- Associated Press - Thursday, December 18, 2014

LANSING, Mich. (AP) - Michigan voters would be asked to approve a sales tax increase as part of a $1.6 billion deal struck Thursday by Gov. Rick Snyder and legislative leaders, who settled on an all-or-nothing statewide vote to fix deteriorating roads.

The Republican-led Legislature was expected to vote on the plan late in the day and possibly into early Friday, as the two-year session was drawing to a close. A statewide vote would occur in May if two-thirds of the House and Senate OK the proposed constitutional amendment.

It would ask voters to raise the 6 percent state sales and use taxes to 7 percent, drop the sales tax on fuel and ensure that school aid fund revenue goes only to K-12 districts or community colleges - not universities. Transportation funding would rise by $1.3 billion a year, giving a big boost to the $2 billion now collected through fuel taxes and license plate fees. And $11.8 billion in annual school funding would jump by at least $300 million, the equivalent of $200 per student.

“We have a solution that really takes into account key concerns in a very bipartisan, bicameral fashion. We listened to everyone,” the Republican governor said.

Michigan spends less per driver on roads than any other state. It ranks 33rd in spending per lane mile and 47th per vehicle mile traveled, according to the state Transportation Department.

Yet Michigan also has some of the country’s highest taxes at the pump, about 10 cents a gallon above the national average. That’s because the sales tax is also applied to fuel, but mostly goes to schools and local governments under the state constitution.

Snyder acknowledged that a ballot-only road funding fix is “challenging” because voters could defeat it, but said: “Isn’t it good we asked our citizens to participate in the process in a constructive way?”

Lawmakers will vote on roughly 10 related bills, many of which wouldn’t take effect unless voters approve the ballot measure.

Those include converting the flat taxes of 19 cents a gallon on gasoline and 15 cents per gallon on diesel to taxes that could rise with wholesale fuel prices, to help address declining revenue as people drive less and with more fuel-efficient vehicles. The base fuel tax would likely double, though it wouldn’t be a net tax hike at the pump - at least initially - because the sales tax on fuel would go away.

Low-income earners who lost part of a tax break in a 2011 GOP business tax overhaul would see it reinstated, a $260 million budget loss equaling an average $300 gain for qualifying families.

Other bills, not tied directly to the ballot proposal’s fate but which would yield at least $50 million more, would force Amazon and other online retailers to collect the sales tax on Internet purchases in the state.

If the ballot measure is OK’d, vehicle registration fees would rise $95 million - partly through a change that would freeze license plate fees.

“Taken as a whole, this is an excellent package,” said House Minority Leader Tim Greimel, an Auburn Hills Democrat.

But some advocates of increased transportation funding criticized the Legislature for not putting a tax hike in place in case voters reject the sales tax measure. The Senate voted last month to significantly increase per-gallon fuel taxes without a ballot plan, but that met resistance in the House, which favored no tax hike.

Detroit Regional Chamber President and CEO Sandy Baruah said the group preferred the Senate’s approach, “that more closely tied the cost of fixing the roads to the users of the roads - and prevented an increase in the sales tax and the cost of a ballot initiative.”

Mike Nystrom, executive vice president of the Michigan Infrastructure and Transportation Association, a construction trade association, said it was disappointed there’s no guaranteed funding boost unless voters sign off, but was still supportive of the package because it has “number of good public policy components. … In particular, taking the sales tax off of motor fuel purchases is a step in the right direction.”

Senate Minority Leader Gretchen Whitmer, an East Lansing Democrat, said she had hoped for a legislative solution to go with the ballot plan. “But in this climate, that was not to be,” she said. “I am of the opinion that the worst thing we could is to leave without doing anything.”


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