Governor Whitmer’s Proposed Gas Tax Hike; Questions Answered
There has been quite a bit of talk about Governor Whitmer’s proposed 45 cent per gallon of gas tax. This tax would increase the state of Michigan’s gas tax from 26.3 cents per gallon to 71.3 cents per gallon. This tax hike would make us the most expensive gas taxed state in the country. Our fuel tax was raised 7.3 cents per gallon and our vehicle registration increase an additional 20% back on January 1, 2017.
Some groups believe Michigan has the worst roads in the country; that is for you to decide. You can also decide whether you believe we should increase our fuel tax by 45 cents per gallon or something less than that.
Emily Lawler wrote an informative piece published in MLive which attempted to answer many questions that we have about this fuel tax increase. The questions and answers are as follows:
Q: Would this plan give Michigan the highest gas tax in the nation?
A: Yes. According to The Tax Foundation, a Washington, D.C.-based nonprofit focused on tax policy, Michigan has the sixth highest gasoline tax nationally at 44.13 cents per gallon (that number can vary, since it includes sales tax, which is based on the price of gas.) The governor’s proposed 45-cent increase would push Michigan into the top spot, overtaking Pennsylvania’s current high of 58.7 cents per gallon.
Q: How much would this plan cost me?
A: If gas is $2.99 per gallon, 68 cents of that is state and federal tax. That changes a little based on the fuel price, since the 6 percent sales tax is variable.
According to a Nov. 2018 report from the U.S. Department of Energy, the average U.S. driver of a car uses 480 gallons of gas per year (That is 9 gallons a week), while the driver of a light truck uses 683 gallons. If the gas tax increase by 45 cents, that’s an extra $216 in taxes per year for a car and $307 per year for a light truck.
Q: Does all the tax we pay at the pump go toward the roads?
A: No, and Whitmer’s plan would not change that. Michigan is one of seven states that applies a sales tax on fuel, along with gas taxes.
The six percent sales tax is constitutionally dedicated mainly to the School Aid Fund and local revenue sharing, so that money largely does not go to roads.
Q: Didn’t lawmakers already fix the road funding problem in 2015?
A: No. Estimates at the time were that the roads needed at least $2 billion per year in an ongoing cash infusion. The final package was $1.2 billion, and ramped up gradually – actually, the full $1.2 billion doesn’t kick in until 2021.
Q: Would all of the money raised under this proposal go to roads?
A: Yes, but it displaces other road money -- in fact, that 2015 road funding money we just talked about. About half of the 2015 road funding increase is from hikes in vehicle registration fees and the gas tax and about half comes from the General Fund, the discretionary pot of money lawmakers appropriate in the budget every year.
Whitmer’s plan is $2.5 billion in new road revenue, but it doesn’t layer on top of the previous $1.2 billion. Instead, it diverts the general fund portion of the last road increase plan, about $500 million this year, into higher education. That lets the governor backfill higher education funding and keep those dollars with the School Aid Fund that goes toward K-12 and community colleges.
Q: Can’t we just use lottery money for this?
A: Not very easily. State law specifies the extra revenue, or what’s left after running the lottery and giving out prizes, goes to the state’s School Aid Fund. In 2018, the lottery sent $941 million to schools – less than the $2-plus billion experts say is needed for roads.
Great questions and answers, hopefully this will help you shape your opinion of the Governor’s proposed new fuel tax increase.