Michigan’s Road Funding Agreement – The Breakdown

The road funding package agreed to and passed by the House and Senate late last night during the final day of the legislature’s lame duck session is essentially a three-step process.

Step One

  1. Legislature Approves Ballot Proposal
    1. Raise rates on sales & use tax to 7%
    2. Eliminate sales tax on motor fuels
    3. Remove higher-Ed from School Aid Fund
    4. Amend use tax distribution
  2. Passes Mainstreet Fairness – $60 M
  3. School Adequacy Study

Step Two – Legislature Approves Additional Bills Effective ONLY If Ballot Proposal is Approved by Voters

  1. Wholesale tax on motor fuel – $1.2 B
  2. Registration Changes – $95 M
    1. $45 M in vehicle registrations
    2. $50 M Heavy Truck registrations
  3. Transportation related reforms – warranties, competitive bidding
  4. Earned Income Tax Credit restoration (tax year 2016) – $260 M

Step Three – Ballot Proposal – May 2015

  1. Increase General Sales/Use tax from 6% to 7% (+$1.34 B)
  2. Eliminate Sales Tax on Motor Fuels (-$752 M)
  3. Removes Higher-Ed from School Aid Fund
  4. Dedicates portion of use tax for school aid
  5. Activates laws approved by legislature in step two

Here is a breakdown on how the reported revenue would be dispersed:

  • $1.2 billion for roads;
  • $112 million for public transit and rail;
  • $300 million to schools;
  • $94 million to local units of government;
  • $260 million toward fully restoring the Earned Income Tax Credit for low-wage workers.
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