The Michigan House narrowly approved a plan that avoids new taxes and fees to pay for $1.2 billion annually in road funding. It differs significantly from a plan that Senate lawmakers endorsed last month.
House Speaker Jase Bolger’s plan relies on diverting money from schools and cities to bolster transportation work. Specifically, HB4539 would phase out the 6 percent sales tax added to fuel purchases while converting the state’s excise tax rates to a percentage rate that would gradually increase over time.
Most sales tax revenue now goes to the School Aid Fund and local revenue sharing programs.
House Democrats are critical of Bolger’s plan. Rep. Marilyn Lane, D-Fraser, said it fails to find any new revenue and instead creates holes in the budget for schools and revenue sharing for local governments.
“There’s no leadership or fiscal responsibility in just shifting money around when we are facing a roads repair bill in the billions of dollars,” Lane stated.
Bolger says a provision in the bill specifies that schools and local governments could not have funding reduced lower than the previous year during the transition. During this time, he says the growth in sales tax revenue could make up for the lost revenue.
“Simply put, this plan dedicates the taxes drivers pay at the pump to fixing their roads,”
Bolger, R-Marshall, said in a news release.
A competing plan approved by the Senate in mid-November could potentially raise $1.5 billion annually to fix roads and bridges. It calls for repealing the state’s per-gallon tax rate on gas and diesel. Lawmakers haven’t increased the 19-cent-a-gallon gas tax since 1997. The 15-cent-a-gallon diesel tax has remained unchanged since 1984.
If approved, HB5477 would replace the excise taxes on April 1, 2015, with a 9.5 percent wholesale tax, which would allow tax collections for gas and diesel to increase with inflation.
The tax rate would increase by 2 percent increments each January until reaching 15.5 percent on Jan. 1, 2018. At that time, it is estimated the tax rate would approach 40 cents per gallon.
Time is running short to get a deal done before the Legislature adjourns for the year. If they fail to approve a plan before the regular session ends in two weeks, they will be forced to start from scratch after the first of the year.
Gov. Rick Snyder has turned up the heat in an effort to get a deal done.
Specifically, he called on the House and Senate to work out a deal by the end of the year to pay for $1 billion in road improvements.
“There’s a time for discussion and a time for action,” Snyder said. “After nearly 20 years of discussion in Lansing, taxpayers deserve action.”
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