Lawmakers are considering a pause in Michigan’s gas tax as prices soar. But what tax?
The bill, which is expected to gain approval in the GOP-controlled Senate next week, would go into effect April 1 unless Democratic Governor Gretchen Whitmer vetoes it.
Several members of the House Democrat criticized the GOP proposal on Wednesday, noting that the loss of revenue would reduce funding earmarked for repairing state roads. But House Appropriations Committee Chairman Thomas Albert, R-Lowell, said the state‘s more than $4 billion surplus revenue would help absorb the cost.
Senate Minority Leader Jim Ananich, D-Flint, hopes instead to suspend the 6% gasoline sales tax for a year, which he says will lead to greater savings as prices gasoline soared. Michigan’s School Aid Fund and General Fund both rely on state sales tax revenue.
It’s unclear whether either plan would get the green light from Whitmer, who offered a third option to cut fuel bills. The first-term Democrat this week called on President Joe Biden and Congress to suspend federal gas tax collections through the end of the year, but she’s been reluctant to back a wide suspension. of any form of gasoline tax.
“Right now, the best way to bring the price of gas down without affecting our ability to fix those damn roads is to suspend the federal gas tax,” Whitmer spokesman Bobby Leddy said Wednesday. , in a press release.
Gas tax relief talks have emerged in various states as gasoline prices soar across the country amid continued inflation, Russian military attacks on Ukraine and the Biden’s retaliatory ban on US imports of Russian oil.
Experts expressed uncertainty about when the price rise would subside. “When I look at this situation, I don’t know what that end point is,” Mark Griffin, president of the Michigan Petroleum Association, an industry group, said in Bridge Michigan earlier this week.
In Michigan, the average price for regular gasoline is $4.25 a gallon Wednesday afternoon, on par with the national average, according to the American Automobile Association. That’s up 26% from last month’s $3.37 per gallon and up 53% from last year’s rate of $2.78, according to AAA data.
The Republican plan would cost the state about $770 million
Michigan’s Republican-backed gas tax suspension would take about $725 million from the Michigan Transportation Fund, according to a House fiscal analysis. That would mean a cut of $255 million in funding for state highways, $255 million for county road commissions, $142 million for cities and towns, and $72.5 million for the State’s Comprehensive Transportation Fund, a primary source for public transit systems.
In addition, it would reduce funding for local and state bridge repairs by a total of $45 million, according to the analysis.
Albert, who chairs the House Appropriations Committee, told reporters Wednesday that the state should be able to absorb the fiscal impact with a $4 billion revenue surplus. Meanwhile, the state still has to appropriate $4.8 billion in federal COVID-19 relief through the American Rescue Plan Act, he said, though federal rules prohibit that the funds are used to pay for tax reductions.
“We have more than enough cash to pay for that, so it’s not really a problem at all,” Albert said.
So how much would the Republican plan benefit average Michigan drivers?
On average, fuel consumption for American cars was 25.4 miles per gallon in 2020, according to data from the Environmental Protection Agency. As of October 2020, Michiganders averaged 10,338 miles of vehicle travel per year, which means Michigan residents burned about 407 gallons per year on average, according to data from the Federal Highway Administration.
Under the Republican plan, waiving the flat tax of 27.2 cents per gallon would save an average Michigan driver about $111 a year.
What about the sales tax suspension?
Ananich, who favors suspending the 6% gasoline sales tax, told Bridge that his plan would deliver greater savings as gasoline prices continue to rise. Based on the current average gasoline price in the state, suspending the sales tax would mean a savings of about $25.5 per gallon, or $2 less than what the Republican proposal would deliver.
But as prices continue to rise, drivers would benefit more from Ananich’s plan.
The Flint Democrat said the state is currently receiving a “windfall” in sales tax collection due to soaring gasoline prices.
Entering fiscal year 2022, the state expected to receive $621 million based on the price of $2.84 a gallon, Senate Democrat spokeswoman Rosie Jones said at Michigan Bridge. Instead, the price nearly doubled.
“It was money we didn’t expect to have,” he said. “If we suspend those dollars, we can give people money back right away.”
The GOP-controlled House also approved a nonbinding 62-40 resolution urging the state to allow Enbridge Line 5 — a pipeline in the Straits of Mackinac operated by Canada’s Enbridge — to remain in place. The resolution says the pipeline must remain in service to ensure an “affordable” energy supply amid volatile global oil supplies. Even if the vote had teeth, it would be a failure with Whitmer, who campaigned for the position in 2018 on a promise to shut down the pipeline.