- Associated Press - Wednesday, July 1, 2015

LANSING, Mich. (AP) - The Republican-led Senate on Wednesday approved a $1.5 billion plan to improve deteriorating Michigan roads by raising fuel taxes and redirecting money from elsewhere in the budget.

Lt. Gov. Brian Calley broke a 19-19 tie on a key bill that would bring the 15-cents-a-gallon state diesel tax in line with the 19-cent gasoline tax, boost both to 34 cents by 2017 and provide for future increases pegged to inflation.

The plan, which includes annual income tax cuts starting in 2018 if general revenues rise by more than inflation, was the subject of seven hours of private talks before voting occurred.

“Our people just want our roads fixed. This advances that debate and that discussion,” said Calley, a Republican. “This was a step I felt was necessary in order for us to really get to a final compromise.”

Eighteen GOP senators and one Democrat voted for the fuel tax hikes that would generate $822 million a year when fully phased in, according to the Senate Fiscal Agency. Ten Democrats and nine Republicans opposed them.



Democrats said the annual diversion of $700 million from the $9.9 billion general fund - the state’s second-biggest spending account behind school aid - would be too steep.

“It’s way too high. It’s cutting our universities, our local governments, our education. It’s the wrong way to fund our roads,” said Senate Minority Leader Jim Ananich, D-Flint.

Michigan last boosted the gas tax by 4 cents in 1997. Fuel taxes are not generating enough to keep pace with construction and snow-plowing costs as people drive less and with more fuel-efficient vehicles.

Voters in May resoundingly rejected a 1-percentage point sales tax increase along with higher fuel taxes that would have triggered more funding for roads, schools and municipalities.

The Republican-led House quickly responded with a nearly $1.2 billion plan in mid-June that would earmark $900 million in general funds for roads, as well as bring the 15-cent diesel tax in line with the gas tax and increase both with inflation in the future, cut economic development spending, increase registration fees for hybrid and electric vehicles, and eliminate a tax credit for lower-income earners.

The Senate’s eight-bill counterproposal would boost the gas tax to 23 cents in October, 27 cents in January and 34 cents in 2017 and provide for future inflationary adjustments. It also would increase hybrid/electric car fees and trigger an income tax reduction if the general fund grows more rapidly than inflation.

A percentage-point general fund revenue increase above the inflation rate would trigger an approximate $100 million tax cut, dropping the existing 4.25 rate to 4.21 initially, according to Senate economists.

Senators voted to require the state Transportation Department to issue a report by December on building higher-quality roads. A new “lock box” account, which would be funded with 7 cents of fuel taxes collected, could be spent only on longer-lasting roads and with future legislative approval.

Unlike the House, the Senate did not hold a vote to end the earned income tax credit after a Senate committee had done so along party lines Tuesday.

Amber McCann, spokeswoman for Senate Majority Leader Arlan Meekhof, said there was “heartburn” among both Republicans and Democrats over halting the credit.

“Right now just wasn’t the time to take up that issue,” she said.

The Michigan Chamber of Commerce estimated that drivers would pay about $7 more a month to fix the roads under the Senate plan, which it applauded.

Jim Holcomb, the chamber’s general counsel and senior vice president for business advocacy, said: “Michigan’s citizens are demanding action and we are confident that leaders in the House and Senate can work together to resolve any differences and enact a final solution to Michigan’s road funding crisis before Labor Day.”

Asked if the Senate’s $700 million in unspecified cuts are too high, Calley said the administration wants to see “more details on the table regarding exactly how we’re going to get to that answer as opposed to leaving it for a future Legislature or future governor.”

Liberal organizations criticized the legislation. The conservative group Americans for Prosperity said the income tax cut provision is “commendable” but would not be enough to offset higher taxes at the pump.

“Michigan drivers already pay some of the highest taxes on gas in the country, yet 40 percent of the state taxes paid at the pump don’t fund roads,” state director Pete Lund said. “Policymakers can find a solution that doesn’t involve raising taxes.”

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Online:

House Bill 4615: https://1.usa.gov/1NxTyal

Senate Bill 414: https://1.usa.gov/1gbPP7 S

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Follow David Eggert at https://twitter.com/DavidEggert00

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