5 Tax Ideas Floated To Makeup, Replace Gas Tax
January 25, 2023
Article courtesy MIRS News, for SBAM’s Lansing Watchdog e-newsletter
A new report stated Michigan roads could suffer a funding chasm if something isn’t done to replace the federal and state gas tax as more electric vehicles come online.
Several municipal and roads association leaders proposed the adoption of a tax that would fully make up the funding to a possible $95 million-per-year loss predicted by an Anderson Economic Group report for the County Road Association of Michigan released today.
“You are taking a whole class of people and saying: ‘Boom, you don’t have to pay federal taxes and you get a discount on your state taxes.’ And it’s unrelated to usage and you don’t have to take into account – unless you drive a Hummer – how much it weighs. This is not sustainable,” said Anderson Economic Group CEO Patrick Anderson.
The report said Michigan had already lost $50 million because of the 2% of the vehicles in the state that are electric.
However, electric vehicles in Michigan are required to pay an extra $100 registration fee per year and the report suggested a registration fee increase to offset any loss to the gas tax. Anderson said the fee was not enough to make up for the loss and there was between a $100 to $200 shortfall between the two.
To emphasize his point today’s press conference Anderson pointed outside to a blue electric vehicle and said he drives on the same roads but paid no federal or state gas tax and said that people driving electric vehicles should “pay our fair share of the cost to maintain the roads we use.”
“Pat, I believe they are generating some revenue from your car right now,” said Michigan Townships Association Executive Director Neil Sheridan, as Lansing parking enforcement wrote up a ticket for Anderson’s street-parked EV.
“That parking ticket is certain to be disputed, I might add,” Anderson quipped. “I’ve got a receipt right out there showing I put coins in the meter.”
Outside of parking tickets and registration fees, there were four other suggested makeups introduced by the report. County Roads Association of Michigan CEO Denise Donohue said the members of the newly-formed Coalition on Electric Vehicles and Transportation Revenue would not recommend any one of the solutions.
One of the suggested makeups would be a per kilowatt-hour user fee that would be based on the units of electricity used at a charging station.
“Paying a kilowatt-per-hour fee is not that much different than a gas pump,” Anderson said.
Another solution proposed was the mileage-based user fee, which could be measured by a flat rate for users who don’t want to provide the data from a private company’s data collection.
“We should all pay taxes for the road that we drive. Right now, there is a small fraction of people that don’t and we should address it,” Anderson said.
A third solution would be a declaration of miles to the Secretary of State during annual registration. The odometer would be recorded and compared and the miles driven would be applied.
“There are 19 other states that are doing some mileage-based tax,” Donohue said.
The last suggestion in the report was toll roads that would be used by the state to generate revenue to make up the difference.
The biggest hurdle for any road tax would be the presentation to the public and Anderson said taxes have upset people “all the way back to Roman times.”
“Of all the taxes we levy in this country, the road tax is generally the most fair and most consistent,” Anderson said.
He said if this doesn’t happen soon it would soon become unsustainable.
Rob Coppersmith, the executive vice president of the Michigan Infrastructure and Transportation Association, said it was already critical and the roads in the state have been underfunded for decades.
He said Gov. Gretchen Whitmer proposing a 45-cent gas tax increase in 2019 was the indicator that the state already has a problem and was “woefully behind” on the solution.
“We need action from Michigan’s leaders to rethink how we fund our roads and it’s time for everyone to come together to support an equitable, long-term infrastructure plan that recognizes the new realities Michigan faces,” Coppersmith said.