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Michigan gas tax holiday all but dead. Now, lawmakers eye other options.

gas pumping
(Shutterstock)

March 18: GOP outraged as Whitmer rejects gas tax holiday, Michigan income tax cut

LANSING — A Republican proposal halting Michigan’s gas tax collection for six months is all but dead — despite winning support from both chambers of the Legislature.

The Senate voted 24-14 Tuesday to advance the measure, which would have suspended the state’s 27.2-cents-per-gallon gas tax for six months between April and September this year.

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Although the bill now heads to Democratic Gov. Gretchen Whitmer, she signaled last week she would veto the GOP-backed bill. Even if she were to sign the bill, the plan would not take effect until March 2023 — almost a year after the proposed effective date of the gas tax relief. That’s because legislative rules require two-thirds support to take immediate effect.

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“Those that voted against immediate effect are the ones ... that are not going to be able to deliver any kind of relief immediately to our drivers.” Senate Majority Leader Mike Shirkey, R-Clarklake, told reporters Tuesday.

Now, the election-year battle over gas relief moves to Whitmer’s request to the Biden administration for a holiday from the federal 18.4 cent per gallon gas tax — as well as talks to suspend the state’s 6 percent sales tax on gasoline.

The debate comes amid sticker shock and anger over skyrocketing gas prices across the country — a spike worsened by the ongoing inflation and the U.S. ban on Russian oil following the Russian war with Ukraine.

Gas prices have risen nationwide 11 straight weeks. In Michigan alone, a gallon of gas has spiked to $4.32, from $3.10 at the start of the year.

Michigan Senate Republicans’ plan to suspend state gas tax collections for a year would have cost the state roughly $770 million in revenue, including $725 million from the Michigan Transportation Fund and $45 million for state and local road and bridge repairs, according to a House fiscal analysis.

GOP legislators have argued that, with more than $7 billion in revenue surplus, the state is capable of shouldering the cost. Democrats agree relief is needed but said funding roads repair is a priority as well.

With the tax holiday likely dead, both Republicans and Democrats on Tuesday expressed willingness to suspend or completely do away with the 6-percent sales tax on gasoline. 

Michigan is one of seven states where motor fuels are subject to some or all of the statewide general sales tax, according to the National Conference of State Legislatures

Senate Minority Leader Jim Ananich, D-Flint, said he is considering legislation to suspend the sales tax on gas until the end of the year. 

The tax dollars collected on gas sales go toward the state’s school aid fund and general fund, and Ananich told Bridge Michigan last week taxpayers deserve some of the “windfall” revenue Michigan has collected.

At the beginning of fiscal year 2022, the state had expected to receive $621 million based on the price of $2.84 per gallon, Senate Democrats spokesperson Rosie Jones told Bridge. 

That estimate likely will rise significantly since the price of gas has soared.

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“If (the gas price) goes back down to levels where we were at before, I’d be happy to have it end early,” Ananich told Bridge. “Obviously I don’t want to hurt schools … but I think we can solve that (concern) after we give people relief.”

Multiple Republicans, including Shirkey, embraced the idea. Shirkey said he would like to see the sales tax eliminated.

“I want to drive a stake in the heart of sales tax on gas. It’s just been a dumb tax from Day One,” he said. “I’m anxious to get the rest of the (legislative leaders) together and move this forward.”

Ananich said he is open to negotiations.

“I think a relief holiday right now is the most appropriate way to go,” he said.

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