The Michigan Senate November 13 voted to replace the state’s 19 cents-per-gallon motor fuels tax with a 9.5 percent sales tax on the wholesale price of gasoline, gradually increasing to 15.5 percent by January 2018. House Bill 5477 could generate an additional $765.3 million to $1.5 billion per year, according to a November 14 Senate Fiscal Agency analysis.
The Senate approved the bill by a vote of 23-14. The Michigan House will vote on the measure when they reconvene in early December. House lawmakers had approved a previous version of HB 5477 by a vote of 85-24 on May 8 2014. However, the Senate changed the tax rate on motor fuel from six percent to 9.5 percent, therefore making a second vote in the House necessary.
HB 5477 is part of a package of transportation funding bills being considered by the Michigan legislature this year. Other proposed measures include increasing fines and permit fees for overweight trucks, increasing taxes on vehicle registration, dedicating two-thirds of revenue generated from the six percent sales tax collected on gasoline purchases (currently being deposited in the state’s General Fund) to roads, and earmarking one percent of the state’s use tax for transportation. Several other bills to increase efficiency and fairness— including bills on competitive bidding for local road agencies and allowing the Michigan Department of Transportation to enter into public-private partnerships—are also under consideration by the legislature.