All Pump Taxes Can Be Dedicated To Roads
MIRA supports this ballot proposal as the fairest solution to address the road repair challenge that has been ignored for many years. Of all the various plans considered this is a plan our members can live with.
In May, 2015 the people of Michigan will have an opportunity to decide upon a plan to reallocate funds for maintaining roads and funding education.
Right now the Sales Tax paid on fuel purchases at the pump is directed into the General Fund, not roads.
The proposed ballot issue will eliminate the 6% sales tax and 19 cents-per-gallon Michigan Road Tax on gasoline purchases at the pump.
Before the motorist celebrates any windfall let’s analyze the “the rest of the story”. If approved, the sales tax and Michigan Road Tax will be replaced by a percentage tax on the wholesale price of gasoline and diesel fuel.
Beginning on October 1st, 2015, in addition to the 18.4 cents per gallon Federal Road Tax, the price at the pump will include a tax of 14.9% of the average wholesale price of the fuel for the period July, 2013 through June, 2014. This new tax number will be 41.7 cents per gallon. Bottom line, the 19 cent Michigan Road Tax plus the 18.5 cent Sales Tax for the base calendar period equaled 37.5 cents per gallon. If approved, the new percentage tax will be 41.7 cents, an increase of 4.2 cents per gallon. As the price of fuel changes the replacement tax will change.
The important factor to consider is: the tax money paid at the pump will be used mostly for roads, bridges, and infrastructure, not diverted to the General Fund! That all these taxes are pre-paid by the retailer in the price paid for fuel delivered to the merchant’s underground storage tanks. And since this new tax plan would list taxes on invoices paid by retailers for fuel, it reduces the opportunity to obtain untaxed fuel from a source in an adjoining state.
An additional factor in this ballot proposal is the increase in the Michigan Sales Tax from 6% to 7% on those items subject to sales tax. This increase replaces the funds that are lost by eliminating the sales tax on fuel. Any increase in the rate of sales tax must be approved by the electorate, hence the necessity of the ballot issue.