Michigan Senate panel passes $1.5 billion highway plan funded by fuel tax increases

Michigan welcome sign with road workA Michigan Senate panel approved a package on Tuesday to provide $1.5 billion to infrastructure improvements in the state.

The plan would fund roads by raising the gas and diesel taxes over three years and send some money from the general fund to pay for road projects, MLive.com reported.

The plan would also get rid of the Earned Income Tax Credit that’s currently offered to the working poor—getting rid of the credit would save the state about $120 million each year.

If the new plan were to become law, the 19-cent gas tax would rise to 24 cents in October, 29 cents in January 2015 and 34 cents in 2017. The diesel tax would go from 15 cents to 22 cents in October, 29 cents in January and 34 cents in 2017.

Rates for both would be adjusted after 2017 for inflation. The higher fuel taxes would bring in $822 million for infrastructure funding by 2018.

“I think it’s a great opportunity for us to look at ways we can constrain the growth of government and find a way to fund our roads,”Senate Majority Leader Arlan Meekhof (R-West Olive) said.

In addition to the fuel tax increases, the plan would send $350 million of general fund money to the Michigan Transportation Fund in 2017 and $700 million a year starting in 2018. However, sending money from the general fund would mean cuts elsewhere in the budget. Lawmakers haven’t said where the money would come from, but Meekhof said the cuts wouldn’t be across the board.

The bill passed the Senate panel across party lines with the only two Democrats in the panel voting against it. The Democratic opponents said they only saw the details for a few hours before the vote.

“This effort to fix our roads should start by not making things worse,”  Senate Minority Leader Jim Ananich (D-Flint) said. “Democrats are without question interested in finding the right plan, so hopefully we can work together to produce a final product that is better than this.”

The bill is similar to one passed by the Michigan House of Representatives in June. However, the Senate road plan raises the fuel tax much more than the House’s plan to simply match the diesel tax with the gasoline tax.

Partner Insights
Information to advance your business from industry suppliers

“Our House priorities for a long-term transportation solution were tax fairness, making the best use of existing funding, making road work a priority in the budget process, and consumer protections that ensure quality work,” House Speaker Kevin Cotter (R-Mt. Pleasant) said in a statement. “I am optimistic that we can find an agreement with our partners in the Senate that lives up to those standards and fixes Michigan’s crumbling roads.”

Both the House and Senate bills come following taxpayers in the state overwhelmingly voting down Proposal 1 on May 5—the proposal would have raised about $1.25 billion for road repairs through a sales tax increase and higher gas prices.  eq