Area legislators are split on Proposal 1, the state constitutional amendment that would raise the sales tax from 6 percent to 7 percent and provide $1.2 billion per year for crumbling state roads.
As a state representative, Sen. Jim Stamas voted for Proposal 1, which passed during last year’s lame duck session.
“I support it,” he said. “It is a long-term strategic and sustainable funding for our roads instead of coming up with different ways to fund the roads every year.”
Freshman State Rep. Gary Glenn has a different view on the proposal.
“I’m going to vote ‘no’ on Proposal 1,” he said Thursday at a gathering of citizens at the Grace A. Dow Memorial Library. “I’ve not tried to hide that vote from the very beginning.”
One of Glenn’s campaign promises was to not support any new taxes. Proposal 1 would eliminate the sales tax on gasoline, but increases the fuel tax from 19 cents to 41 cents per gallon and attaches it to the wholesale price of fuel.
By increasing registration fees for truck and some automobiles, along with the sales tax hike, the total tax increase would be $2.1 billion in 2016. The Mackinac Center estimates that the average Michigan household would see an additional $477 to $525 in costs per year.
“The voter’s rejection of Proposal 1 is an ultimatum as a mandate for us to fix the roads but without raising taxes. I think that is possible,” said Glenn.
The sales tax increase, which voters will see on next Tuesday’s ballot, requires a vote of Michigan citizens.
“The increase is constitutionally protected,” said Stamas. “The legislature can’t mess with changing the 1 percent increase funding of the sales tax. This actually reduces the legislature’s ability to spend those dollars somewhere else.”
The sales tax is constitutionally restricted for schools and local governments.
“People expect the dollars they pay at the pump to go to roads,” said Stamas.
Besides providing funding for roads, 2016 and 2017 would see approximately $800 million and $400 million, respectively, go to pay down MDOT debt acquired under previous administrations. Currently, each year $239 million from the transportation budget goes to debt payment, money that could be used for fixing roads.
“There is an implementation that pays down the debt of about $2 billion acquired under Gov. Engler,” said Stamas. “We wanted to make sure we were responsible with these dollars and paying down long-term debt is being responsible.”
The other component for additional revenue comes from increases on truck and auto registration fees. Discounts on passenger vehicles would be phased out starting Jan. 1, 2016. Those cars with model years of 2013 or older would be grandfathered in and allowed to maintain their registration fee discounts. Commercial trucks weighing more than 26,000 pounds would see increases between 9 to 12 percent. Electric vehicles would be assessed an additional annual fee of $75 for vehicles under 8,000 pounds and $200 for vehicles over 8,000 pounds.
The Earned Income Tax Credit would be restored back to 20 percent. Early in Gov. Rick Snyder’s tenure, the credit was reduced from 20 percent to 6 percent.
Glenn has proposed an alternative, reviving a plan proposed by former Republican Speaker of the House Jase Bolger that would remove the 6 percent sales tax on fuel over a six-year period. Concurrently, the 19 cents per gallon fuel use tax would be converted to a percentage rate that would slowly increase.
“The net effect of removing the sales tax and phasing in the new use tax would be a no net tax increase,” said Glenn. “As the sales tax comes off of gas, that means that there will be a fairly significant part of the sales tax revenue because it is no longer applied to gas, would no longer produce the revenue that is constitutionally earmarked for public schools and (local governments). It would reallocate out of existing revenues and projected growth $1.2 billion per year over time. After six years, it should be $1.2 billion a year.”