Michigan looks to simplify fuel tax system

| Monday, June 10, 2002

While in the process of considering a hike in taxes assessed on diesel fuel, Michigan lawmakers had a revelation: If they were to simplify what they recognize as the most complicated fuel tax collection system in the nation, they would collect more taxes without increasing the tax rate.

The House Committee on Transportation is considering an amended package of three bills that would simplify the way truckers pay taxes on diesel fuel. The new system would collect the entire tax on diesel at the pump.State officials believe the simpler fuel tax collection system might net their state a windfall of $10 million through greater compliance and the elimination of tax evasion.

"The state, the taxpayer and everyone else is a winner with tax simplification," says Todd Spencer, executive vice president of OOIDA. "Likewise, having all taxes assessed reflected in the pump price of fuel is the simplest, the most honest, and most efficient way to assess and collect these fees."

Currently truckers pay a fuel tax and a sales tax at the pump, then file a quarterly tax return to pay additional fuel taxes, then file another quarterly tax return to apply for a sales tax rebate. You're paying the same amount but with three steps.

Under the proposed system, truckers pay the entire tax at the pump. Intrastate truckers in Michigan would not be required to or need to file a quarterly return. Interstate truckers would still file quarterly and could receive credit for over-purchases.

The bills' opponents - Michigan truckstops and the Michigan Petroleum Association - say truckers won't buy their fuel in Michigan if the entire tax is listed on the pump price, making the price of diesel seem higher.

"They are just squawking because the current system gives the illusion that fuel prices in Michigan are lower than they actually are," said Spencer. "In reality, excluding state taxes, fuel prices in Michigan are the fourth highest in the nation."

On June 4, the transportation committee approved the first reading of the amended bill package before leaving for a one-week session break. When they return on June 11, the committee is expected to vote on the package and send it on for approval by the House and then the Senate, all before the session ends in mid-June, though a special session could be called.

To follow the bill package's status, call (517) 373-0135 and ask for bills HB5734, 5735 or 5736.
--Rene Tankersley

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