NFIB

Governor Whitmer Proposes Gas Tax Increase

Date: March 19, 2019

Related Content: News State Michigan taxes

Should the legislature pass the governor's proposed motor fuel tax?

NFIB members are being asked for their input on Governor Whitmer’s proposal to increase the state’s motor fuel tax.

NFIB’s position is determined by our members. Our member ballot is a key part of that process. If you did not receive an email with a link to vote your ballot, please contact Amanda Fisher in our office.

Background: In 2015, Michigan enacted a new road funding package that raised the tax on motor fuels from 19 cents per gallon on gasoline and 15 cents on diesel to 26.3 cents per gallon on both, effective in 2017. The plan also increased registration fees on vehicles by 20% effective in 2017. In addition to these funding increases, money from the state’s income tax that would normally be credited to the state’s General Fund was earmarked for roads. Once fully implemented in fiscal 2020-21, these changes will generate about $1.2 billion in additional revenue for roads.

Some studies say this is inadequate. As part of her budget proposal for 2020, Gov. Gretchen Whitmer would raise more than $2.5 billion dollars in funding for repairs and maintenance of Michigan’s roads with a 45 cent per gallon increase in motor fuel taxes. Under her proposal, the current gasoline tax of 26.3 cents per gallon would increase by 15 cents on Oct. 1, 2019, another 15 cents on April 1, 2020, and a final 15 cents increase on October 1, 2020, for a total tax of 71.3 cents a gallon. When the 6% state sales tax is added, at current average fuel prices, another 15 cents would be added to the pump price for a total of 86 cents a gallon in increased taxes.

Opponents of the Governor’s proposal to increase the gas tax, point out that it would, at current prices, be a 171% increase and make Michigan the state with the highest gasoline tax in the country. They say that the proposal, like others before it, is not just for roads but would shift current funding already earmarked for roads (from the 2015 road funding package) back into the General Fund to provide new spending for the governor’s other budget proposals such as free community college tuition and boosting school funding. Opponents of the gas tax increase also question changes to the funding formula included in the proposal that would redirect road funding to urban areas at the expense of rural roads and communities. They are skeptical of claims by gas tax supporters, many who stand to benefit by the increased funding, as to the amount of funding needed to maintain the roads.

Supporters of the Governor’s proposal to increase the gas tax, say that decades of neglect and “kicking the can down the road” with funding “half-measures” must end and decisive action is needed if we are ever going to bring our roads back to where they need to be. They point to study after study that shows current funding levels, including the most recent increase in taxes and vehicle registrations in 2015, are insufficient to keep up with the rate of decline in the state’s road and bridge infrastructure. Supporters of the gas tax increase also refer to studies that show drivers are paying higher taxes anyway via increased vehicle repairs averaging $500 to $800 per vehicle per year due to poor roads. They say that some business groups are supporting the increase because of the negative impact our poor roads are having on economic development and job creation.

Should the Governor’s gas tax proposal be adopted by the legislature?

 

Related Content: News | State | Michigan | taxes

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