Published in Economic Development

Whitmer’s budget proposes 45-cent gas tax hike to fund road repairs

BY Tuesday, March 05, 2019 04:52pm

Gov. Gretchen Whitmer’s first budget proposal would raise Michigan’s gas and diesel fuel tax by 45 cents per gallon over 12 months to generate $2.5 billion annually to repair state and local roads.

Under the governor’s budget proposal to legislators, the gas tax would increase 15 cents per gallon Oct. 1, 2019, with the start of the state’s next fiscal year, then increase two more times by 15 cents each in six-month intervals.

Michigan Gov. Gretchen Whitmer Courtesy photo

In proposing the gas tax increase, Gov. Whitmer seeks to launch her “Fixing Michigan Roads” plan that would restore 90 percent of the roads in Michigan to fair or good condition by 2029, up from 78 percent today.

If left unaddressed and “if we do nothing today other than what’s been done in the past,” roads will deteriorate further to 65 percent that are in good or fair condition within two years, and to 60 percent within three years.

In her budget message to lawmakers, the governor noted one study that concluded Michigan’s roads were the worst on the nation, costing residents an average $562 a year for vehicle repairs, “and this doesn’t even factor in lost time or productivity.”

“We’ve all shelled out hundreds of dollars to fix our cars when we should be fixing our roads,” Whitmer told a joint meeting of the House and Senate appropriations committees. “This is a road tax we are paying. Every one of us is paying a road tax in the form of higher auto repairs.

“This is the worst kind of road tax you can pay because it doesn’t actually fix the roads.”

Whitmer would offset the higher gas tax by doubling the earned income tax credit from 6 percent to 12 percent for low-income residents.

“I am proposing a plan that would actually fix the roads the right way, the first time, because right now our roads are downright dangerous,” Whitmer wrote. “My plan will make sure we fix the roads and they stay fixed, so that everyone can drive to work or drop their kids at school safely.”

The Michigan Chamber of Commerce commended the governor for addressing the issue, although it stopped short of backing of the proposal. The chamber in a statement reiterated support for improving Michigan’s infrastructure through uses fees.

“The Michigan Chamber agrees with the principle that those who use the roads should pay for the roads and we are prepared to support a meaningful increase in user fees phased in over time,” Michigan Chamber CEO Rich Studley said in a statement. “We urge lawmakers to recognize that state government must take bold action to fix the roads and we look forward to working with them to solve this problem.”

Options for addressing the problem are to raise new revenue, reallocate current spending, or a combination of both, Studley said.

“Michigan now has the worst roads in the country. To prevent further decline, state government must invest substantially more per year to repair or replace roads and bridges,” he said. “Doing nothing to fix Michigan’s crumbling roads is not an option and piling more borrowing on top of the current debt burden for roads is a bad idea. We encourage the governor and legislative leaders to work together on a legislative solution to fix the roads.”

One lawmaker involved in the appropriations process said he’d rather wait to see how a plan lawmakers enacted in 2015 works out before raising fuel taxes again. That plan raised the gas tax 7 cents per gallon and increased vehicle registration fees to generate $1.2 billion annually for roads, but doesn’t get fully funded until 2021.

Sen. Jon Bumstead, a Republican from Newaygo who’s vice chair of the Senate Committee on Appropriations, said he’s “very wary” of the governor’s proposal for another gas tax increase.

“We’ve all been asking how we would pay for her goals mentioned in the State of the State address. Well today we see it is simply another tax increase,” Bumstead said. “The Legislature approved landmark road funding initiatives in recent years that have yet to take full effect, and we are seeing results based off those efforts. I would like to see more success out of current funding before going back to the taxpayers again and throwing money at a program that has not been fully implemented.”

Republican House Speaker Lee Chatfield voiced opposition as well. He cited voter rejection of 2015 proposal to increase the gas tax.

Chatfield supports putting sales tax revenues on gasoline to pay for road repairs. Sales taxes on gas sales do not presently go for roads.

“I’ve said it before and I’ll say it again, we will always have a road funding problem in Michigan until every penny we pay in taxes at the pump is devoted to fix the roads,” Chatfield said. “The people of this state already said no to a reckless $2 billion tax hike not that long ago. We can’t continue to gloss over the long-term structural problem, while asking families, workers and seniors who are already living paycheck to paycheck to pay even more.”

At Tuesday’s joint meeting of appropriations committees, administration officials said that if lawmakers wanted to offer a different plan, “we’ll look at it,” although the state’s transportation system faces “a very sobering moment” and needs $2.5 billion annually to catch up to what’s needed and overcome “40 years of disinvestment.”

“I understand and the governor understands the enormity of what we’re asking, but we want to provide a solution,” said state Budget Director Chris Kolb. “If you don’t like this solution, then you can bring another one to us, but we need $2.5 billion and there’s only so many ways to raise that.”

EDITOR’S NOTE: This story has been updated with additional details. 

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