Despite tax increase for infrastructure development, many remain skeptical of impacts
In an effort to fund the restructuring of Michigan’s deteriorating roads and bridges, a new state tax on gasoline will place Michigan in the nation’s top five for highest gas tax rates. There have been mixed reactions, however, since the implementation of the tax.
The tax took effect Jan. 1 and increased the tax on unleaded gasoline from 19 cents to 26.3 cents per gallon. Tax revenue will go toward an investment in Michigan’s transportation infrastructure and will add about $455 million a year to the budget, according to the Detroit News.
The Republican-backed plan is the first gas tax increase in 20 years, and is a part of a $1.2 billion package announced last November. The package passed narrowly, though Gov. Rick Snyder promised benefits that would go beyond repaired roads.
“It's not just about asking for more revenue,” Snyder said. “It's about investing in Michigan's future to create jobs.”
At the State of State address in January, Snyder made infrastructure improvements a main pillar of his speech.
“Michigan residents deserve safe, reliable, sustainable infrastructure,” Snyder said. “We need to invest more, we need to literally invest billions of dollars of new investment over the next several decades.”
Including 6 percent sales tax and excluding the federal gas tax of 18.4 cents per gallon, Michigan’s combined tax rate will total about 37.8 cents per gallon, the fifth highest in the nation after Pennsylvania, Washington state, Hawaii and New York. Federal tax revenue will not go toward infrastructure repairs.
This increased cost will place a significant burden on drivers, especially student drivers, such as LSA freshman Catharine Greenberg.
Greenberg, a resident of Vermont, said, though her state’s harsh weather should yield similar damage to its infrastructure system, Michigan’s roads are in far worse condition.
“My first time driving in Michigan, it was very obvious that the roads weren’t as comfortable to drive on,” Greenberg said.
Though most of Greenberg’s driving is done in Vermont, she has a car on campus, which she said is becoming more expensive than she expected.
“My car doesn’t get great gas mileage,” Greenberg said. “For a college student trying to scrape things together, that's going to cost me about four dollars extra each time I fill up my tank, which is a really significant amount.”
Despite this relatively large change in gas prices, Sam Beydaun, manager of University Fuel Mart on Main Street, said he has not seen any changes in demand for gasoline at his station.
“The price of gas changes so much on its own that I don’t think people paid much attention to the 7 cent increase,” Beydaun said. “It seems like just another fluctuation.”
Many Michigan residents have stressed the urgency with which infrastructure needs to be repaired. The package, which was announced in 2015 and included taxes that did not take effect until 2017, does not allow revenue to go toward roads until fiscal year 2019. The full dedication of revenue to roads will not be available until fiscal year 2021.
The $455 million in expected tax revenue actually replaces the $400 million allocated by the state’s general fund to go toward infrastructure improvements in the 2015-2016 fiscal year. The $400 million amount was not in the current fiscal year budget.
In addition to the increased gas tax, annual registration fees for cars, vans, light trucks and commercial trucks will rise 20 percent. Prior to the increase, the average annual fee was $120. With the 20 percent increase in place, an additional $24 will be charged, making the total fee $144. Gas-electric hybrid vehicles will experience an average increase of $47, and electric vehicles will experience an average increase of $135.
Democrats have expressed concern that with such large sums of money coming out of the state’s budget to fund the parts of the project not covered by tax revenue, less money will be available for issues like health care and education.
State Rep. Yousef Rabhi (D–Ann Arbor) said taking money from the general fund was a reckless decision that will not solve Michigan’s roads problems.
“We should never have touched the state’s general fund,” Rabhi said. “It is just fiscally irresponsible, especially since 1.2 million isn’t even enough to fix our roads. We are looking at cutting 600 million from our budget, and it's a year after year expenditure.”
No conversations have taken place to discuss what programs could potentially lose funding, despite the inevitable losses. Rabhi speculated this conversation is not taking place because supporters of the tax are trying to avoid a public relations “nightmare.”
“It's just another example of the government being treated like an ATM,” Rabhi said.
Rabhi agreed that fixing Michigan’s roads is a critical issue that needs to be addressed. However, he said he does not think the state has addressed it efficiently and fairly.
“The thing that I am cautious about it that it is a regressive tax,” Rabhi said. “People with lower incomes pay higher percentages of their income because of it. I think an ad valorem tax would make it more fair.”
Though the increases are significant, Beydaun said, when boiled down, the issue at hand is simple and uncontroversial.
“The revenue is going towards a good cause,” Beydaun said. “I don’t think anyone has a problem with it. We need to fix the roads.”
State Rep. Kevin Cotter (R–Mount Pleasant), who orginially aided in manufacturing the intrastructure funding plan, did not respond to request for comment.