As the 2024 legislative session in Michigan winds down, talks are ramping up to get a deal done to boost transportation funding.
A recent report from the County Road Association of Michigan found the state faces an estimated $3.9 billion annual deficit in road funding.
Multiple pursuits have been introduced at the statehouse in recent weeks to get something done to help eat into the deficit. Options include raising the fuel tax, increasing vehicle registration fees and adding tolls.
Fuel tax
House Democrats are behind multiple pursuits to raise the state’s fuel tax rate before the start of the 2025 regular session. At that time, the party will no longer be in the chamber’s majority.
With a little less than two weeks left in the lame-duck session, two bills introduced would boost the 30-cent gas and diesel tax rates by 19 cents to 49 cents. The lame-duck period is the time before term-ending officials leave the legislature and newly elected officials are sworn in.
Both bills, HB6196 and HB6258, include a provision to continue to allow for automatic adjustments to the tax rate each year. Changes are based on the U.S. inflation rate or 5%, whichever is lower.
Michigan fuel tax rates are scheduled to increase on their own Jan. 1, 2025. At that time, the gas and diesel rates will be raised by a penny to 31 cents per gallon.
Statehouse Republicans do not support the legislation to increase fuel tax rates. They question what happened to a record $9 billion state surplus from 2023.
“The governor ran her first campaign on a tagline promising to fix roads. Instead, she has compounded our debts, taking out unilateral bonds,” Senate Republican Leader Aric Nesbitt of Lawton wrote in an opinion-editorial to The Detroit News. “In her six years in office, the governor has failed to offer up any real solution other than a universally rejected 45-cent gas tax increase.”
Tolling and vehicle fee increases proposed
Other road funding options include a bill to permit tolling.
The state does not have any toll roads. Certain tunnels and bridges, however, are tolled.
Sponsored by Rep. Jasper Martus, D-Flushing, HB6256 would authorize the creation of a “Michigan tolling authority.” The five-member panel appointed by the governor would be able to authorize the designation of toll roads and lanes by the state Department of Transportation.
One more bill from Martus, HB6257, would increase registration fees by $100 per vehicle.
Lansing Democrats, who blew through a record $9 billion surplus in a matter of months last year, now say there isn’t enough money to fix our roads.
You’ll never guess where they plan to get it from…🤦♀️ https://t.co/rIQ8iYtqBj pic.twitter.com/O1K032XDkd
— MI Senate Republicans (@MISenate) December 6, 2024
House Republican calls for devoting fuel taxes to roads
House Speaker-elect Matt Hall, R-Richland Township, has another transportation funding plan that would tap existing revenue to help get road work done.
Hall wants to tap fuel revenue and the Michigan corporate income tax to bolster local transportation infrastructure projects. He said his plan could allot nearly $3 billion in state funds to fix roads and bridges.
Specifically, Hall wants to allocate $1.2 billion of corporate income tax revenue to infrastructure. An additional $600 million in funding would follow in 2026, with every penny of state tax at the fuel pump applied to road funding.
In addition to the excise tax on fuel purchases, the state collects a fuel sales tax, but the revenue does not go to transportation. Nearly all of the sales tax collected goes to schools and local government.
Hall is looking to replace the sales tax with a corresponding revenue-neutral increase in the excise tax. The move would ensure that all fuel tax revenue is applied to infrastructure.
The change is estimated to raise about $945 million in additional road revenue.
Critics have said eliminating the sales tax would be problematic for schools, which receive the bulk of the existing fuel sales tax revenue.
The County Road Association of Michigan supports Hall’s plan to get a road funding deal done during the lame-duck session. LL
County Road Association applauds ‘lame duck’ plan, discussion on annual road funding increase. https://t.co/llyMvTuS3A pic.twitter.com/VWWYkMXrSG
— CRA (@MICountyRoads) November 25, 2024
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