For Immediate Release
March 19, 2015

Contact: Craig Thiel
or Bob Schneider
517.485.9444

or Eric Lupher
734.542.8001

CRC Releases Analysis of Proposal 15-1: Sales and Motor Fuel Tax Increases Related to Transportation Funding

The Citizens Research Council of Michigan has released its analysis of Proposal 15-1, which will appear on the statewide ballot at a special election on May 5, 2015. The proposal has the dual objective of increasing state funding for transportation repair and maintenance and modifying the taxation of motor fuels to guarantee that all taxes paid at the pump are directed to transportation purposes. If approved by voters, the proposal would change Michigan’s tax structure to generate additional revenue for transportation infrastructure improvements as well as address the funding displacement to public schools and local governments caused by removing motor fuels from the base of the sales tax. The CRC analysis provides voters with an accessible and objective explanation of the issues surrounding the proposal and its ramifications for Michigan residents.

A complex package of laws were enacted to restructure various state taxes with the primary objective of raising taxes to finance increased transportation funding. Those laws will not take effect unless voters approve a ballot proposal which increases the maximum authorized sales tax rate from 6 percent to 7 percent. The proposed sales tax increase is related to the goal of guaranteeing that all taxes paid at the pump are directed to transportation purposes. They will be used to address the funding displacement to schools and local governments that is created because sales tax revenues are constitutionally dedicated to funding these programs.

CRC’s Webinar to Discuss Proposal 15-1: Sales and Motor Fuel Tax Increases Related to Transportation Funding

Join us for a webinar on March 25, 2015 at 2:00 PM EDT.

Register now!
https://attendee.gotowebinar.com/register/2174988296627013121

On May 5, 2015, Michigan voters will be asked to amend the Michigan Constitution to alter sales tax provisions. The amendment is tied to a series of bills that aim to increase state funding for transportation repair and maintenance and modify the taxation of motor fuels to guarantee that all taxes paid at the pump are directed to transportation purposes. CRC will explain the proposal and analyze how the changes will affect state and local governments, Michigan’s roads, and individual taxpayers.

After registering, you will receive a confirmation email containing information about joining the webinar.

The state motor fuel and motor vehicle registration tax increases that will provide funding for transportation are contained in state laws that are “tie-barred” to the May vote on adoption of the constitutional amendment.

“Because of the ‘tie-barred’ legislation, the vote on Proposal 15-1, effectively serves as a public referendum on the entire transportation package, both the constitutional amendment as well as the laws passed by the legislature,” said CRC Senior Research Associate Craig Thiel. “The idea of enacting laws by “tie-barring” their enactment to adoption of a constitutional amendment is very uncommon and last occurred with Proposal A of 1994. Because of this, voters are being asked to understand and weigh in on a very complex plan that normally would be the sole province of the state legislature.”

The law changes tie-barred to Proposal 15-1 will raise over $1.3 billion in additional annual tax revenue for transportation improvements and over $700 million in new sales tax revenue that will benefit schools, local governments, and other areas of the state budget.

“Recent reports have suggested the state needs anywhere from $1.2 billion to $2.0 billion per year to get the roads back into good condition,” said CRC’s Director of State Affairs Bob Schneider. “So, this $1.3 billion is a significant step. Further, the new motor fuel tax rates are tied to inflation. Those inflationary increases could help revenues keep pace with the cost of maintaining the highway system — which fixes a fundamental revenue problem with our current fixed per-gallon motor fuel taxes.”

The effect of those tax increases on individual taxpayers will depend on a couple of independent variables. At current pump prices ($2.40 per gallon), CRC estimates that motorists will pay just over 10 cents more per gallon in total taxes under the proposed motor fuel taxing scheme. Higher pump prices will lessen the effect on fuel purchasers. Additionally, with the one percentage point increase in the sales tax rate (from 6% to 7%), consumers will have to pay higher sales taxes on the purchases of taxable goods and services. The effect of that tax increase will depend on the purchasing habits of individual taxpayers.

CRC’s analysis of Proposal 15-1 is available at no cost in a three page summary or in a 23-page detailed analysis.

 

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