Sometimes education is the best advocacy and that’s the case with Ballot Proposal 15-1 which will be before Michigan voters on the May 5th ballot. This complicated proposal is designed to raise the necessary $1.2 billion needed to fix Michigan’s roads and bridges without hurting the School Aid Fund and local units of government. With the help of our Director of Government Relations, Kent Wood, I’ve developed this message as a way to help you better understand the proposal. Here we go:
Let’s start at the gas pump. If approved, the current 19¢/gallon gas tax would go away and so would the 6% sales tax that is currently applied to all gas purchases. These taxes would be replaced with a 14.9% tax on the average wholesale price of gasoline and diesel. Note, we’re replacing a fixed 19¢/gallon retail tax with a percentage-based tax on wholesale. MDOT estimates that if this was enacted today, consumers would see a net gain of about 4¢/gallon at the pump. It is through this restructure of gas taxes that we arrive at most of the $1.2 billion in new revenue for our roads, and it would mark the first time in Michigan’s history that 100% of gas taxes will go to support roads and transportation.
So, if the 6% sales tax is no longer being applied to gas sales in Michigan, then that means local units of government and our public schools would see significant losses. That’s why the legislature added the 1% increase to the sales tax. Taking the sales tax from 6% to 7% will backfill the lost dollars to the School Aid Fund and to municipalities. It’s for this reason that this issue is on the ballot. Changing the sales tax in Michigan requires a change to the state constitution which can only be done by a vote of the people.
By the way, if enacted, the proposal would maintain the same distribution of the sales tax of 60% to the School Aid Fund, 15% to revenue sharing and the balance to the general fund. There are new provisions that would prohibit the School Aid Fund from funding higher education, but it would still permit funding for community colleges and career tech ed programs. It has not been determined what the net, per-pupil impact will be for northern Michigan schools.
But wait, there’s more! The proposal would also increase registration fees on commercial trucks, hybrids, and electric vehicles. Also, do you recall how the registration fees on your vehicle decline annually as your vehicle depreciates? That would not occur anymore. Your registration fees will freeze at the new car level when you purchase a vehicle after Jan. 1, 2016.
Are you with me so far? A couple of other elements to the proposal include a one-time earmark of $40 million for at-risk schools in the current fiscal year. There is also an increase in the Earned Income Tax Credit which will be an advantage to working families.
Oh, by the way, if the proposal passes, work on Michigan roads would be phased in over three years. In FY 2016, the first $400 million would go to road improvements while the rest would go to pay off existing road-improvement bonds. In FY 2017, the first $800 million would go to road improvements and rest toward the bond pay-offs. These bonds date back to the last major road improvement initiative in Michigan which occurred during the Engler administration and re-financed in the Granholm administration.
Here are the bottom-line impacts:
1. This is a tax increase. The Michigan League for Public Policy estimates that a household with an income of $51,000 will pay around $267 more per year, around $22/month.
2. We’ll pay about .04/gallon more at the pump in the beginning.
3. We will raise the estimated $1.2 billion for road improvements leading to 6,600 miles of roads fixed by 2027. Experts say we’ll only fix 2,900 miles of roads without the new funding.
4. 100% of gas taxes will now go to transportation in Michigan, and since the gas tax is now tied to a percentage of wholesale, it will keep up with inflation.
5. Sales tax losses at the pump for public schools and municipalities will be made up through the sales tax increase.
6. Businesses will see an estimated increase in fuel taxes of around $200 million and increases in vehicle registration fees of around $95 million.
7. Brian Gutowski of the Emmet County Road Commission says the impact on Emmet County will be a gain of around $4.8 million annually, $3.15 million of which will go toward roads and $1.65 million to area schools and municipalities.
The following organizations support Ballot Proposal 15-1:
• Traverse City Area Chamber of Commerce
• Lansing Regional Chamber of Commerce
• Detroit Regional Chamber of Commerce
• Grand Rapids Chamber of Commerce
• Cadillac Area Chamber of Commerce
• Small Business Association of Michigan
• Michigan Manufacturers Association
• Michigan Association of Convention and Visitors Bureaus
• Michigan Lodging and Tourism Assn.
• West Michigan Policy Forum
Those opposed include the National Federation of Independent Businesses and many anti-tax organizations.
The Petoskey Regional Chamber of Commerce has elected to take no stance on the issue as did the Michigan Chamber of Commerce, Gaylord Area Chamber of Commerce and the Alpena Chamber of Commerce.
I hope this helps you with your decision as you head to the polls on May 5.