local roads is the sales tax on gas. The Senate Fiscal Agency estimates this tax will raise $800 million this fiscal year, the majority of which is now directed to schools and local governments. If this entire amount were dedicated to roads, Michigan would have the funds necessary to match federal dollars and complete construction projects.

Of the $800 million, $580 million is distributed into the school aid fund. That amount would leave less than a five percent deficit in the school aid fund. However, an article from the Mackinac Center for Public Policy lists reforms that would immediately save local schools millions of dollars.

• Privatizing non-instructional services would save $500 million according to an updated analysis from the Mackinac Center.
• Repeal “prevailing wage” on school construction projects: $150 million.

These changes are primarily opposed by the powerful teachers’ unions– the MEA and MFT. Until politicians are willing to take on the unions, true spending reform will not occur.

Likewise, local governments could stand to lose $192 million in revenue sharing by appropriating the sales tax on gas for our roads. They could see savings similar to the schools if the prevailing wage were eliminated on their construction projects and embraced privatization (again unions stand in the way to this common sense reform). The Mackinac Center has published a primer for local government explaining how to effectively privatize its services.

The Senate and House will be in session on Thursday, December 18th. This will probably be the last day of session in 2008. This funding package is on their agenda. Please contact your senator and ask him or her to enact reforms and efficiencies first and to oppose a tax increase. Give them your ideas for improving the roads in our state. Please contact your elected officials and ask them to oppose new taxes and fees by clicking here.