In early November, the Michigan Senate passed legislation that would increase revenues from the “gas tax” by over $1 billion over the next three years. The Senate version of House Bill 5477 would convert the current 19 cent per gallon motor fuel tax into a wholesale tax that would start at 9.5% and rise to 15.5% by 2018. The Senate version of the bill would provide increased funding for both roads and public transit.
On December 4, the Michigan House responded with a proposal authored by Speaker Jase Bolger that would fund road construction by diverting over $1 billion from public education, local governments and public transit. The newest House version of House Bill 5477, similar to the Senate version, would transfer the 19 cent per gallon motor fuel tax into a wholesale tax, but at a smaller rate (starting at 7.5% and increasing to 13.5% over the next six years).
However, the House also passed a companion bill – House Bill 4359 – which will be devastating for public education funding. HB 4539 will gradually repeal the sales tax on gasoline over the next 6 years, a majority of which goes to fund public education. By the time the sales tax on gasoline is fully phased out in 2020, the House Fiscal Agency estimates that $888 million will be shifted annually from the School Aid Fund to the Michigan Transportation Fund.
Proponents of the House package attempted to reassure education advocates by touting predictions that growth in overall sales tax revenues will make up for the loss. An amendment was added to HB 4359 that would suspend the phase-out of the sales tax on gasoline in any year in which the School Aid Fund would have an amount lower than the previous year. However, this amendment will do nothing but assure flat funding while still robbing the School Aid Fund of any growth over the next 6 years or longer.
It is uncertain whether the Michigan Senate and the Governor’s office will accept this House proposal, but early indications are that Senate Majority Leader Richardville and Governor Snyder are not supportive. House and Senate Democrats have harshly criticized the House proposal, calling it a “stunt” and “hocus pocus.”