Michigan’s roads and bridges are in desperate need of repair, yet the funding structure for transportation is broken. The measure on the ballot this May 5 attempts to remedy that. While Proposal 1 is not a perfect fix, the Michigan Land Use Institute firmly believes that the positive changes it would have for our infrastructure far outweigh the negatives.
On balance, it’s good for Michigan’s future. It would put into effect a series of policy changes that would raise much-needed money for streets, bridges, rail, and bus systems without cutting funding for cities and schools. Even though the many changes it introduces may seem complex, in reality, it simplifies transportation funding: Fuel taxes will be dedicated to our transportation system.
The public’s distrust in Lansing makes the proposal a legitimate target for cynicism and grandstanding—and it’s not without its flaws. It’s complicated. It’s regressive. It does little to fix how transportation dollars are spent. It would still allow questionable road projects. And, it’s an all-or-nothing ultimatum that the legislature kicked to voters. If you are looking for reasons to vote NO, you can find them.
But, when you consider the alternative—trusting a newer, more conservative legislature to come up with a better solution—we’re focusing on the proposal’s many merits:
Even though the language is complicated, it simplifies how we pay for transportation. Fuel taxes would go to transportation only.
It means many more dollars for buses, rail, and bike networks over the long term. Without this funding, Michigan’s bus, passenger rail and complete streets projects are in deep trouble – especially with this new legislature.
It better connects transportation maintenance to the gas tax and registration fees, making drivers more responsible for their impact on the roads.
It raises money for transportation while giving a little boost to cities and schools. Previous proposals that had traction would divert money from schools and cities for roads.
Right now, the taxes we pay at the pump go to different places in the state budget. Here’s how our current funding system works:
We pay a 19-cents per gallon “Motor Fuel Tax” on gasoline (15-cents for diesel) that covers about half of Michigan’s transportation budget. This tax does not increase with inflation; it’s a “flat” rate that has resulted in declining revenues as fuel efficiencies reduce gasoline purchased. Vehicle registration fees cover the other half of Michigan’s transportation budget.
Motorists also pay a 6% sales or “use” tax when they fill up. Appropriately, this money goes to the state’s school aid fund and cities. Some groups criticize this as a “second tax” on gasoline that doesn’t go to roads.
If the ballot measure passes, then a number of changes would go into effect:
The 6% sales tax on fuel would be eliminated;
That 19-cent “Motor Fuel Tax” would jump to about 41-cents and would increase with inflation. That sounds high, but with the elimination of the fuel sales tax, drivers will only be paying about 10 cents more per gallon, according to the Citizens Research Council.
To make up for the school and city funding that would be cut with the elimination of the sales tax on fuel, the general sales tax on all goods would increase by 1%.
To alleviate the “regressive” impact of the sales tax increase on those with lower incomes, the Earned Income Tax Credit for low-income families would increase. The credit would jump from about $140 for the average recipient to about $430 a year, according to the Michigan Department of Treasury.
Registration fees for large commercial trucks would increase and owners of electric and hybrid vehicles—who pay much less in fuel taxes—will have to pay $25 to $75 a year.
Other changes include making road contractors more accountable for the quality of their work; tweaking the percentages of the sales taxes allocated to schools and municipalities; and eliminating depreciation rates on registration fees.
All those changes will have a big impact on Michigan’s budget. The higher fuel tax would raise about $1.3 billion for transportation improvements annually. And there’s no question that we need new revenue to fix our crumbling roads and bridges. It would also increase funding for transit and rail projects by an extra $116 million each year.
The net increase of a 1% sales increase equals roughly $800 million, which would go toward the school aid fund, local governments, and the state’s general fund.
Again, we recognize this proposal is not perfect. It’s passing the buck to Michiganders to make up for underfunding an overbuilt system. It’s an overly complicated ballot proposal. And leaves plenty of room for much-needed reforms to how transportation dollars are actually spent. Rest assured that MLUI and our transportation reform partners will continue to advocate for those reforms.
But doing nothing—or worse, cutting from schools and cities—is not an option.
The state that brought modern transportation to the rest of the world has been long fractured by crumbling roads, congestion, airport and train delays, and poor bus service, while other places still invest heavily in quality streets, rapid transit, and first-class passenger rail. Michigan must get better, and this is a start. We think Proposal 1 is worth a “yes.”
James Bruckbauer is the Michigan Land Use Institute’s transportation policy specialist. Follow him on Twitter at @jimbruckb. Reach him at james@mlui.org.
