By Samantha Wintner, Daily Staff Reporter
Published February 23, 2015
In January, Gov. Rick Snyder (R) approved a plan to fund road repairs and other infrastructure upgrades in the state. But because the proposal must also receive approval from Michigan voters, both proponents and critics are already prepared to sway voters before the May election.
Snyder’s plan, Proposal 1, has received mixed reviews from the state’s residents and businesses. Supporters say they are concerned with the poor condition of Michigan’s roads. However, others worry that increasing the state sales tax caters to special interests groups and will have a disproportionate effect on lower-income residents.
Under the plan, a wholesale tax on motor fuels would replace the state sales tax on fuel, which currently provides funding for K-12 schools and local municipal governments.
Revenue from that wholesale tax would be earmarked entirely for funding transportation and related infrastructure.
Snyder’s proposal also includes a 1-percent increase in the state sales tax, from 6 to 7 percent, to replace the funding for schools, municipalities and other entities that would be lost with the elimination of the sales tax on fuel.
Though the legislature passed the proposal in December, a sales tax change requires an amendment to the state constitution. Michigan constituents will vote on the proposal May 5.
If passed, the legislature anticipates the restructuring will raise about $2 billion per year, according to an analysis by the Senate Fiscal Agency.
Safe Roads Yes, the ballot committee in favor of Snyder’s proposal, has focused on the message that fixing the roads is an urgent matter of public safety.
“Any of us who drive Michigan roads and bridges understand just how dangerous it’s become,” said Roger Martin, a spokesperson for the committee. “It’s dangerous for firefighters and ambulance drivers and dangerous for police officers and sheriffs.”
Martin also said Michigan currently spends less per capita on infrastructure than most other states.
The Coalition Against Higher Taxes and Special Interest Deals, one of several committees formed in opposition to Snyder’s plan, agrees that Michigan roads are in a state of disrepair. However, Randall Thompson, a spokesperson for the group, said the committee does not believe Snyder’s current proposal is the right remedy.
Thompson said the group opposes Proposal 1. He said $1.2 billion of the $2 billion raised by the proposal would go toward road funding, with the remaining 40 percent funneled toward other projects.
He said the Snyder administration claimed it would use that remaining 40 percent for an income tax credit as well as to fund education, public transportation and municipalities.
However, Thompson said the Snyder administration had to give out “sweetheart deals” to these interests so that the proposal would have enough support to pass in May.
“(The administration’s) support of Proposal 2015-1 requires $700 million of other investments to special interests in order for us to fix our roads,” Thompson said. “We believe that Michigan roads are a problem — but we shouldn’t have to pay out $700 million to special interests to have the opportunity to fix the roads.”
Martin said the $700 million figure is mostly a reallocation of funds that these groups already received from the sales tax on fuel, but will now come from the state sales tax revenue.
Martin said the proposal increases the state government’s accountability and creates a fairer taxation structure for taxpayers.
“Right now, the 6-percent state sales tax on gasoline doesn’t go to fix roads and bridges,” Martin said. “The politicians in Lansing can basically spend that money wherever they want, and that’s wrong. We shouldn’t be paying taxes on gas that aren’t used to fix the roads and bridges.”
Martin said Proposal 1 would guarantee all tax revenue on the proposed new (wholesale) fuel tax would go to road funding.
The groups also disagree on the potential effects of a hike in the sales tax for consumers.
Thompson said such an increase would make it more difficult for many Michigan taxpayers to afford their taxes. He said the tax increase would strongly affect low-income taxpayers because it would take a larger chunk out of their monthly budgets than it would for higher income residents. These types of taxes are often termed regressive taxes.
Opposition groups have said the proposal could have a net impact of costing taxpayers $2 billion per year.
“A guy making a million dollars a year — is he really going to miss 1-percent sales tax? No, because he can already meet his basic needs,” Thompson said. “But to a single mom or a college student, 1-percent sales tax? That’s an additional 16.7 percent (in tax) on every single thing you purchase.”
Martin argued it would be very difficult to calculate the cost to taxpayers of this proposal. Whether a taxpayer would see a net gain or a net loss if Proposal 1 were enacted would depend on how much they drive, how much fuel they buy and how much they spend on sales-taxable items, he said.
“The working poor definitely get a tax cut here,” Martin added. “There’s a tax cut in this for the working poor: an income tax credit that was abolished years ago is restored under this proposal.”
Donald Grimes, senior research associate at the University’s Institute for Research on Labor, Employment and the Economy, said in an e-mail interview Michigan residents would see benefits from the proposal.
“The residents will have a better driving experience and less money spent on vehicle repairs,” he said.
Grimes also said the proposal will create jobs in the state due to increased construction. He said improving the state’s roads would reduce the cost of transportation and consequently the cost of doing business in Michigan, encouraging job creation.
“The taxpayers will be getting something for their money when the money is spent on roads even if they are not one of the people who will benefit from the additional jobs,” Grimes said.
The University’s Center for Local, State, and Urban Policy released a report Monday surveying Michigan local leaders’ views on road conditions and road funding in the state.
As part of the Michigan Public Policy Survey, CLOSUP surveyed 1,356 local government leaders and found that while road conditions vary across Michigan, there is widespread agreement among those leaders that it would take a major increase in state funding to simply maintain current road conditions. Survey respondents largely said improving roads would require an overhaul of state funding.
CLOSUP found that 71 percent of local officials say they are mostly or only able to focus on short-term fixes, like filling potholes, as opposed to practicing long-term management.
“Overall, 65 percent of local leaders say they would have significant problems improving roads and bridges within their jurisdictions if the state does not significantly increase road funding,” a release on the survey said. “In fact, a majority (53 percent) say it would be a significant problem just to maintain their roads if the state does not significantly increase funding.”
Safe Roads Yes and the Coalition Against Higher Taxes and Special Interest Deals have received support from a variety of demographics and from both Democrats and Republicans.
Safe Roads Yes has a diverse membership, including school districts, police officers, county sheriff departments, business organizations and local units of government, Martin said.
As of Feb. 10, the committee had reported contributions of $3.2 million in a campaign finance statement, including support from the Michigan Infrastructure and Transportation Association, as well as several other infrastructure and transportation-related groups.
In contrast, The Coalition Against Higher Taxes and Special Interest Groups said they rely on small-denomination checks from residents across the state.
Both Martin and Thompson said their groups aim to turn out voters to the polls.
“We’ve got to have average citizens, got to have college students, families and so on that get on board and make sure that their friends, loved ones, coworkers and fellow students vote,” Thompson said.