John Hanieski is the retired chief economist for the Michigan Department of Commerce
The debate about how to finance the restoration of good roads and safe bridges has gone on for an interminable time. The problem seems to be captured by former U.S. Senator Bob Dole’s rule of public financing. “Don’t tax you; don’t tax me; tax that guy behind the tree.”
The public discourse seemingly has focused on finding a third party to bail Michigan out of a serious problem that is widely agreed upon. This proposal recognizes that infrastructure rehabilitation is a problem that belongs to all of us. A broad-based surtax with a low rate may be the least unpalatable solution.
Former Governor Rick Snyder’s 21st Century Infrastructure Commission issued a finding that the state needed to spend an extra $2.6 billion per year to maintain current roads and bridges.
The Michigan Consensus Policy Project (Ken Sikkema, Bob Emerson, Paul Hillegonds, John Cherry), in response to that finding, recommends raising the fuel tax by five cents per year for nine years, predicting it would raise nearly $2.5 billion. The underlying rationale seems to be that users should pay for road restoration.
There are problems with this assumption. The principle of user fees is defensible but too narrow in its conception of users. Users of the roads and bridges are not exclusively drivers. If one uses public transportation, if one uses non-motorized transportation, if one uses toiletries, food and expects an ambulance to arrive when needed, one is dependent upon our infrastructure and, hence, is a user.
The difficulty with depending on a fuel tax surcharge is the revolution in personal transportation vehicles. Hybrids and all electric vehicles are rapidly increasing their share of the fleet. General Motors is undergoing fundamental change by abandoning 20th-century technology. The traditional gas tax still generates substantial revenues, but the future revenue outlook is uncertain bordering on dismal.
In fiscal year 2016-17, Michigan generated over $12 billion from individual income tax ($9.573 billion), plus net corporate income tax ($1.105 billion), plus motor fuel taxes ($1.329 billion), according to data from the Michigan State Treasurer Annual Report for 2016-17.
A surtax of 4 percent on each of the revenue sources cited above would generate slightly more than $480 million annually. Allowed to continue for five years, the Infrastructure Rehabilitation Fund would provide $2.4 billion. This revenue stream would be in addition to current financing for infrastructure projects enabling Michigan to recover from past neglect.
The first law of economics is “There is no such thing as a free lunch.” A broad based surcharge of temporary duration is a reasonable alternative to expecting the tooth fairy to solve our problem.
Related Michigan roads stories:
- Whitmer’s road funding plan could pit Michigan cities against rural areas
- Gretchen Whitmer’s plan to fix Michigan roads: Nearly triple gas tax
- Bipartisan ex-legislators propose gas tax hike to fix Michigan roads
- Michigan roads are a big mess. Here are eight big ideas to fix them.
- Look to sales tax on gas to help fix Michigan roads, report suggests
- The real state of Michigan roads: Poor and getting worse without more cash
- Michigan Republicans’ 2019 to do’s: roads and auto insurance