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Senate Passes Gas Tax Vacation Package For The Summer

May 31, 2022

The Senate passed a gas tax vacation package to temporarily suspend both Michigan’s gas tax and the sales tax on motor fuel, hoping to sidestep projections of gasoline prices hitting $6 per gallon this summer. 

Some Democrats were hesitant to leap across the aisle and support the summer vacation proposal. However, term-limited Senate Minority Leader Jim Ananich (D-Flint), the chamber’s top Democrat, said, “Today, we’re doing everything we can within our powers as state officials to lower prices at the pump for Michigan families.” 

In March, Republican lawmakers attempted to cancel the state tax on motor fuel from April 1 to Sept. 30. 

The Governor vetoed the legislation, as it would bite out around $750 million from the Michigan Transportation Fund for the current Fiscal Year of 2022, potentially impacting ongoing road projects – although it aimed to reimburse them with an excess in General Fund dollars. 

At that time, Ananich – in remarks that were echoed by the Governor’s office – proposed a brief sales tax vacation for gas prices instead. He pinned the rising prices on gas company CEOs and suggested an investigation.

“I want to recognize there are some concerns from groups and programs across the state that are funded by these revenue streams,” Ananich said. “You pledge to work across the aisle and with the Governor to make sure no program is financially harmed.” 

The “Pain at the Pump” legislation featured SB 1029 by Sen. Roger Victory (R-Hudsonville) to pause the state tax of 27.2 cents per gallon on gasoline and diesel fuel until Sept. 15. The bill would utilize approximately $192.6 million from Michigan’s General Fund to reimburse project money lost by county road commissions. 

It would also use around $107.4 million to compensate for revenue lost among cities and villages. 

SB 972 by Sen. Tom Barrett (R-Charlotte), SB 973 by Sen. Aric Nesbitt (R-Lawton)and SB 974 by Sen. Dan Lauwers (R-Brockway) would also eliminate the sales tax and the use tax on motor fuel within the same timeline of Jun. 15 to Sept. 15 of this year. 

According to the Senate Fiscal Agency, the School Aid Fund (SAF) obtains around 73.3% of sales tax revenue, and one-third of use tax revenue. Cities, villages and townships also acquire 10% of sales tax revenue assigned to them via constitutional revenue sharing provisions. 

Under SB 972, SB 973 and SB 974, the SAF would lose between $266.3 million and $280.5 million in revenue for the present-day Fiscal Year of 2022. Local units of government participating in constitutional revenue sharing could also lose between $36.3 million and $38.3 million. 

SB 972, SB 973 and SB 974 were each passed nearly unanimously with one no-vote from Sen. Jeff Irwin (D-Ann Arbor). 

Irwin said he fears that very little of the tax reduction will actually land in the pockets of consumers and residents in need, and that most of the effort’s benefits will be absorbed by gas stations, distributors and oil companies.  

“The benefit that you get from this policy shouldn’t be dependent on what kind of vehicle you drive or whether you drive at all,” Irwin said. “People who drive gas guzzlers are gonna get the maximum benefit. We should be providing a benefit that is more equal for our citizens…but the biggest reason why I stand opposed to this policy is because it won’t work, and because it hasn’t worked.” 

SB 1029 was opposed by Sens. Irwin, Betty Jean Alexander (D-Detroit), Marshall Bullock (D-Detroit), Stephanie Chang (D-Detroit), Erika Geiss (D-Taylor), Curtis Hertel (D-East Lansing) and Mallory McMorrow (D-Royal Oak). 

According to the Senate Fiscal Agency, the School Aid Fund (SAF) obtains around 73.3% of sales tax revenue, and one-third of use tax revenue. Cities, villages and townships also acquire 10% of sales tax revenue assigned to them via constitutional revenue sharing provisions. 

Under SB 972, SB 973 and SB 974, the SAF would lose between $266.3 million and $280.5 million in revenue for the present-day Fiscal Year 2022. Local units of government participating in constitutional revenue sharing could also lose between $36.3 million and $38.3 million. 

“Of the billions of dollars we’ve received from the federal government and from surpluses here in the state, very little proportionally has gone to small businesses, whether directly or indirectly,” Amanda Fisher, the Michigan director of the National Federation of Independent Business (NFIB), said during Thursday morning’s Senate Transportation and Infrastructure Committee meeting. 

She said a recent NFIB survey found that 77% of small employers reported that rising fuel prices are a substantial contributor to higher costs, with 99% reporting that the increase in fuel costs is having some degree of negative impact on their business. 

“The main tool small businesses have to mitigate these costs is by raising prices and 86% are increasing the price of their goods or services, which of course, then affects the citizens of Michigan who utilize these small businesses,” Fisher said. “If we can do just this one thing to help, then we need to do it.” 

Irwin also offered an amendment to distribute $300 million to county road commissions based on the proportion of gas tax revenue that is generated within their jurisdiction, which would offer extra support to counties like Wayne, Macomb and Washtenaw. 

The amendment failed, and Sen. Ed McBroom (R-Waucedah Twp.) described it as the “stick-it to the U.P. amendment.” 

“I’ll continue to thank you for making sure that we have roads so we can transport our steel products and other things that you need so you can build the cars in Detroit and have all of the other products that the Upper Peninsula generally provides,” McBroom said. “Then you can come up there and playground around and tell us what to do about everything.” 

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