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A Look at Michigan’s Road Funding Plan

The fate of an upcoming road funding tax hike rests entirely with voters:

Wed December 31, 2014 - Midwest Edition
The Associated Press

Here’s a look at a $1.6 billion road and school funding deal approved Dec. 19 by the Michigan Legislature. The fate of the tax hike rests entirely with voters:


In May, voters will be asked to increase the state’s 6 percent sales tax to 7 percent and eliminate the sales tax on motor fuel, generating a net $588 million — mainly for $300 million for schools (the equivalent of $200 per pupil) and nearly $100 million for local governments. The plan also would bar the Legislature from spending School Aid Fund revenue on public universities, an issue for Democrats who feel the fund mainly dedicated for K-12 schools has been ”raided’ in recent years. The money could be spent on community colleges, however. Republicans especially wanted to ensure all taxes at the pump go to transportation, which isn’t the case now.


Legislators passed 11 bills that will only go into effect if the ballot measure is approved.

• In October 2015, Michigan’s flat 19-cents-a-gallon gasoline tax and 15-cents-per-gallon diesel tax would be converted so they are based on wholesale prices and significantly rise, with floors and ceilings in place so taxes couldn’t fluctuate significantly with changing fuel prices. Of the $1.3 billion collected, $1.2 billion would go to roads and bridges at state and local levels and about $100 million to public transit. The fuel tax rate would be 14.9 percent — equaling about 42 cents a gallon initially — but be offset by the removal of the sales tax on gas, at least initially. The diesel tax would be the same as the gas tax.

• In the first two years, a combined $1.2 billion of the fuel tax revenue would go to partially pay off long-term debt from past road construction bonds. It’s partly a way to phase in spending increases as opposed to immediately infusing all of into the system.

• In 2016, low-wage earners would see more generous tax breaks. As part of a 2011 tax overhaul, Snyder and Republican legislators reduced the earned income tax credit from 20 percent of the federal earned income tax credit to 6 percent. It would go back to 20 percent under a Democratic-backed bill, a $260 million loss in revenue. Advocates say low-income families on average would get $300 more in their pockets.

• There would be changes to vehicle registration fees next year that would bring in an additional $95 million per year from regular cars and heavy trucks. License plate taxes, which are based on a percentage of a vehicle manufacturer’s suggested retail price at the time it’s first titled, would be frozen. They currently drop by 10 percent each year for the first three annual plate renewals and then stay level. Drivers’ fees wouldn’t go up but they wouldn’t go down, either. Separately, the heaviest freight trucks could pay $1,000 more annually in fees. Owners of electric and hybrid vehicles would pay extra fees ranging from $25 to $200.

• Road warranties and competitive bidding rules for road work would be revised.

• At-risk schools would get an extra $40 million in the 2015-16 academic year.

• The state would contract for a statewide study determining how much money per pupil is needed to provide an adequate public education.


Lawmakers also approved two bills that would force retailers such as to collect the sales tax on Internet purchases, which supporters say would level the playing field for brick-and-mortar stores. Shoppers are supposed to voluntarily pay a 6 percent ”use’ tax for their online purchases when they file Michigan tax returns. But few do. The measure could bring in about $50 million a year and is not directly tied to the ballot proposal’s fortunes.

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