The hard-sell is on!
Proposal 1 is being sold here in Michigan as "the sales tax that will go toward fixing Michigan's roads"—but analyze its language, and you'll learn that during its first year only 7% actually goes to fix state roads.
If voters approve Proposal 1’s $2 billion tax increase, most of the revenue from the measure’s $1.2 billion fuel tax will initially go to repay the Michigan Department of Transportation's debt on past road repairs. (MDOT has about $1.9 billion on the books and spends roughly $240 million a year on debt service.) In 2016 (the first year), $815 million will be used to repay debt. In the second year, this falls to $456 million. Only in 2018 will the full gas tax amount go to current transportation funding, rather than paying for past road repairs.
Really, Miss Fortune?
The Governor wants us to believe those slick television ads that tell us Proposal 1 will immediately create jobs and boost investment in Michigan. What are we to believe?
While Michigan Proposal 1 would eventually pump some $1.25 billion a year into crumbling roads, if approved by voters on May 5 it would trigger $865 million in debt payments in fiscal year 2016, according to an analysis by the House Fiscal Agency. Another $368 million would be distributed to state and local road agencies for maintenance and repairs.
In fiscal year 2017, $467.5 million would be used for MDOT debt payments while $764 million would go to roads. Beginning in fiscal year 2018, the full $1.25 billion in additional funding would end up with road agencies.
Oh sure, the delay in real road funding could give Michigan's Republican-controlled legislature time to figure out how to misappropriate that dough for all kinds of monkey business...but come on, would they really do that?
In a word, yes.
I'm voting against this proposal...you can make your own decision.
Here's an analysis, courtesy of the Mackinac Center for Public Policy:
On May 5, Michigan residents will vote on a constitutional amendment and a package of bills that will go into effect if approved. Proposal 1 would increase the sales tax from 6 to 7 percent, raise the fuel tax and increase vehicle registration taxes, among other things. It will also hike the state’s Earned Income Tax Credit.
Overall, the proposal will increase state taxes and spending by $2 billion in 2016, of which about $1.3 billion will go to funding public roads. Of the additional $700 million in new tax revenue, $300 million would go to public schools, $100 million to local government revenue sharing, and pledges for future spending on local bus and transit agencies. The increase in the EITC will cost the state budget a further $260 million.
Based on data from the U.S. Census Bureau, Department of Transportation and Bureau of Labor Statistics, Proposal 1 would increase the tax burden of the typical Michigan household by between $477 and $525 in 2016.
Part of this increased tax burden would come from paying more taxes at the pump. The federal Energy Information Administration projects the average price of gasoline to be $2.39 per gallon in 2015. At this rate, taxpayers would pay an extra 10 cents per gallon in taxes under Proposal 1, a 4 percent increase.
Tax and fee changes:
The proposal raises the state’s sales and use taxes from 6 percent to 7 percent, a 17 percent increase in the rate. This would give Michigan the second-highest state sales tax in the nation, though other states allow local governments to also levy their own sales taxes. Increasing sales and use tax rates would bring the state government an extra $1.4 billion.
New and higher fuel tax:
The state currently imposes both sales tax and a per-gallon excise tax on motor fuel. This excise tax along with vehicle license and registration fees are the primary source of revenue for the state’s road maintenance budget. Under the measure, sales tax would no longer be imposed on fuel and the motor fuel tax would be replaced with a new wholesale tax levied at higher rates than currently.
At a listed price of $2 per gallon, the state is currently collecting 29 cents per gallon in sales and excise taxes on gasoline. This proposal would increase those collections to 41.7 cents per gallon.
Registration fees for commercial trucks that weigh more than 26,000 pounds will be increased on a sliding scale based on the truck’s weight.