All About Michigan’s Road Funding and the Recently Proposed “Gas Tax” Increase

Gax Tax Increase Say NO

Michigan’s Road Funding and Proposed “Gas Tax” Increase

While the funding for Michigan’s roads and bridges are in disarray raising the “gas tax” on the already overburdened Michigan taxpayers is not the answer especially with the economic climate we are in. Meanwhile, some states such as Michigan are diverting transportation revenues to plug other holes in their budgets, as the recession’s impacts continue.

Many of our current and former legislators will site Act 51 and the state constitution in how our fuel tax money is allocated it would be interesting as to how they find a way around these two surreptitiously. The distribution of the transportation dollars is governed by Act 51, which is a very complicated formula. Over 90% must go to roads and bridges according to the state Constitution which clearly is not the case.

The general sales tax rate was raised from 4 percent to 6 percent in 1994; all revenues from the additional 2 percent increase go to the state school aid fund. Of the revenues from the base 4-percent tax on all items, 15 percent is distributed to cities, villages and townships, and 60 percent to the state school aid fund.

After those set-asides, of the remaining sales tax collected on motor fuels and other vehicle-related items only, a variable amount (not less than 27.9 percent) is allocated to the Comprehensive Transportation Fund. The balance goes to the general fund.

Some of the problems I see are that our legislators have in the past and continue to reallocate or to put it bluntly, “steal” these road fund dollars for other unspecified state spending purposes. How could this be with what was sited above in Act 51 and the state constitution?

The state of Ohio allocates a larger portion of their “gas tax” revenue towards roads than the state of Michigan and hence they have better roads. Michigan also has a higher tax rate 5th highest of the states at $.39.4 cents per gallon versus Ohio at $.28.0 per gallon as of January, 1, 2012.

Two bills enacted in the Michigan Legislature provide funding for transportation. House Bill 4748 will divert transportation-related funds to roadwork. It redirects a deposit of $12 million collected from driver’s license fees from the Transportation Economic Development Fund’s Targeted Industries program to state road construction and maintenance for two years.

The shift will allow the state Department of Transportation (DOT) to match all available federal aid highway funds. Among other provisions, House Bill 4526 created a public-private partnership (PPP) investment fund in the state Department of Treasury, to be used for expenditures associated with PPPs.

Other bills carried over to 2012. House Bill 4131 is a comprehensive measure that would allow for public-private partnerships (PPPs) for transportation infrastructure projects. It would give the State Transportation Commission the power to approve all PPPs, but requires the commission to hold a hearing every five years to receive public comment on the facilities operated by a PPP.

Two interdependent bills, Senate Bills 410 and 411, would address the construction of a bridge between Michigan and Canada. Senate Bill 410 would create the Michigan Governmental Authority for a New International Trade Crossing also called the Detroit River International Crossing within the Michigan DOT, authorizing procurement, design, finance, construction, maintenance, operation, improvement and repair of new international bridges and approaches, as well as certain agreements with public and private entities.

Senate Bill 411 would include the new authority in the definition of “eligible governmental agency” under the Michigan Transportation Fund law in order to make it eligible to receive distributions from the fund. The omnibus budget bill (House Bill 4526), however, restricts PPPs and any funding or construction for the New International Trade Crossing without legislative approval; and House Bill 4262, pending at the end of 2011, would prohibit new tolls on previously untolled facilities, including as part of a PPP project.

Transfer road tax money to other purposes (Senate Roll Call 539)

Transfer road tax money to other purposes (Senate Roll Call 404)

2009 House Bill 5073: Transfer road tax money to other purposes – Public Act 137 of 2009

2009 House Bill 5072: Transfer road tax money to other purposes – Public Act 136 of 2009

The Brookings Institution on the collection, allocation, and use of federal and state taxes on motor fuels the “gas tax”. Thirty states restrict the use of their gas tax revenues to highway purposes only. 

State Gasoline Tax Rates, as of January 1, 2012

  1. #1 by Tim Bos on February 16, 2014 - 10:31 pm

    Governors and legislatures have been playing a shell game with fuel taxes to pad the pockets of different special interest groups for decades. A famous Michigan military/commercial pilot informed me that most pilots flying in Michigan airspace make a point of determining where they buy their fuel prior to landing in Michigan, and only buy it here when they feel it’s unsafe to wait til they get to their next destination, because the cost of our aviation fuel is exorbitant compared to neighboring states- due to our fuel taxes. In other words, pilots, like motorists entering and leaving Michigan, avoid buying their fuel here whenever possible, resulting in a loss of tax revenue. Anybody in Lansing ever hear of the Laffer Curve, or thought to apply it to our fuel tax nightmare?

    The bottom line is this- Our fuel taxes are among the highest in America, while our roads are and have perpetually been, among the worst. Our state govt has a longstanding record of showing a poor attention to maintaining our transportation infrastructure, and while they unabashedly spent 50 BILLION tax dollars on everything under the sun last year, they just couldn’t seem to find enough money to fulfill their responsibility to keep our roads and bridges in safe operating condition.

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