WSW: Analyzing the Proposed Road Funding Package

Mar 27, 2015

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If voters approve a proposal to increase the sales tax on May 5th, it will trigger a series of laws designed to boost funding for roads in Michigan. 


The Citizens Research Council of Michigan has prepared an analysis of Proposal One. They also presented a webinar on March 25th. State lawmakers have been criticized for turning to voters to solve the road funding problem after years of debate. Citizens Research Council State Affairs Director Bob Schneider says the Legislature would not have needed voter approval to increase only gas taxes. He says the Michigan Constitution requires any increase in the sales tax to be approved by voters. Schneider says the dual goals of eliminating the sales tax on gas and protecting funding for schools and local governments required a sales tax increase, and therefore putting Proposal One on the ballot. 

Schneider says the state has been facing a lack of funding for roads because it's been relying largely on gas and diesel fuel taxes. He says that as people have chosen to drive less and cars have become more fuel efficient not as much money has been available for infrastructure. 

Proposal One would increase the sales tax from 6 to 7 percent. But the sales tax will no longer be applied to gasoline. Schneider says while that amounts to a loss for the state, there will be increases in gasoline and diesel fuel tax rates to boost road funding. The increase in the sales tax is designed to replace money to the school aid fund and local governments that they would no longer receive from the sales tax on gas. Schneider says the law also puts protections in place against large fluctuations in gas prices. 

If voters approve Proposal One on May 5th, motorists will pay more for gas, and everyone will pay more on retail purchases because of the increase in the sales tax. Schneider says some tax credits for low and moderate income residents will also go into effect to mitigate some of the impact of the sales tax increase. 

The Citizens Research Council report says a vote is needed because past amendments to the state Constitution have limited the Legislature's prerogatives to raise revenue. Schneider says Proposal One also adds a provision to the State Constitution which says that motor fuel is exempted from the state sales tax. He says it wasn't necessary to amend the Constitution to make that change. Schneider says that could tie the Legislature's hands sometime in the future. 

The approval of an amendment to the Michigan Constitution (raising the sales tax) triggers a series of other laws that would take effect if voters give their approval on May 5th. The Citizens Research Council report raises the question of whether that is the proper role of the Legislature. Schneider says there is a legal question about that method of law making. 

If voters don't approve Proposal One, Schneider says the state will be back to square one on road funding. He says none of the other laws tied to the increase of the sales tax would take effect.