Work continues at the Michigan statehouse on a deal to ultimately raise $1.2 billion annually for roads and bridges.
House lawmakers voted this past week to advance a possible fix for the state’s ailing road and bridge system. The multi-bill package now moves to the Senate for further consideration.
The main part of the Republican-led package calls for raising the state’s 19-cent-per-gallon gas tax rate by 3.3 cents to 22.3 cents in October 2017. The 15-cent diesel rate would increase by 7.3 cents over two years to 22.3 cents.
An initial diesel rate hike of 4 cents would take effect in October 2017. A second increase of 3.3 cents would kick in the following October.
Additionally, the tax rates would be linked to the consumer price index in 2022, which would allow tax collections to increase with inflation.
Changes in the fuel tax rates are estimated to raise $201 million annually once fully implemented.
Another component in the package would increase vehicle registration fees in October 2016 by an average of 40 percent for cars and large trucks. The bill is expected to generate about $400 million per year.
A new registration tax surcharge would also be created for electric-powered vehicles.
The package also authorizes an annual transfer from the state’s $9.9 billion general fund to roads. The first transfer would shift $150 million between the accounts and increase to $600 million by 2021.
Rep. Jon Bumstead, R-Newaygo, said in prepared remarks that while he would have preferred that all of the money come from existing funds, “this approach allows all of our legislative leaders the opportunity to get on board.”
Critics of the package say it will take five years for the state to build up to the $1.2 billion in annual revenue touted by supporters. House Democrats also point out that transferring money from the general fund will hurt programs that include public safety, education and health care.
A transportation funding solution has been a hard sell at the statehouse in recent years. Late last year the GOP-controlled Legislature endorsed a plan to allow voters to make the final decision.
In May, voters resoundingly rejected a statewide sales tax increase to raise $1.27 billion annually for roads and bridges. Also included in Proposition 1 were plans to convert the state’s gas and diesel tax rates to a wholesale rate, which would allow tax collections to increase with inflation.
Rep. Ned Canfield, R-Sebewaing, labeled the latest House-approved package as a “common-sense solution to fix the roads.”
“This is a compromise plan,” Canfield stated. “The results of Proposition 1 told us that Michigan residents want a roads-focused plan. This plan is about roads.”
House Democratic Floor Leader Sam Singh of East Lansing is not impressed with the plan.
“House Republicans care more about passing a plan – any plan – than about passing a responsible plan that will actually work,” Singh said.
Democrats offered a plan that relied on reprioritizing existing funds, reforming registration and closing registration “loopholes,” and scaling back tax breaks to corporations.
The House plan now moves to the Senate where the upper chamber recently approved a package of bills that would increase the state’s excise tax rates and route additional revenue to transportation.
The main part of the package calls for raising the state’s gas tax rate by 15 cents to 34 cents per gallon. The diesel rate would increase by 19 cents to 34 cents.
The gas rate would increase by nickel increments on Oct. 1, 2015, Jan. 1, 2016, and Jan. 1, 2017. The diesel rate would be raised by 7 cents on Oct. 1, 2015, and Jan. 1, 2016. Another increase of 5 cents would kick in Jan. 1, 2017.
Changes in the fuel tax rates are estimated to raise $822 million annually once fully implemented.
Additionally, the tax rates would be linked to the consumer price index on Jan. 1, 2018, which would allow tax collections to increase with inflation.
The Senate plan would also take $700 million from existing income tax revenues routed to the General Fund and shift the money to roads and bridges.
However, Gov. Rick Snyder is opposed to rerouting existing revenue from one budget to another. The Republican governor has said he is unwilling to jeopardize the state’s long-term fiscal responsibility.
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