By on June 3, 2014

May 2014 Michigan Gas Prices

State senators in Michigan returned to Lansing Monday in a rare session to discuss raising fuel taxes to fund improvements to the state’s road infrastructure.

Detroit Free Press reports majority leader Randy Richardville of Monroe is proposing a new tax to replace the current fuel taxation scheme. At the moment, regular unleaded fuel is taxed at 19 cents per gallon, while diesel sees 15 cents per gallon go to Lansing’s coffers. The new scheme would replace both taxes with a wholesale fuel tax, beginning at 9.5 percent next January, then rising to 15.5 percent by 2018. The tax will result in 25 cents per gallon sent to the government, raising an additional $1.5 billion annually to repair and maintain the state’s roads and bridges. Meanwhile, the state house wants to set a wholesale tax of just 6 percent, delivering $450 million a year.

Though Governor Rick Snyder is on board with Richardville’s proposal, business groups are split over the wholesale tax plan. The state chapter of the National Federation of Independent Business objects to the new tax, believing the tax could not come at a worse time as president Charlie Owen explains:

While we recognize the need for good roads and adequate funding, this is a difficult time for fuel tax increases on Michigan small-business job providers as we watch the price of gasoline approach $4 a gallon. The rising price of fuel and the recent increase in the minimum wage are already putting pressure on Michigan’s small and family-owned businesses. Raising the gas tax would cut more from their bottom line.

Michigan Chamber of Commerce Senior Vice President Jim Holcomb, however, sees no problem with the proposal because of the amount the tax would raise for road projects per annum. The chamber itself urged state lawmakers to solve the problem before facing the possibility of putting the question before the populace on the November 2014 ballot. If passed, the wholesale tax, in tandem with the state’s general sales tax, would give Michigan the title of having the highest fuel taxes in the United States, up from sixth place right now.

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47 Comments on “Michigan Legislators, Business Groups Debate Proposed Fuel Tax Hike...”


  • avatar

    I don’t mind paying taxes as long as they keep my roads clean and pothole free.

    • 0 avatar
      VoGo

      Why do so many people see a link between gas taxes and road maintenance? I don’t have an opinion on it, just wonder why so many people see these as linked. As if a nation or state could not decide to tax gasoline whatever is best for its people, rather than an exact offset to the cost of maintaining roads.

      Do we expect the income tax to fund unemployment insurance? Do we expect a tax on guns to make up for all their devastation? By this logic, how would we pay for WIC – by taxing breastmilk?

      • 0 avatar
        Big Al from Oz

        @VoGo
        The only way to introduce a fair tax to pay for road maintenance and infrastructure development is to tax what ever has direct contact with the road surface.

        Tyres would be ideal. As more power and more weight abrades the tyre.

        If you have a heavy foot or like driving hard around corners, again more rapid wear.

        But, fuel tax is the next best and fairest way, except for greenpeace wagons. They should be taxed by their weight every year.

        • 0 avatar
          VoGo

          Thanks, Al,
          I just don’t get why so many people want a “fair tax” to pay for road maintenance and infrastructure. I am more interested in taxes that influence behavior for the greater good than taxes that seem “fair”, since fair is always in the eye of the beholder.

          • 0 avatar
            Hummer

            The greater good? Seriously?
            There is no greater good, unless free gas and free roads are an option.

            Are the subjects your trying to influence behavior in -
            dogs?

          • 0 avatar
            Landcrusher

            All taxes influence the greater good one way or the other, but I get your point. The problem is that whole “who chooses the greater good” thing and it seems to be pretty well broken. It saves a lot of time and trouble if many things are taxed in a way that really reflects the societal cost and avoiding much of the arguments. Fuel taxes for roads, tobacco taxes for healthcare, labor taxes for unemployment plans, etc.

            It simply narrows the field of argument so we don’t spend all our lives with special interests trying to tax other people to pay for their pet peeves.

            You can have a fuel tax and then raise it to offset pollution damage. Well, you could have had that, but then that sort of thing got abused and now you can’t have any reasonable tax discussion at all because we have passed the transfer payment threshold.

          • 0 avatar
            Luke42

            @VoGo

            A gas tax does both.

            I’d rather see a gas tax (or carbon tax) displace the income tax. Taxing something discourages it. The world would be a better place with more personal income was not-discouraged and using more energy than necessary was-discouraged.

            That sounds like the kind of future where I want to live!

        • 0 avatar
          hubcap

          Weight is more detrimental to road surfaces than a session(s) of spirited driving. It would be nice if the funds specified actually went to their specified use but a) money is fungible and b) this is government we’re talking about. It wouldn’t surprise me if the politicians already have alternate spending plans is mind.

      • 0 avatar
        redav

        Because fuel taxes are supposed to be earmarked only for road projects. Govt knows how to spend money, but they aren’t good at saving for a rainy day, so if it can’t be spent on anything else, odds are more road projects would be approved & completed.

        Using the general fund to pay for roads results in many projects being delayed or never approved because those general budgets are tight.

  • avatar
    sirwired

    I can understand some groups won’t like this tax and will object to it; that’s what they do. But inserting “small-business job providers” and “small and family-owned businesses” into every argument just looks silly. Like a fuel tax somehow hunts out small businesses and taxes them more heavily than large ones. If anything, this tax will hit large businesses more than other tax increases, as you can’t dodge a wholesale fuel tax, unlike an income-based tax.

    • 0 avatar
      Big Al from Oz

      @sirwired
      I believe in consumption based taxes.

      They are a fairer way to extract monies for government, like you stated, they are harder to circumvent.

      • 0 avatar
        bball40dtw

        But the gas tax is a flawed consumption based tax for road funding. The amount of fuel you use does not necessarily show how much damage your vehicle does to the roads. A toll, that takes into account vehicle size, would be the proper consumption based tax when it comes to road funding. That being said, Michigan does have a much lower gas tax than surrounding states. We also have worse roads.

        In Michigan, that is never going to happen. To be honest, I’d rather pay more yearly on my plate renewal. The tax could be based on an odometer disclosure you fill out with a formula based on the weight of your vehicle.

        • 0 avatar
          MBella

          Michigan has the highest gasoline tax of surrounding states. Including the federal $0.184 Michigan is at $0.598. Ohio’s tax is $0.464, Indiana is $0.592, Wisconsin is at $0.513. Even Illinois is at $0.575.
          http://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States

          • 0 avatar
            bball40dtw

            No. Michigan does not have the highest gas tax in the area.

            Wikipedia is including the sales tax. Most other states do not levy sales tax on gasoline. They just levy a gas tax. My post below illustates the problem. We send more money to the general fund and schools than roads via the purchase of a gallon of gasoline.

          • 0 avatar
            MBella

            And sales tax goes to whom exactly? Last I checked it was the state.

        • 0 avatar
          bball40dtw

          It goes to the state, but it is constitutionally earmarked for other things besides road repair.

        • 0 avatar
          redav

          Fuel tax is quite efficient for this, IMO. Vehicle size/weight directly affects fuel consumption, and thus taxes paid. Similarly, distance driven directly affects fuel consumption and taxes paid.

          There is also the issue of pollution, which is directly related to amount of fuel consumed. So again, taxing the amount of fuel you use makes sense.

          I also have no problem with (miles driven)*(vehicle weight)*(scale factor) = taxes owed. However, fuel consumed also happens to follow that same general formula. In the end, it’s the same thing.

          • 0 avatar
            bball40dtw

            It does to a certain extent, but the revenues are going to continue to decline because cars are getting more efficient.

            I’d prefer to cut the gas station middle man out too.

  • avatar
    Big Al from Oz

    I would also hope that Michigan creates a EV/Hybrid/CNG tax.

    It would be simple look at the weight of the vehicle and tax according to weight. Maybe a something like $200 per 1 000lbs per year.

    This would help equalise an inequitable situation favouring one group of users over another.

    • 0 avatar

      Glad you brought that up. With more and more alternative fuel vehicles coming onto the market any taxation on fuel is going to create inequities across the board, and will be a mess to administer and manage.

      In my opinion they should scrap gas taxes altogether and replace that with a mileage tax (payable at re-registration and/or sale of the vehicle). That way it won’t matter what fuel anyone uses to get around, everyone pays for the amount they drive in total for the year. The States could vary the fee based on vehicle type if they chose to do so, or make it the same for everyone, the program would be flexible.

      • 0 avatar
        redav

        But not all fuels create the same damage, and thus some are preferred. It is reasonable to expect govt to incentivize them through taxation policies.

        How complex can it possibly be? They already tax gas & diesel differently, taxing other fuels amounts to nothing more than a few new lines of text.

        • 0 avatar

          OK I fuel my EV at home 80% of the time. How do you tax that without taxing my regular household use of electricity? Or should I just get a free ride 80% of the time? Separate meter sounds fine, except as soon as they put one of those in I will plug into a regular outlet or go off grid and use a solar and storage system.

          Taxing fuels will generate inequities. The poor tend to drive the older less fuel efficient cars. Is that fair they pay more tax per mile than the guy who can afford the latest plug-in hybrid? Gas tax revenues are on the decline because of increased fuel efficiency, which is being mandated.

          Notice with a mileage tax you can tax different vehicles differently if that floats your boat. Say you consider a hybrid SUV as better than a non-hybrid SUV, the mileage rate could be based on vehicle classification, so you can structure the tax any which way.

  • avatar

    Lets tax bicycle riders too, freeloaders.

  • avatar
    ringomon

    I moved to Michigan from Ohio three years ago.
    When people ask me how it is I always respond “pretty much the same, nice lakes, good beer, but the roads suck.” Seriously the worst I’ve experienced in any state. You can tell when you’ve crossed the border back into Ohio just from not being bounced around on the roads anymore.

    People here like to claim it’s from the “freeze-thaw” cycle, as if that stops at the border. There’s also a lot more dirt roads in Michigan close to civilization than Ohio, which surprised me. (and dissapointed me as a road biker that likes to ride in the country).

    I traded in a car recently at the dealer- and the salesperson was worried I wouldn’t get much for it before I brought it in (a 2006 Mazda 3). When he drove it to the garage and came back he asked if I drove the car in Michigan. I told him 90% of the miles were in Ohio. “Ah that explains it” he said, “most cars of that age driven in Michigan have been shooken to sh!t”. I got high blue book.
    Might be worth the new taxes just to save the wear and tear.

    • 0 avatar
      MBella

      That’s the problem I have with a Michigan tax rate increase to found the necessary road repairs. How does Ohio do it in the same climate, with usually more snow, and not have the same issues? Before we talk about higher taxes, let’s talk about how do we get more from the money that’s coming in. I just got back from Texas, and even though they don’t have a state income tax, their sales tax is only 0.25% more then here in Michigan, and their gas was way cheaper, they where doing massive road infrastructure projects everywhere. New freeways, freeways being widened, better interchanges, etc… Everywhere. It’s time to audit where our money goes first, because obviously something is being done incorrectly.

      • 0 avatar
        ringomon

        The rumblings I hear are always that politically connected road crews get paid good money to do half-arsed jobs- guaranteeing that they’ll have more (good money) work when the road is back in disrepair in a few short years.

        Seems like maybe the state needs to hire an independent auditor (from out of town) to sort it all out.

        • 0 avatar
          bball40dtw

          That doesn’t happen (I can’t speak for Wayne County or the City of Detroit). The city I lived in sued the company that did a half-a$$ed job a few years ago on a major road. They won, and now we have a new road. If the state, a county, or a city suspects that a contactor did a poor job, they will take core samples and investigate.

          The problem has more to do with the road specs than the road crews. The state needs to up its specs for freeways. Just pouring a few more inches deep will save money over the long haul.

          • 0 avatar
            ringomon

            This is interesting. I can tell you many of the roads even right after being fixed aren’t done to the quality that the ones in Ohio are.

            Whether that’s a question of standards or poor financial oversight (if the crews are able to charge more for lesser work which results in needing lower standards at a given price-point), the fact is something needs to be changed.

          • 0 avatar
            bball40dtw

            Other cities and counties may be different. In Oakland County and Livingston County, they don’t put up with that BS. Wayne County and Detroit have had their scandels, so I wouldn’t be suprised. The state does give bonuses to companies that finish ahead of schedule, so that make be where the crap job comes in. I would be suprised if the state does take core sample on every major project though.

            My family business used to pour concrete floors for the Big 3 and suppliers on a regular basis. They took samples almost every time, and when something went wrong, you bet we got a phone call. Magna tried to sue us because of cracking, but we poured at least 3 inches deeper than the specs. They were using equipment that was way too heavy for their internal specifications and documentation.

          • 0 avatar
            ringomon

            I live in Oakland county and can tell you the roads where I lived previously in Ohio are multitudes nicer.

            You may be right on the diagnosis- but it’s still a major potmark (pothole?) on the authorities involved.

          • 0 avatar
            bball40dtw

            I was just saying the Oakland County Road Commission isn’t crooked. They roads still suck.

            Yes there are more potholes in Oakland County than Ohio. I live in Southern Oakland County and I’m in Akron, OH right now. A lot of it has to do with funding. We haven’t funded the roads enough, but still pay too much tax on every gallon of gas we buy. Terrible

      • 0 avatar
        bball40dtw

        You can’t compare roads in Texas to those in the Midwest.

        As far as Michigan having worse roads than its neighbors, it comes down to funding. We don’t fund the roads to the level of states like Wisconsin, Illinois, or Ohio. Ohio and Illinois also get revenue from tolls roads. The Ohio turnpike collects $250 million in revenue on a yearly basis.

        • 0 avatar
          MBella

          The toll road revenue is irrelevant because we’re not talking about those. My argument with Texas was not about a direct comparison but the fact that with a drastically lower gas tax, no income tax and a very similar sales tax they are able to spend on massive infrastructure projects. Obviously here in Michigan more has to be spent on repairing existing roads instead of new projects.

          • 0 avatar
            bball40dtw

            I seperated those arguements. Toll roads do bring in revenue for Illinois, Indiana, and Ohio so it helps road funding.

            Texas has a gasoline tax that is $.01 and a diesel tax that is $.05 per gallon higher than Michigan’s. That may be enough for a growing state to fund road projects. It looks like it isn’t enough for a shrinking state to fix everything.

          • 0 avatar
            MBella

            The point is still that total tax in Michigan is higher and we get less for it. Until we start using the money we bring in competently why would we allow them raise any tax? Why is our Michigan shrinking? We need to look at what other states are doing right. You point about sales tax not going to roads doesn’t matter to me. We give them a higher percentage of our money than in other states, and they can’t spend it efficiently. It’s not like our schools are amazing to make up for the balance shifted that way. I’m sure people in surrounding states aren’t thrilled with the how efficient their state governments are, but obviously they are better than in Michigan. Funny thing that we do have the money to build Snyder’s friends bridge though.

          • 0 avatar
            bball40dtw

            Canada has enough money to build Snyder’s bridge. We do not.

          • 0 avatar
            MBella

            From all the information that I have read that wasn’t Snyder talking out of his ass, Canada doesn’t want to finance the new bridge.

          • 0 avatar
            bball40dtw

            Canada seems to want the bridge more than we do. They did agree to finance the $550 million bill for Michigan’s share of the project.

            When it comes to the total tax we pay on fuel, I don’t disagree with you. The community I live in has been hurt by the state’s revenue sharing and I don’t think we should be taxed twice by the state on fuel. I am just explaining why we have an issue. We send less money from fuel taxes to road constuction than most other states. Revenue is the problem. The state needs to get rid of the sales tax, drop thesales tax percentage on fuel while increasing the gas tax, or replace the gas tax with something else.

          • 0 avatar
            MBella

            I think we kind of missed what the other was saying. The excuses are very frustrating. Before they hand out their hands and ask for money they need to see where they are wasting the money that they do receive. We keep giving more money for schools, and we keep falling down the list of academic performance. Let’s take 1.5 billion of the money schools waste, and we would have more than what they are trying to raise with the gas tax. Since we all had to learn to get by with less, they should too. Why not cut 20% out of their salaries as a start too. They are the forth highest paid legislature in the country.

      • 0 avatar
        Luke42

        In Texas, they tax land heavily.

  • avatar
    picard234

    Sixth-highest in the nation already?! I would like to know where all that money is going now, before I agree to pay even more. We have roads around here that resemble the surface of the moon.

    • 0 avatar
      MBella

      As I stated above, they need to revisit where existing money goes before we even have this discussion. Other states do it better for less.

      • 0 avatar
        picard234

        Amen. Too many people will say “Oh I don’t mind,” assuming they will get better roads. Then the extra money disappears into all the little politician’s pet projects and we’re back to square one.

      • 0 avatar
        bball40dtw

        If gas is $4 a gallon, here is the breakdown:

        Base retail price: $3.41
        Federal fuel tax: 18 cents
        State sales tax: 22 cents
        State gasoline tax: 19 cents

        The state sales tax is earmarked for education and revenue sharing. Revenue sharing is another term for screwing cities in SE Michigan while sending money elsewhere.

    • 0 avatar
      bball40dtw

      The portion of the gas tax used for roads is low. It is 19 cents per gallon. In Ohio, it is 28 cents per gallon. The problem is that we have a regular sales tax on gas, but DO NOT use it for road funding.

  • avatar
    TW5

    Switching to ad valorem taxes makes sense. As fuel prices rise, fuel tax revenues generally fall as people reduce consumption. Ad valorem taxes can mitigate the negative impact on tax revenue caused by rising prices.

    However, ad valorem taxes are also risky. If global demand is weakened by an economic slow-down in China, the price of oil could fall sharply. Ad valorem tax revenues would decrease sharply, though demand would probably not rise sharply due to CAFE regulations. By converting to ad valorem, Michigan is assuming the price of oil cannot fall sharply due to Chinese stability and marginal production costs.

    Also consider the possible unintended consequences. The best way to avoid tax for suppliers is to reduce the cost of their product. Production efficiency is good, but they may find ways to reduce the quality of their gasoline. If ad valorem fuel taxes were adopted at the federal level, refiners may be pitted against auto manufacturers, as refineries lobby to blend cheaper fuels, like tax subsidized ethanol.

    As far as the rate is concerned, 10% is probably more appropriate at the state level than 6%.


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