A nine-bill transportation funding package in Michigan is halfway through the statehouse.
Elected officials on both sides of the aisle are looking to address a long overdue transportation funding fix. Time is running out to avoid a funding cliff for transportation funding. The last of the $3.5 billion in transportation bonds issued in 2019 is nearly used up.
The Republican-led Michigan House has approved a $3.1 billion transportation bill package that includes language to swap taxes at the fuel pump to ensure the revenue is routed to roads. Most of the revenue would be allotted to local roads.
“We can’t fix the roads by just raising taxes,” House Speaker Matt Hall, R-Richland Township, said at a press conference. “We have to find efficiencies in our budget and we have to find a way to fix the roads, and that’s what the bipartisan House road plan does.”
Fuel taxes
Truck drivers and motorists fueling in the state pay a 31-cent state excise tax. Tax rates are adjusted each January.
There is also a 6% state sales tax on every gallon of fuel sold. The tax raises about $925 million annually. Much of the sales tax revenue is diverted away from transportation for purposes that include education.
HB4180 would eliminate the sales tax collected on fuel purchases. Instead, an equivalent increase in the excise tax would be made.
The switch would enable the state to apply all fuel tax revenue for transportation purposes. Michigan state fuel tax revenue is constitutionally dedicated to transportation.
A second bill, HB4183, would authorize the fuel tax rate increase to start Oct. 1. The gas and diesel rates would each be increased to 51 cents.
The taxes would continue to be adjusted for inflation each Jan. 1. For the coming year, the adjustment increment would be based on the average of the tax rates in effect during the fall of 2025.
The amount of the annual increase would continue to be limited to 5% of the previous fuel tax rate base.
Another bill, HB4181, would eliminate the 6% specific tax levied on truck drivers that use diesel or alternative fuel in the state. The credits available against these taxes to offset any sales tax paid on fuel purchased in the state would be eliminated.
Other revenue sources
The bulk of road revenue would come from rededicating about $2.2 billion from the state’s 6% corporate income tax to transportation via HB4187. The money now goes to the state’s general fund.
The Michigan Department of Transportation would get $220 million and $1.98 billion would be earmarked for local roads.
Revenue transferred from the Michigan School Aid Fund to transportation due to the change in fuel tax collection would be replaced with money from the general fund.
To compensate for the lost fuel sales tax revenue, HB4185 would increase annual education revenues and correspondingly decrease annual general fund revenues by $755 million.
A separate bill, HB4186, would increase the Michigan business tax rate from 4.95% to 30%. Eliminated in 2011, certain businesses are allowed to continue to take advantage of the legacy tax credits.
“We just have to stop the eight or 10 most connected companies in Michigan getting these mega credits, and then we can fix our roads, or we can do what (Gov. Gretchen) Whitmer wants and just raise taxes on everybody, and that doesn’t make sense,” Hall said.
House Democrats said the transportation funding plan is unsustainable. They characterized the plan as taking money from one part of the state budget to pay for others.
Supporters said that reprioritizing existing revenue is the best path to guarantee road funding because it would not be appropriate to raise taxes when the necessary revenue already exists. They add that the bills achieve guaranteed funding without cutting any critical programs elsewhere in state government.
“Politicians and career bureaucrats in Lansing know a roads plan can get done without raising taxes or taking funding away from schools,” Rep. Dave Prestin, R-Cedar River, said in prepared remarks.
The bill package now moves to the Senate where significant changes are expected in the Democrat-led chamber.
Speaker Hall on redirecting corporate welfare to roads:
“We have stakeholders too. They’re called taxpayers…
They want good roads. And if we, instead of giving this money to GM, spend this money fixing our roads and bridges, we’re going to have great roads, and that’s going to… https://t.co/dMJgjmVCcK— Michigan House Republicans (@MI_Republicans) March 26, 2025
Governor’s plan has similar provisions
Gov. Whitmer has her own $3 billion transportation-funding plan that includes funds to fix local roads, boost transit, and improve safety on the roads.
The Democratic governor has described her plan as “fiscally responsible, balanced, and sustainable.”
Like the House GOP plan, her plan would ensure that all state fuel tax revenue is applied to roads.
The governor’s office said her plan would “ensure that every penny drivers pay at the pump goes toward Michigan infrastructure.”
Additionally, she wants to collect $1.7 billion in new transportation revenue from corporations and Big Tech industries that include Amazon, X, Facebook, and TikTok.
She said it is time these businesses “pay their fair share” to do business in Michigan and use state roadways.
“To deliver goods and services to Michiganders these corporations haul heavy weights using semi-trucks that deteriorate roads and bridges faster than commuter vehicles,” Whitmer said.
Another part of her plan is described as closing a loophole that exempts the marijuana industry from the state wholesale tax. The tax is applied to similar smoking products.
Including the marijuana industry in the wholesale tax collection is estimated to add $470 million to help fix roads across the state.
The governor has said she will work with both parties at the statehouse to get a deal done. LL
More Land Line coverage of Michigan news is available.
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