If Michigan voters are willing to pay an extra cent on the sales tax to fix the state’s roads, they’re going to have a chance to prove it.
Per an agreement with Gov. Rick SNYDER, the Legislature passed measures on its last voting days of the year to present voters with a state sales tax hike from 6 to 7 percent as part of plan designed to ultimately inject around $1.3 billion into the state’s transportation network annually.
In doing so, voters would be able to increase school funding by $300 million annually — which is equal to roughly $200 more per pupil — and protect the School Aid Fund from being raided by universities.
The plan is to eliminate the sales tax on gasoline (HB 4539), scrap the per-gallon charge and replace it with a new wholesale tax that would roughly raise the same amount the state currently collects in total on taxes collected on motor fuel (HB 5477). HB 5493 would make this same change for diesel taxes, so what drivers pay at the pump will remain relatively unchanged.
The difference is that the entire amount collected by the state at the pump would go to roads, meaning an additional $1.2 billion for the roads. Under the current formula, schools and local governments are partially funded by the 6-percent sales tax on motor fuel.
The remaining $95 million comes in the form of new driver registration fees (HB 4630). The Legislature voted to freeze the depreciation schedule that drivers currently enjoy when they renew their registration tags. Currently, a person enjoys a slightly lower registration fee as their car ages annually. The fee would now freeze as is.
This breaks down to $45 million more from vehicle tags and an additional $50 million from heavy truck registration. Transportation-related reforms on warranties (HB 5460) and competitive bidding (HB 5167 and HB 4251), which both chambers have already agreed to, are also in the plan.
The lynchpin of the entire package is an up-or-down ballot proposal slated for May, which would raise the sales tax a penny to cover what schools and local governments lose from the eliminated sales tax on gasoline.
If voters turn it down during the May election — which statistically has had the highest success rate in new revenue requests — the whole plan collapses, the status quo remains and lawmakers are back to square one on finding new funding for the roads.
If it passes, House Speaker Jase BOLGER said $400 million more would go into the roads in 2015.
“With this passing, we will not miss another construction season,” Bolger said.
Richardville responded to criticisms that the Legislature was shoving a road funding solution onto voters by reminding reporters at today’s press conference that a two-thirds vote is required from each chamber before the proposal can move forward.
“In no way is this punting anything down the field … we want to participate,” Richardville said. “Because the Constitution has to be changed, the people have to be involved, as well.”
The 1 percent increase in the sales tax would be set aside for local governments and schools, which would see at least $300 million more under this plan and local government would see $94 million.
Democrats and Senate Minority Leader Gretchen WHITMER (D-East Lansing) scored a big win in this package because School Aid Fund money would only go to K-12 schools, not universities. The Fund could still be used for community colleges and vocational education, however.
The Earned Income Tax Credit would also be restored to 20 percent of the federal level, which is an increased savings of $260 million for low-and middle-income families. If the ballot proposal passes, House Minority Leader Tim GREIMEL (D-Auburn Hills) said families who qualify for the credit would see a net decrease in their tax burden.
“One of our caucuses’ main concerns was making sure low- to middle-income folks, those who are struggling the most in today’s difficult economic circumstances, were not hit with an additional tax burden that would make life even harder for them,” Greimel said. “This is critically important, especially to make sure that those who work hard for low and moderate wages are protected from tax increases here.”
Democrats got a long-sought-after proposal pushed by gubernatorial candidate Mark SCHAUER on the campaign trail to force the state to conduct a study to determine what it costs to successfully educate a student. The state Board of Education also suggested the idea.
Rep. Brandon DILLON (D-Grand Rapids) won the language in SB 0423. He said the study would establish a “business plan for schools.” About 13 to 15 other states have done such a study, he said.
“Nobody has ever really had a definitive target for what it really costs to educate a child in Michigan,” Dillon said. “This, simply, I think, will give people the information once the study is completed to know where we need to be spending money, what we need to be spending on.”
Although transportation reform similar to the Senate-passed plan offering decisive legislative action would have been preferable to Whitmer, she said getting something done was better than leaving the matter unresolved.
“I was really proud that the Senate put together a bipartisan plan, but in this climate, that was not to be,” she said. “I am of the opinion that the worst thing we could do is to leave without doing anything.”
Part of the deal also included the passage of “Main Street Fairness” bills, which would require businesses with a “nexus” in Michigan to collect the state’s sales tax from customers who make Internet purchases SB 0658 and SB 0659).
The plan also included a few other sweeteners that House Democrats, in particular, bargained for:
– Restoring the Earned Income Tax Credit to 20 percent of the federal rate, a savings to low- and middle-income families of $260 million (SB 0847).
– Another $40 million for “at-risk schools” (SB 0080).
– An executive order from Snyder that opens up opportunities for small businesses interested in contracting as it relates to transportation-related projects. It’s argued this type of program could be beneficial to minority- and female-owned businesses. This piece helped get members of the Detroit caucus on board.
– A commitment from Snyder to not sign either a prevailing wage repeal or a change in the Electoral College allocation of votes for at least the upcoming term.
The total cost of the ballot proposal still needs to be analyzed, Snyder said, but he noted campaigns for statewide elections are typically in the $10 million range.
A final bill in the package, HB 5492, makes sure the state’s use tax is distributed as agreed upon.