Road Funding Plan Avoids Tax Only Funding Approach

Date: November 19, 2015

After more than three years of effort and controversy, the
Michigan House and Senate have passed a road funding plan. The
Governor has signed the legislation into law. The $1.2 billion plan
is a 50/50 mix of $600 million in new revenue in the form of pump tax and
registration fee increases and $600 million in future earmarks of the state’s
general fund revenue.

While the plan still increases registration fees and fuel
prices at the pump, it is a far cry from the original proposals that sought to
more than double registration fees and the pump tax on fuel. NFIB was the only
business group that opposed efforts to raise more than $1.6 billion in road
funding through tax hikes and registration fees alone. NFIB small business
owners recognize the need for good roads and adequate funding but this is a
difficult time for tax and fee increases on Michigan small business job
providers. While these tax increases are disappointing, lawmakers did listen to
the concerns of small business and NFIB and the plan they passed dedicated a
substantial portion of future general fund revenue to road construction and
maintenance in order to avoid funding the roads with hikes in the gas tax and
vehicle registration alone.

The plan includes $200 million in tax relief via expansion
of the Homestead Property Tax credit. An income tax rollback formula is also
included in the proposal. The income tax rollback would occur when general fund
revenue growth exceeds the rate of inflation times 1.425. The rollback does not
go into effect until January 1, 2023 and it is questionable if it would ever go
into effect as a future legislature could change the terms of the cut before
2023.

The gasoline tax will increase by 7.3 cents per gallon and diesel
taxes would increase to be on par with gasoline taxes (an 11.3 cent increase
per gallon) beginning January 1, 2017. Registration fees would increase by 20
percent on passenger vehicles and trucks also beginning January 1, 2017. The
earmarking of general fund revenue to roads would phase-in over the next five
years.

Related Content: Small Business News | Michigan | Taxes

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