Would you trade a higher sales tax for paying less at the pump?
Wednesday, November 30, 2011
LANSING – Would residents be willing to pay 1 percent more in sales tax dedicated to road repairs in exchange for lower gas taxes?
Senate Finance Committee members on Wednesday considered a plan backed by Sen. Howard Walker, R-Traverse City, repealing the 19 cents per-gallon gasoline tax, but adding to the 6 percent sales tax.
Proceeds from the extra sales tax would go to the Michigan Transportation Fund.
“This would allow all of Michigan to be contributing to road funding,” Walker said. “That's fair, because everyone benefits from the roads, not just the people who use them.”
Walker said the drop in per-pump price would make Michigan more attractive to travelers and businesses compared to border states.
According to a Senate Fiscal Agency review, the fund would get about $830 million in new money in 2012, and $1.14 billion in 2013.
Repealing the fuel tax would create an estimated $962 million loss based on 2010 data.
The transportation fund also received $842 million in 2010 from vehicle registration taxes, revenue that would not be affected.
Raising the sales tax would require voters to amend the constitution.
Mike Nystrom, executive vice president of the Michigan Infrastructure & Transportation Association, said he's concerned whether the move would generate enough money to meet the state's long-term needs, and whether it could happen fast enough.
He said a campaign would cost a considerable amount of money, and feared that there would be no backup plan if the measure was defeated.
Mark Griffin, president of the Michigan Petroleum Association, said the economy would benefit from lower pump prices. Michigan's gas taxes are the sixth-highest in the country, he said.
“Why we have a tax structure that benefits northern Indiana, I don't know,” he said. “We need to be smarter than Indiana.”
Sen. John Proos, R-St. Joseph, said border towns like his were hurt dramatically when the state raised diesel fuel taxes.
But Sen. John Pappageorge, R-Troy, said he would rather see a user tax, and suggested that it might be more fair to develop a system that taxes people for the number of miles driven as opposed to gallons purchased.
The move comes after Gov. Rick Snyder in October looked to start a conversation about state road repairs with an eye on getting $1.4 billion a year. Snyder said tax revenue for transportation has dropped because rising fuel prices are prompting people to drive less and cars are becoming more fuel efficient.
Snyder wants people who use the roads be the ones picking up the tab for maintaining them, his strategic adviser said.
Among his proposals is allowing counties to assess vehicle registration fees of up to $40 per car for local road projects and a shift in the state's 19-cents per gallon gasoline tax to a percentage wholesale tax on fuel, saying it would stabilize funding for Michigan's roads.
Michigan Transportation Department leaders have said about 68 percent of the state's roads are now in good for fair condition, but at the current level of support that will drop to 35 percent by 2023 – and those repairs will cost significantly more.
Snyder also will continue working with the Congressional delegation to increase the percentage of federal gas tax revenue that is returned to Michigan for projects. Michigan now gets about 95 cents on the dollar on federal road projects.
The Finance Committee did not take action on the bills, but considered them the start of a conversation. Committee chairman Jack Brandenburg, R-Harrison Township, said there's no doubt that the state needs to repair its roads.
“Anyone crossing the border from Ohio to Michigan is in for a real treat,” he said with a laugh.