Metro Detroit businesspeople say they would be willing to pay more out of their own pockets to repair Michigan’s failing roads and bridges, both in the form of higher taxes and fees — and nearly half of them would even consider corporate income tax changes.
The roads, they agree, are broken.
What they don’t agree on is just what Plan B for roads should look like.
Of the 300 business owners and managers surveyed in a poll commissioned by Crain’s Detroit Business and law firm Honigman Miller Schwartz and Cohn LLP, a majority, 56 percent, said some combination of fuel tax and fees could fill the funding gap. The polling was conducted by Lansing-based Epic-MRA.
Respondents said lawmakers and Gov. Rick Snyder must make reaching a deal on an alternative funding plan a priority in the wake of Proposal 1’s defeat this month.
These respondents to the Crain’s poll said coming up with Plan B quickly is essential. But they nearly uniformly opposed cuts to some existing state programs to match the $1.2 billion that Proposal 1 would have generated.
Sales or fuel tax hikes are the most popular picks when quizzed about funding sources; only 31 percent supported finding the road money via cuts to the existing state budget.
Debate over the roads issue has reached a fever pitch with many business owners and civic leaders — enough to push forward the introduction of new legislation last week from Republican lawmakers.
Dennis Nordmoe, executive director of Detroit-based nonprofit Urban Neighborhood Initiatives, and one of those surveyed, said he thought Proposal 1 was a “terrible proposal” but voted for it anyway because he wanted to support investment for roads. He said he would prefer to pay higher fuel taxes before a higher sales tax, due to Michigan’s growing income disparity.
“We have to take that issue seriously,” Nordmoe said. “Maybe we should just go right at the issue of people using the roads pay for the roads.”
But Bob Munoz, general manager for Madison Heights-based mail presort firm Zip Mail Services Inc., said a sales tax increase would allow the state’s growing number of out-of-state tourists to help foot the bill for roads they also use.
Higher fuel taxes could also be part of the answer, he said. But overall, he’s worried that drawing on existing state spending would not generate the amount of needed road dollars without raiding government services.
“It’s robbing Peter to pay Paul. It will just cause problems somewhere else,” Munoz said. “An extra tax somewhere is going to be required.”
Buy-in from voters
Businesspeople are raising their hands to pay taxes?
Yes, that’s how important the issue has become to many of those surveyed, and the state is paying attention.
“It’s a good sign that the public recognizes that we need to invest more in our foundation,” said Jeff Cranson, Michigan Department of Transportation spokesman.
The state this year expects to spend $1 billion on road construction and $300 million on maintenance, a figure that includes patching, shoulder repairs and snow removal, MDOT said.
Exit polling, Cranson said, has shown rejection of Proposal 1 “was not a case of the voters saying, one, that we don’t need to fix the roads, and two, that we don’t need to pay more to fix the roads.”
Proposal 1 would have raised more than $1.2 billion by raising the state sales tax from 6 percent to 7 percent and removing it from fuel sales while also boosting the gasoline tax. But 80 percent of statewide voters turned it down, in part because of its complexity.
Business tax changes?
In the Crain’s survey, respondents were given options to choose their preferred method of generating state revenue; options ranged from the various forms of fuel and sales tax hikes to actual income tax changes. (See box, this page.)
Business owners surveyed were nearly split on whether to expand the state’s 6 percent corporate income tax to an estimated 100,000 companies not considered C corporations that currently are exempt from paying it. Forty-seven percent of respondents favored the idea, while 45 percent were opposed.
“I was a little bit surprised, too, at the willingness of Crain’s subscribers to even entertain the notion of an expansion of the base of the existing business tax,” said John Cavanagh, a co-founder of Epic-MRA.
Sentiment supporting tax hikes appears to counter the idea behind a new proposal from Republican lawmakers that would rely heavily on existing revenue, mostly from economic development, to pay for infrastructure.
House Speaker Kevin Cotter, R-Mount Pleasant, last week introduced a proposal that would raise more than $1 billion by 2019 in part through expected state revenue growth. The plan would raise the tax on diesel fuel from 15 cents to 19 cents, the same as regular fuel, and charge fees to drivers of hybrid and electric vehicles.
But Cotter’s plan also would eliminate the state’s Earned Income Tax Credit for low-income workers and divert money from economic development programs, including the 21st Century Jobs Fund, tribal casino funds and film incentives.
In an interview with Crain’s last week, Snyder withheld comment on the specifics of Cotter’s proposal, saying only that he looks forward to working with the Legislature on a new plan.
“My first plan was a combination of user fees and registration fees. There is a way to work through this,” he said.
Whatever is decided on funding, the state needs to take more accountability on road projects to make sure the work is done well the first time, said Kim Maul, CFO for Kulbacki Inc. The Clinton Township-based construction firm builds schools, churches and retail centers, among other buildings. Concrete and asphalt costs are difficult to guarantee, Maul said.
She supports finding road dollars in the current budget, although not from public schools, higher education or health care for the poor as asked in the survey questions.
But, she said, she strongly opposes raising sales or fuel taxes, saying doing so would crunch a class of workers whose wages are not keeping up with cost-of-living increases.
“You’re in a Catch-22,” Maul said. “They want to crush the middle class. Who’s spending money? If the middle class isn’t spending, then who is?”