Michigan Gov. Rick Snyder (R) signed into law Nov. 10 an increase in the state’s motor fuel taxes and vehicle registration fees as part of a comprehensive $1.2 billion plan to fund the state’s transportation infrastructure.

Beginning in 2017, the plan will:

  • Increase the state gasoline and diesel taxes to 26.3 cents-per-gallon (an increase of 11.3 cents-per-gallon for diesel and 7.3 cents-per-gallon for gasoline);
  • Apply the state motor fuel tax to alternative fuels (based on the motor fuel gallon equivalent);
  • Establish an alternative fuel dealer license and fee of $500;
  • Raise vehicle registration fees by approximately 20 percent; and
  • Create a new annual fee for electric-powered motor vehicles.

Starting in Fiscal Year 2018-2019 – and gradually increasing for three years until $600 million per year is transferred – the plan will also earmark a portion of income tax revenue for the Michigan Transportation Fund, to be distributed to state and local road agencies.

And, starting in January 2022, the plan will annually adjust the state motor fuel tax rates based off of changes in inflation as reported by the Consumer Price Index.

As part of the compromise, the package of bills will also expand the Homestead Property Tax Credit and amend the state’s income tax.

The $1.2 billion per year in new revenue, gradually phased in over the next five years, will be distributed through the Michigan Transportation Fund for public transportation, highway construction, county road agencies, and cities and villages.

The plan was narrowly approved along party lines by lawmakers on Nov. 3. Only two Democratic lawmakers—4 percent of all Democrats in the legislature—approved the gas tax increase, while 73 Republican legislators—83 percent of all Republicans in the House and Senate—supported the increase.