With gas prices falling, should the state start collecting taxes for roads now?




While we’re dreaming of Powerball riches a little while longer, let us, perhaps, suspend reality a bit more.

What if, while oil prices are at 12-year lows, Michigan legislators revisit their controversial 2015 roads deal, which calls for raising taxes next year, and begin raising the money now, when gas is below $1.90 a gallon and falling?

Rather than levying 7.3 additional cents per gallon next January as scheduled, could they pass a bill to raise it a few cents per gallon now ‒ which would require less to be raised next year, when we’re not sure of the price?

“That’s a reasonable proposition. We certainly wouldn’t have any problem with that,” said Jim Walker, executive director of the National Motorists Association Foundation, which has advocated for more road funding in Michigan from dedicated gas taxes.

For motorists feeling flush as the price of oil – and gasoline ‒ keeps falling, the idea of “pre-paying” the tax may have some appeal.

“It would help and it would get some of the money in the coffers quicker, which is needed,” said Walker, of Ann Arbor.

Sen. Tom Casperson (R-Escanaba), agreed that the idea of accelerating the tax may make some sense. But he doubts his Republican colleagues would do so. “I think it would be a worthy conversation,” he said, “but I don’t think there’s an appetite for it.”

Gas low, skepticism high

Casperson and others say that while the idea has its merits, it would get a cool reception in Lansing, where a years-long battle over additional road-repair funding finally culminated in November when Gov. Rick Snyder signed legislation to add up to $1.2 billion in annual road funding. Half of the new money will come from gas tax increases and the rest from the state’s general fund.

The Senate wanted higher gas taxes than the body ultimately approved but the House demanded a smaller hike in gas taxes and more money from the general fund. It was a compromise that left many Republicans and Democrats fuming.

Under the compromise, the hike in gas taxes was delayed until 2017 in part because of concerns the road construction industry would be unable to handle an immediate $1.2 billion in additional annual spending.

“The political reality is, I don’t see (accelerating the tax increase) happening because it was so difficult to get to the final plan that came out,” said Sen. Goeff Hansen (R-Hart), a member of the appropriations committee who chairs the transportation subcommittee.

Consider that when Michigan voters last May rejected Proposal 1, the statewide proposal to fix roads, gas cost over $2.50 a gallon. And when the Senate passed a bill in July to address the issue of the state’s deplorable roads, gas prices had risen to $2.80 a gallon. The house rejected the idea.

By the time Gov Snyder finally signed the compromise bill tacking on 7.3 cents to the cost of a gallon – effective next January ‒ gas was $2.25 a gallon.

But now, prices are below $1.90 and falling, with forecasts that oil prices will stay
at low levels – and possibly erode further, given the strengthening U.S. dollar, turmoil in the Middle East and a dampening economy in China.

Is it time Lansing take notice, reconsider the roads bill and start paying the higher taxes now, when prices are lower rather than in a year, when prices are uncertain? Or would it be more likely that MDOT pin its hopes on a lottery ticket?

All state representatives are up for reelection in November, perhaps making them wary of accelerating a tax increase, even if it would be arguably easier for motorists to absorb in 2016. Such fears are not unfounded: State Sens. Arlan Meekhof (R-Olive Township) and Wayne Schmidt (R-Traverse City) face recall efforts over their support of the roads plan that Snyder signed.

“I don’t think there’s going to be any changes,” Hansen said.

Theoretically, at least, a legislative change could be defended.

Glenn Steffens, a transportation expert for the nonpartisan Senate Fiscal Agency, said legislators could add to the gas tax this year and make it contingent on lower prices – say, a penny of tax for every 5 or 10 cents below $2 a gallon. And if they wanted to make it revenue neutral (that is, ensuring that the same amount is raised over the next two years as was planned in 2017 alone) they could enact a tax this year but not spend it until next year. That would raise the same amount as the law enacted in November, but it would spread the pain over two years and do so when gas prices are lower.

“They can work it into the legislation as long as it conforms to the (state) constitution,” Steffens said.

In the existing roads deal, the law creates a so-called “lock box” of $100 million a year from the rise in gas taxes and vehicle fees for special roads projects. But the money is not to be spent until the legislature passes specific roads legislation – and that could be in 2017 or in subsequent years, he said.

As of now, every penny-per-gallon in gas tax generates about $45 million in taxes, Steffens said, meaning the 7.3 cents will generate over $320 million at current consumption rates, which have been declining. But if gas prices stay low and people drive more and buy more gas, Hansen said the state could see additional money from the current gas taxes.

What are the chances they’d go back and revisit the 2015 roads deal?

“None,” said Sen. Rick Jones, (R-Grand Ledge).

In Jones’s central Michigan district, constituents made it clear how they felt about higher taxes: “They don’t want any more taxes, they didn’t want any more license fees,” he said.

Deja vu all over again

John Truscott is a Lansing public relations veteran, having worked within the administration of Gov. John Engler and now as a political consultant across the state. He said he can see the rationale for considering an acceleration of the tax. But any move to do so would restart the negotiation process – and the pain.

Democrats were upset money was taken from the general fund for road repair. Some Republicans wanted more gas taxes and some wanted more taken from the general fund.

“If you open it up, it may wreak all sorts of havoc on what was passed,” Truscott said. “I think it’s a pretty tough political sell: ‘Give us your money (now) and we’ll hold onto it.’”

Democratic Rep. Marilyn Lane of Fraser would be willing to consider the idea, said her legislative director, Frank Surmann.

“I think it’s a great time to revisit this,” he said. He said Lane was unhappy with the roads bill, as many Democrats were. It wasn’t enough money for roads and too much of it will come out of the general fund, hurting other programs, he said.

“This (low gas prices) is definitely an opportunity,” Surmann said. “But logic doesn’t prevail as much in politics and Lansing.”

So the state will likely wait a year for the biggest infusion of roads cash even as motorists continue to benefit from lower gas prices.

One possible suggestion: Put a jar in your car and every time you fill up, throw in a few pennies. Next year, when you’re grumbling about the 7.3-cent increase, treat yourself to a candy bar from the jar.

What do you think about the idea of moving up the 7.3-cent-per-gallon gas tax increase to this year, rather than waiting until 2017? Bridge would love to read your comments below.

About The Author

Mike Wilkinson

Mike Wilkinson is Bridge’s computer-assisted reporting specialist. He can be reached here.

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Comments

didisaythat
Thu, 01/14/2016 - 8:59am
Even if it makes sense I don't see it happening, try to explain the logic of "pre paying" a tax to a skeptical public. With the huge mistrust about politicians in general these days the idea is going nowhere.
Callie
Thu, 01/14/2016 - 9:15am
With gas prices this low, they should just start collecting the whole 7.3 cents per gallon extra right now and start fixing the roads and bridges. The longer we wait, the more it will cost to fix them.
carl ver beek
Thu, 01/14/2016 - 9:39am
The low gas prices are the perfect opportunity to raise the tax. The price fluctuates more per week than the proposed increase. The general fund will have increased pressure from Medicaid expenditures so removing this pressure would be wise.
Robert S
Thu, 01/14/2016 - 9:45am
Our MI legislature missed a great opportunity to look like they knew what they are doing for taxpayers. My best guess is that with all the other major problems on the state agenda, like Flint water and Detroit public schools, none of our elected officials will want to reopen the road funding issue. If they did, this would mean they made a mistake the first time they passed their hare-brained road fix plan.
BigDCvx
Thu, 01/14/2016 - 10:05am
The crux of the matter: "All state representatives are up for reelection in November" You're right it won't happen. That's ok with me, because whenever they get into something, we get more screwed. The whole road funding cluster is a prime example of why we are fed up with Lansing's money addiction. ...they wanted more revenue, and "fix the roads" was a convenient (and dishonest) way to put it together.
Chuck Bowman
Thu, 01/14/2016 - 10:07am
Are you kidding? Let us enjoy the "low" prices for a minute. No one believes that the powers that be will act responsibly with the money anyway, as they haven't in the past. The voters have approved tax hikes many times in the past, but when it comes to repairing the roads, there is never any money. Really? where did it go then? Empty promises of spending additional taxes from gasoline revenues on road maintenance and repairs have been going on for years. There apparently is no such thing as having an account with a billion dollars in it, ready to write checks against it to pay for the repairs. If someone sees a billion dollars sitting around collecting interest, they figure out a way to spend it, instead of having it available for it's intended purpose. Sorry, but my attitude is....."YES, I want the roads repaired, and NO, I'm not going to give you MORE money to do it." Kill off whatever project the money was spent on, and find what you need there. It's not in MY pocket anymore, I entrusted you with it and you abused that trust.
Anna
Thu, 01/14/2016 - 10:20am
In a word, YES! I think it's a great idea to collect the road taxes we desperately need when the cost of gasoline is at the low point this decade. That means much less impact on the budgets of the people who are just getting by, and no problem at all for those of us who are doing better than average. I also think it's smart to levy the tax per gallon or fuel, not as a percentage of the price, since most aspects of road maintenance or construction do not vary with the cost of fuel.
Dan Sibo
Thu, 01/14/2016 - 10:22am
Maybe the Governor could get the ball rolling and ask the Legislature to send him a simple, straight up bill that just institutes 1/2 of the tax increase now for the 2016 construction season. They already voted to raise the gasoline tax, so come on folks, do something sensible.
Donna
Thu, 01/14/2016 - 10:40am
Of course they should but this legislature is not known for its ability to make good decisions. Won't happen.
Bob
Thu, 01/14/2016 - 10:55am
Not only is this a no brainer, but providing an immediate fuel tax increase on top of the legislation signed by the Governor last year should be adopted. Remember, last year's package was junk. It did not raise nearly enough revenue to solve our transportation infrastructure problem. It robs from the general fund and there is no guarantee that future legislatures will provide necessary funding (for example, the state will probably be paying Flint residents a huge civil settlement and rebuilding their water delivery infrastructure). I know its probably inconceivable that the legislature will act. Still, lets put pressure on these people to use an old fashioned user tax to fix our infrastructure, now!
Keith
Thu, 01/14/2016 - 11:01am
I agree we need the money now to fix our roads . My problem is why should all of the burden be laid on the automobile gasoline taxes and registration increases when every person living in Michigan depend on the roads for either their lively hood or their health and safety . Every Michigan citizen should be contributing to the up keep of our roads through some form of taxes or fees not just owners of vehicles .
David L Richards
Sun, 01/17/2016 - 10:32am
Everyone in the State of Michigan is paying for the gas tax, whether they drive or not. The cost of gas is built into the products and services they buy, so non-drivers are not getting a free pass.
John Sullivan
Thu, 01/14/2016 - 11:04am
Makes common sense, buts no common sense in Lansing, only politicians who want to get reelected.
dlb
Thu, 01/14/2016 - 11:05am
Nice dream. The GOP members of this legislature are so beholden to the extremist anti-tax constituents, it is absurd. The only bills they pass are highly partisan,self serving bills like the recent election "reform". I have no faith that they will accomplish anything that serves the people of the state.
Rolland O'Hare
Thu, 01/14/2016 - 12:06pm
The suggestion that the questions involved in financing needed road repairs should be reexamined by the members of the Legislature while gas prices are low (and likely to remain that way) makes so much sense that it is certain that it will not even be seriously considered, another victim of that omnipresent principle,political reality, i.e., not what it does for the common good, but what it does for my political future. Who can blame them when we are constantly told that everybody acknowledges the dangerous disrepair of our roads and wants them fixed but many (perhaps a majority) of those everybodys (many of them voters) do not want to pay to do it.
R.L.
Thu, 01/14/2016 - 12:16pm
Do it now but make sure it is ear marked for roads and bridges. With Flints terrible situation he will try to divert that money. I pray for those in Flint and hate what some people did to hide it or at least not deal with it. Saved 19 million by taking water out of the Flint river, now look what WE AND THEY FACE. R.L.
Rich
Thu, 01/14/2016 - 12:42pm
Time to start registering the cars out of state. Between the coming increase in registration fees and the absurd catastrophic insurance fee, it is not prudent to pay extra for a car that never drives on a Michigan road.
Rick
Thu, 01/14/2016 - 1:16pm
Think ahead, plan, be rational? Please. This legislature and governor? They're not nerds. Nope. Ignore facts, evidence, experience and express shock, surprise and then do nothing. Except transfer the costs to the public ('little people').
KG-1
Thu, 01/14/2016 - 4:30pm
Newsflash: Michigan Taxpayers are already ahead in our taxes when Lansing (temporarily) bumped up the collection date on our property taxes over a decade ago. We still haven't seen any "relief" from that shakedown yet. And I wouldn't be so quick to label the road funding package a done deal just quite yet. Even though the SFA & HFA audits predicted that MORE THAN ENOUGH revenue was available to repair Michigan Roads WITHOUT and "need" for any tax and/or fee hikes before Gov. Snyder/Sen. Meekhof's little road funding scheme, that was before: a.)The Flint water debacle reared its ugly head. I've heard numbers ranging from at least $1.5-billion to start address some of the issues to at least $20-billion for a fix along with covering the lifelong health issues that will arise. b.) Yet another Detroit Bailout. This time for DPS which squandered the billions that have been sent to it over the years (while on and out of state oversight), while the buildings and infrastructure degenerated into 3rd/4th world conditions. Guess who has their hand outstretched for even more money? c.) Wayne County is also going to go bankrupt in the coming months. Again, the gimme-money crowd is going to want Lansing to hand over Michigan Taxpayer money to try and patch that money pit. d.) Snydercaid is coming back to take another huge chunk out of the general fund due to well-known funding shortfalls from the federal government (they only promised to pay 100% of it for about three years). I have many more examples, but to bottom line it, those of us who pay the bills are getting a little tired of others who feel that their pet disaster take priority over our labors. Despite Mr. Wilkinson's piece, Sens. Meekhof and Schmidt won't be the only ones calling MARVIN if Lansing tries to get creative with reaching into our wallets.
Duane
Thu, 01/14/2016 - 4:32pm
Its their money and they want it NOW! How many of the people want to start taxing NOW trust the those in Lansing to keep their word? If they start taxing NOW how much would that cost in future credibility/trust? Everything seems to be more about getting other people's money than trying to solve problems. I hope the State agencies that will be spending the money are right now planning how they will ensure the people's money they will be spending will be getting best value for. That they are putting together critical path maps for each construction project including time tables and 'milestones' and how they will report to the taxpayer on their performance. I hope they are doing research in what new technologies that can be used that will extend the life of the roads and bridges they will be spending money on. I wonder if they have ever heard of porous concrete or asphalt, a town near me is already using it. I wonder how many of those demanding, hoping for, asking for taxing to start NOW have thought of anything other then spending the money. I wonder if any of them even care what we get for the money.
ken ray
Thu, 01/14/2016 - 4:42pm
If price fluctuation in mega corp gasoline companies define a slice from a tax burdened state to also fund highway commission, why not appeal to the unification principle of finance amd ask that commission to segment and restructure so that jim homeowner and family are not burdened with double taxation,again and again... ken ray
Larry
Thu, 01/14/2016 - 5:31pm
So, if it is logical to institute the gas tax early because gas prices are low and consumers can afford it, wouldn't it also be true that it should be reduced as prices rise and consumers can't afford it? Maybe even say that if gas prices exceed $3/gallon it should be zero!
Charles Richards
Thu, 01/14/2016 - 5:43pm
Is Mr. Wilkinson familiar with the concept of interest rates? Because you can receive interest on your bank deposit, a dollar in your possession today is worth more to you than a dollar you will receive in a year. Similarly, a dollar in your possession today and paying a bill with it in a year Is preferable to paying the bill today. That is, individuals are better off delaying paying expenses as long as possible. It may be that gas prices will be higher in a year than they are today. But it is just as likely they will be lower. And what is the point of Mr. Steffens' suggestion to raise the same amount of money over two years and not spend it until 2017? "The Senate wanted higher gas taxes than the body ultimately approved but the House demanded a smaller hike in gas taxes and more money from the general fund. It was a compromise that left many Republicans and Democrats fuming." Like it or not, isn't this representative government at work?
David L Richards
Sun, 01/17/2016 - 10:36am
It is representative government if you don't take into account gerrymandering. The current majority party has received a minority of votes in recent legislative elections, and their majority is a large one despite the smaller number of votes.
PYCC
Fri, 01/15/2016 - 8:58am
How about this: Let us citizens enjoy having a little extra money in our pockets and benefit from lower gas prices. The middle class has been getting poorer since the early 70s. It would be nice to be able to save some money for a rainy day. Seems when government thinks we have a little extra money first thing they want to do is take it. We all know when gas prices go back up this tax will not be eliminated. We will be stuck with it forever. We defeated Proposal 1 in May and that should have been end of story. These politicians come up with some stupid excuse as to why it failed and do an end around the voters to pass the late 2015 increase. The State needs to get better deals with road builders. We are well aware of all the corruption and "contributions" to politicians campaign fund by various interests that they hook up with the money train, including road builders. State workers are overpaid but these contractors are overpaid ten times as much. This must end!
Rick
Sun, 01/17/2016 - 2:38pm
This administration,and legislature plan ahead, do something intelligent and forward thinking? Ha, dream on. Don't plan, just let things happen and blame someone - Obama, immigrants, muslims, gays, ISIS, liberals, etc. Then stick the bill to the middle class.
Larry
Sun, 01/17/2016 - 6:54pm
Smart idea that would be much more manageable for the mass population of Michigan now rather than a time when family budgets are very tight. DO IT Lansing! Do something that makes sense for "We the People!" rather passing "gag order" legislation that forbids citizen's from sharing their views about pending legislation OR even worst making voting tougher for thousands of voters by no longer allow people to vote straight ticket. Stop taking care of yourselves and attend to the needs of "we the people" in full! Spend your time and our tax dollars on things that matter for our State.
Curtiss Albert ...
Sun, 01/17/2016 - 7:28pm
For what are you legislators waiting...to get re -elected? We elected you last time to keep our state infrastructure in good shape, do responsible specific budgeting and listen to your constituents . Apparently not much listening and too much party politics and worry about re-election ! Please, let's move on this and collect the money while the gas prices are low and please , for once, keep to your promises and make this a temporary tax increase not like so many of the other temporary taxes with which we tax payers get stuck paying forever (example: the temporary sales tax for only the purpose to help the WW II war effort). And where is the transparency in our state government showing every penny spent for every specific expenditure ?
Barry Visel
Mon, 01/18/2016 - 12:07pm
We have a plan...let it play out. However, we didn't need the plan in the first place because all we needed to do was eliminate some of the $30Billion we give away in the form of tax credits, deductions and exemptions...which nobody, including Bridge, seems to care about.
Carolyn
Mon, 01/18/2016 - 9:34pm
I forgot if you use a state ID or driver's license option to access fee online learning, make sure high schoolers know they can apply for a state ID before they take driver's education. A free state ID for legal resident students would open students to being able to apply for Summer jobs or part time work options, poor students would get a big benefit in the employment side and a push toward showing them we believe in them counting (i.e. future worker, voter, valued member of society, ...).
FedUp
Tue, 01/19/2016 - 8:00am
I believe the concept is good about starting the tax now while prices are lower and won't hurt as much, but I agree that the politicians will once again reroute that income towards something other than the roads. No trust here.
DocJ
Tue, 01/19/2016 - 2:32pm
YES, but double it to $0.15! It's a small price to pay, and this is the right time to do it.