Michigan road funding: House plan takes shape with wholesale fuel taxes, higher registration fees
Saturday, March 16, 2013
LANSING, MI -- Michigan Gov. Rick Snyder's call to increase road funding by more than $1 billion a year took a small but significant step forward today, with a House panel considering specific legislation that could stimulate debate.
Republican state Rep. Wayne Schmidt of Traverse City, chair of the House Transportation and Infrastructure Committee, said he scheduled testimony on his own bills in order to move the discussion from if the state should boost road funding to how the state should boost road funding.
"As our economy is rebounding, now is the time to double down and get our transportation system working," Schmidt said after this morning's hearing, explaining his motivation to jumpstart the process. "I think that will speed up our progress here in Michigan."
One of Schmidt's bills would increase gasoline and diesel taxes but levy them at the wholesale level, allowing for prices to rise or fall with inflation. A gallon of gas that currently costs $3.75 would cost about 8 cents more under the new plan, he said, while generating an estimated $700 million a year in new revenue.
Schmidt also plans to introduce legislation that would raise vehicle registration fees, and he said future discussions could include higher rates for hybrid, electric or alternative fuel vehicles that use less gasoline and therefore pay fewer taxes at the pump.
Registration fees and fuel taxes were primary elements of Snyder's original proposal, as outlined in his executive budget recommendation. While many lawmakers distanced themselves from that proposal, Schmidt said both revenue sources must be part of the discussion.
"It's going to be a question of how much," he said. "(The governor) tossed out an initial proposal, and there was some shock value to it. But this is a problem, and that's one of the reasons we're taking it up now. I think we're going to moderate that position a little bit. But we're going to do some sort of fuel increase, at least in my opinion. It's needed. Same with registration fees."
Michigan road funding: Democrats eye prevailing wage guarantee, education compromise
A separate bill introduced by Schmidt breaks more sharply from the governor's proposal by exempting fuel purchases from the state's 6 percent sales tax, which is primarily dedicated to schools and cities -- not roads.
"The sales tax is our biggest public policy challenge here in Michigan with regards to transportation," said Mike Nystrom, executive vice president of the Michigan Infrastructure Transportation Association, which is lobbying for new road funding. "You talk to drivers standing there pumping gas, and a majority believe that all the taxes they're paying are going to our roads and bridges."
By boosting fuel taxes but exempting purchases from the sales tax, the state could leave motorists paying about the same price at the pump. But in the process, schools and municipalities would take a hit.
Michigan sales tax: Where does the revenue go? And what could an increase mean for road funding?
Democrats are unlikely to support the proposal without a clear plan to replace that revenue. And future negotiations on replacement funding -- and perhaps even a boost for either schools or cities -- could provide room for a bipartisan agreement that Republican supporters acknowledge will be necessary.
"I think this is a good step," said Rep. Marilyn Lane, D-Fraser, vice chair of the transportation committee. "We need to bring it out there. But it would be such a hole for local governments and schools at a time when they've taken a lot of cuts, both from legislation here in Lansing and through property values.
"We have to be mindful. They have a lot of services that they're mandated or required to provide at the local level for police, fire and education. And they need the dollars to do the very same thing we're trying to do here: put out great roads. That's the challenge."
Schmidt and his colleagues plan to introduce additional legislation over the next two weeks in hopes of sending a package to the House floor by early May and including new road funding in budget bills that the governor wants on his desk by June 1.