Road proposal: How much extra tax revenue will actually be raised?

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MICHIGAN -- It's a proposal slated for the May ballot that will ask voters to support a state sales tax increase from 6 to 7  percent to raise an additional $1.3 billion in revenue to help fund road fixes.

However, the bottom line of just how much extra revenue the increase would generate for the state remains disputed.

A study released from the Mackinac Center for Public Policy finds the actual tax increase is closer to $2 billion overall. Numbers in the study are based on estimates from the state's non-partisan House Fiscal Agency.

“The discrepancy is coming from the fact that they needed to get more support for this proposal," said James Hohman, fiscal analyst for the Mackinac Center.

According to the Mackinac Center study, approval of the proposal triggers roughly $525 million in additional taxes in the first year, which comes to more than $600 million when the fees are full realized.

Those figures include a gas and diesel wholesale gas tax of $460 million, a $50 million increase in annual truck registration taxes, and nearly $11 million in the first year from the elimination of the registration tax depreciation for vehicles. That figure would be closer to $150 million when fully realized.

“This is a proposal they made in the lame duck session," Hohman said. "It’s just a huge number of bills, a lot of wheeling and dealing to get this in place where the taxpayers are going to vote on it."

"There are other ways of doing it outside of raising taxes by $2 billion.”

The proposal, if passed, means an additional $300 million for school funding and restoration of the Earned Income Tax Credit, both of which should be major selling points, according to Rep. Brandon Dillon, D-Grand Rapids.

“I don’t particularly take much stock in what the Mackinac Center says, but I will tell you this: If approved. thousands of people in this state will actually get a tax cut," he said, referring to the EITC restoration.

Dillon said while the final figure might be closer to $1.7 billion, either way the majority of the funding is going toward road repairs, which is how it was always intended.

“The vast majority of the money generated from this will go directly to fixing roads and bridges," he said. “Whether it’s $1.5 or 1.7 billion, these are all estimates. The most important thing is any significant investment is going to be made into our state’s infrastructure, and it’ll be the first significant investment we’ve made in 25 years."

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6 comments

  • NylaR

    People need to read the ballot proposal because it is not all about roads and schools. The proposal does not restore the EIC, it actually raises this credit from 6% to 20% (the state EIC is 6% of the taxpayer’s Federal EIC). I do not know if Michigan’s EIC has been reduced in the past but Indiana’s is currently 9% so I think raising Michigan’s to 20% is way out of line. As far as I am concerned, this proposal forces most of us to pay more in taxes to give those who pay little or no taxes a bigger credit. No thanks. If this proposal was totally about improving roads, I would be for it. I just don’t think I should have to pay more for a coat, a stove, my gas and electric, etc so people with low incomes can get more of a tax credit.

  • guy berk

    The majority of low income people dont have cars. Yet they will be helping with providing the new road funding. That could be part of the reason for the increase in the EITC. Michigan needs this proposal to pass today. Or maybe we should put it off until enough motorists are killed by collapsing bridges before we take action.

  • Warper

    How much of this money will actually go into road repairs and not toward bigger salaries, bonuses and payoffs? I have an idea, instead of seven guys leaning on shovels watching one guy work how about one guy working and hang on to the salary of the other seven and use it for road repairs. Oh, and the school thing, why does the schools always get involved in these discussions when so far we haven’t seen any benefit from the lottery sales gimmick that was supposed to go toward schools? I hear Colorado has a huge surplus in tax revenue they have to figure out what to do with after legalizing pot.

  • Grandvillian

    Michigan’s brick and mortar retailers are hurting enough. Have you seen all the empty storefronts and talked to business owners about another sales tax increase? Why send even more Michigan consumers to the internet to make purchases? Michigan is already losing millions to out of state purchases where Michigan’s sales tax is not collected. Folks reading this, you know you don’t pay your 6% use tax when you shop online, do you? This idea sucks.

  • Justinothertaxpayer

    The majority of the money will not go towards fixing the roads. Most of the money will go to the schools and for welfare. The money that does make it to the various Road Commissions is going towards pay raises and equipment. Next to nothing is left. This is a bill put together in a hurry to get out of town for the Christmas holiday and one that the state figured the voters would approve, as there’s something in it for almost everyone with their hands out.