The Michigan Senate approved a plan July 1 to increase the state gas tax by 15 cents-per-gallon—implemented gradually over three years—and redirect revenue from the general fund to generate $1.5 billion per year in transportation funding.
The proposal also includes a personal income tax reduction if general fund revenue growth exceeds inflation, increases in the diesel tax, provides a new surcharge for hybrid and electric vehicles, and indexes the motor fuel tax rate annually to inflation. If signed into law, a transportation fund ‘lockbox’ would be formed in order to protect the new increase from being diverted to other purposes.
A condition in the bill to eliminate the state’s Earned Income Tax Credit, a credit given to lower income families, has generated protest amongst the legislature.
Additionally, a provision included in the legislation would eliminate the gas tax on January 1, 2033 if lawmakers do not take action to make the fuel tax rates permanent.
The Senate vote was split 19-19 on the nine measures, with an additional vote cast by Lt. Governor Brian Calley (R) in order to break the tie and advance the bills. The bill was largely supported by Senate Republicans, with only one Democrat voting in favor, Senator Virgil Smith (Detroit).
The package will now be sent to the House for review of the amendments when legislators return on July 14. In order to increase much-needed transportation revenue for Michigan, the state House and Senate will need to reach a compromise between their two funding packages.
To read the fiscal analysis of the package, visit the Michigan Legislature’s website.