Michigan Legislature puts 7 percent sales tax on May ballot as part of road funding plan



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Michigan Gov. Rick Snyder explains the transportation department's revenue budget ballot option during a news conference in Lansing, Mich., Thursday, Dec. 18, 2014. Michigan voters would be asked to approve a 1 percentage point hike in the 6 percent state sales tax as part of an estimated $1.6 billion road and school funding deal announced Thursday by Snyder and legislative leaders. The Republican-led Legislature is expected to vote on the plan later in the day, the last of the two-year session. A statewide vote would occur in May if two-thirds of the House and Senate okay the proposed constitutional amendment. (AP Photo/David Eggert)


LANSING, Michigan — Michigan voters will be asked to pass a sales tax increase as part of a $1.3 billion transportation funding deal approved early Friday by lawmakers, who settled on an all-or-nothing statewide vote to fix deteriorating roads.

At 5:30 a.m., the Republican-controlled Senate voted 26-12 to barely pass the proposed constitutional amendment, which needed backing from two-thirds of senators as the two-year session drew to a close after a marathon day of lame-duck voting. The GOP-led House had easily approved it 94-16 more than 3 ½ hours earlier.

The ballot initiative will propose hiking the 6 percent state sales tax to 7 percent, dropping the sales tax on fuel and ensuring that school aid fund revenue goes only to K-12 districts or community colleges — not universities. Transportation funding would rise by $1.3 billion a year, giving a big boost to the $2 billion now collected through fuel taxes and license plate fees. And $11.8 billion in annual school funding would jump by at least $300 million, the equivalent of $200 per student.

"We're going to see pothole season come. But hopefully with a 'yes' vote on the ballot, we'll have a lot more resources to make it start turning around," Snyder told reporters at the Capitol.

Michigan spends less per driver on roads than any other state. It ranks 33rd in spending per lane mile and 47th per vehicle mile traveled, according to the state Transportation Department.

Yet the state also has some of the country's highest taxes at the pump, about 10 cents a gallon above the national average. That's because the sales tax is also applied to fuel, but mostly goes to schools and local governments under the state constitution.

The Legislature passed 11 bills in the plan that won't take effect unless voters approve the ballot measure — the centerpiece of the plan.

Those bills include converting the flat taxes of 19 cents a gallon on gasoline and 15 cents per gallon on diesel to taxes that could rise with wholesale fuel prices, to help address declining revenue as people drive less and with more fuel-efficient vehicles. The base fuel tax would more than double to around 42 cents, though it wouldn't be a net tax hike at the pump — at least initially — because the sales tax on fuel would go away.

Low-income earners who lost part of a tax break in a 2011 GOP business tax overhaul would see it reinstated, a $260 million budget loss equaling an average $300 gain for qualifying families.

Other bills, not tied directly to the ballot proposal's fate but that would yield at least $50 million more, would force Amazon and other online retailers to collect sales tax on Internet purchases in the state.

If the ballot proposal is approved, vehicle registration fees would rise by $95 million — partly through a change that would freeze license plate fees so they no longer decline in the first few years after a car is titled. Electric and hybrid vehicle owners would also be assessed extra fees.

"The main message I got was, 'Just fix the damn roads,'" said Senate Majority Leader Randy Richardville, a Monroe Republican. "I find it hard to believe that enough people won't come out and say, 'Yeah, we need to do this.'"

But some advocates of increased transportation funding criticized the Legislature for not putting a tax hike in place in case voters reject the sales tax measure. The Senate voted last month to significantly increase per-gallon fuel taxes without a ballot plan, yet that met resistance in the House, which favored no tax hike.

Detroit Regional Chamber President and CEO Sandy Baruah said the group preferred the Senate's approach, "that more closely tied the cost of fixing the roads to the users of the roads — and prevented an increase in the sales tax and the cost of a ballot initiative."

Senate Minority Leader Gretchen Whitmer, an East Lansing Democrat, said she had hoped for a legislative solution to go with the ballot plan.

"But in this climate, that was not to be," she said. "I am of the opinion that the worst thing we could is to leave without doing anything."


Follow David Eggert on Twitter at http://twitter.com/DavidEggert00

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