Michigan Senate considers bigger gasoline tax increase than House to improve bumpy roads

5/18/2014

LANSING, Mich. — Under pressure to mend roads and bridges, Michigan senators are considering whether to significantly increase gasoline taxes within five years and then allow annual increases to keep pace with construction costs.

The talk of pumping more money into transportation infrastructure comes on the heels of a House vote to gradually allow the state’s 19-cents-a-gallon gas tax to go as high as 32 ½ cents. The plan would generate $450 million a year more initially, mostly by diverting money from elsewhere in the budget.

But because the tax could rise by no more than probably a penny a year, depending on fuel prices and other factors, there’s concern it wouldn’t raise enough revenue to keep roads from falling further into disrepair.

A Republican-led Senate committee plans to start considering the wide-ranging House plan Tuesday, and it’s possible the full Senate could vote as early as Wednesday on some key bills. The question is to what extent, if any, senators will try to triple or even quadruple the $450 million marker laid down across the Capitol.

“That’s the main event, that decision,” said Sen. Roger Kahn, R-Saginaw Township, who chairs the Senate Infrastructure Modernization Committee.

The House voted to raise the 15-cents-a-gallon tax on diesel fuel to the equivalent of the 19-cent gas tax and to start calculating both on wholesale fuel prices. Flat per-gallon taxation has been faulted for declining state transportation revenue as people drive with more fuel-efficient vehicles.

The House legislation would tax fuel at 6 percent of the wholesale price and effectively keep the 19-cent rate intact to start. If fuel prices rise from one year to the next, the tax could rise by whatever is less — 1 cent, 5 percent or the annual change in highway construction costs.

Those pushing for at least $2 billion more for roads and bridges fear it could be decades before the 32 ½-cent ceiling is hit, given uncertainty over gas prices and other dynamics.

“You would never catch up to deteriorating road conditions if you only raised ... 1 cent each period,” said Lance Binoniemi, vice president of government affairs for the Michigan Infrastructure & Transportation Association, a construction trade association. “Politically, there are a lot of people in Lansing who are fearful that the public will see that as the fix or the solution to our road-funding problem. What will end up happening is it won’t be enough money.”

A plan being discussed in the Senate could put in place a 7.5 percent tax on the wholesale price, with yearly 1.5 percentage point bumps until it gets to 13.5 percent within five years.

The fuel tax could equate to more than 42 cents a gallon in five years, more than double the existing tax — providing an additional $1 billion from fuel taxes. Michigan’s other main source of state-based road funding is vehicle registration taxes, and it appears legislators are unwilling to significantly boost those despite Republican Gov. Rick Snyder proposing to do so in the past.

The House plan would send $370 million per year in sales taxes collected at the pump and on out-of-state purchases to roads and bridges instead of the general fund. But advocates for better roads still see permanently raising fuel taxes — or “user fees” — as the simplest, fairest way to ensure there’s enough money.

Snyder, whose plan to raise the gas tax by the equivalent of 14 cents died last year, said residents pay hundreds of dollars annually on unnecessary vehicle repairs due to poor roads. Michigan last increased the gas tax in 1997.

“It’s taken 17 years to accumulate the problems we have,” said Senate Majority Leader Randy Richardville, R-Monroe. “I never thought I’d say, ‘Thank God for the winter we just went through,‘ but it did point to the fact that we’ve got some serious infrastructure problems.”

It’s crunch time if lawmakers are going to do something before the summer break and this year’s elections. The Michigan Chamber of Commerce, an advocate for increased highway construction spending, plans to keep the pressure on by releasing favorable public polling Monday.

The conservative advocacy group Americans for Prosperity, meanwhile, is applauding the House for steering clear of a “massive tax hike” while also criticizing the move to allow fuel taxes to increase over time.

“Michigan citizens want the roads fixed, but it’s doubtful they support automatic yearly increases in the taxes they pay at the pump,” said Scott Hagerstrom, director of the organization’s state chapter.