Michigan’s Competing Road Funding Proposals

Michigan Senate Plan

Michigan Senate road funding proposal (HB 5477) would:

• Replaces Michigan’s 19 cent per gallon retail tax on motor fuel and 15 cent per gallon tax on diesel fuel with a wholesale tax on motor fuel.
• The new wholesale tax would be based on the “average wholesale price” which is defined as the statewide average wholesale price of gas on a 12-month rolling average.
• The 12‐month average is calculated once a year and is defined as 12‐month period

ending three months prior to the implementation date for a new rate. Based upon the

dates specified in the bill (see below) the 12‐month period for the first year would be

January ’14‐January ’15, whereas subsequent years would be October through October

periods going into effect the following January 1st.

• Limiters are placed upon growth and loss requiring that average wholesale price could

not be allowed to increase or fall more than 5 percent annually.

Rates and Revenue:

Applicable Percentage Revenue Expected to be Generated

9.5% beginning in April 2015 $205 million – FY15

11.5% beginning Jan. 2016 $550 million – FY16

13.5% beginning Jan. 2017 $830 million – FY17

15.5% beginning Jan. 2018 $1.1 billion – FY18

15.5% beginning Jan. 2019 1.25 billion – FY19

Michigan House Plan

Michigan House road funding proposal (HB 4539, HB 5477, HB 5418) would:

• Remove 6% sales tax on gas at the pump over a six year period starting January 1, 2016.
• Includes provision that if funding to the school aid fund or local government revenue sharing fell below the previous year’s appropriation, the sales tax would revert back to 6% for that year.
• Replaces Michigan’s 19 cent per gallon retail tax on motor fuel and 15 cent per gallon tax on diesel fuel with a wholesale tax on motor fuel.
• Requires certain warranties on road construction projects.
• By removing the 6% sales tax, it is believed that will remove nearly $1 billion from the school aid fund and local government revenue sharing.

The applicable percentages are fixed in the bill, as follows:

• Beginning April 1, 2015: 7.5% [9.5% in the Senate plan]
• For the year beginning January 1, 2016: 8.5% [11.50% in the Senate plan]
• For the year beginning January 1, 2017: 9.5% [13.50%% in the Senate plan]
• For the year beginning January 1, 2018: 10.5% [15.50%% in the Senate plan]
• For the year beginning January 1, 2019: 11.5% [15.50%% in the Senate plan]
• For the year beginning January 1, 2020: 12.5% [15.50%% in the Senate plan]
• For the year beginning January 1, 2021, and each calendar year thereafter: 13.5%

[15.50%% in the Senate plan]

Alliance Position

The Northern Michigan Chamber Alliance has not taken a position on any plan specifically, but supports finding new revenue to meet a $1.2 billion target in new funding for Michigan roads and bridges. The Alliance believes that MDOT should continue to look for cuts and efficiencies where possible, and that any new revenue to should be put directly back into roads. We also believe the legislative solution needs to take care of the problem now, and not make the problems more expensive for future legislatures.