June 5, 2014 at 1:00 am

Fuel taxes, prevailing wages, tax credits for poor muddy prospects for Mich. road funds

Republicans may seek a repeal of prevailing wage rates for road workers, while Democrats may insist on income tax credits for the poor. (Charles V. Tines / The Detroit News)

Lansing — A legislative effort to boost annual spending on roads hit another impasse Thursday in the Michigan Senate as Republicans appeared split over which taxes to raise, while Democrats demanded tax relief for low-income residents as a condition for their possible support.

Senate Minority Leader Gretchen Whitmer accused her Republican counterpart of threatening to tie a tax hike to repeal of Michigan’s prevailing wage rates for unionized road construction workers.

“We won’t get to a bipartisan solution through threats, further threats to workers,” the East Lansing Democrat said.

Senate Majority Leader Randy Richardville, R-Monroe, said Whitmer’s demand for larger income tax credits for the poor “muddies” his efforts to secure at least $1.2 billion more annually for the state’s transportation infrastructure needs.

Richardville did not rule out using a repeal of the prevailing wage to garner Republican votes for raising fuel taxes.

“I’m not threatening anybody,” Richardville told reporters. “I’m just saying that the legislative process exists, and I’ve got bills in front of me that people want me to move.”

Added the majority leader: “This is a place that revolves around timing — what’s the right time to do what. And when people are saying let’s screw with the roads and add a whole bunch of other stuff to it, we could go that direction or we could say we can add stuff, too.”

The public airing of bargaining differences was an indication Richardville’s original roads plan — based on a hefty fuel tax hike — is in trouble.

Thursday’s development represents another frustrating turn of events for road builders, the Michigan Chamber of Commerce and other business leaders who are ready to accept a tax hike to get better roads. Gov. Rick Snyder is continuing his push for at least $1.2 billion in additional road repair spending per year and had been meeting with the four legislative leaders.

With time running short before the summer recess, Richardville said he’ll likely unveil a new plan Tuesday that he believes has the best chance of passing the Legislature. Higher fuel taxes also remain under consideration, he said.

“There’s nothing off the table,” Richardville said.

Another option, he confirmed, is a “hybrid” proposal that somehow would adjust sales and fuel taxes to produce the needed road revenue increase.

Richardville originally proposed eliminating the 19-cents-per-gallon gasoline tax and 15-cents-per-gallon diesel tax and replacing them with a 9.5 percent levy on the wholesale price starting at the beginning of 2015. The wholesale tax would then be gradually hiked to 15.5 percent by 2018. The House has approved a 6 percent wholesale tax rate that is “revenue neutral.”

Whitmer claimed Richardville’s proposed gas tax hike eventually would increase taxes on gasoline by 40 cents per gallon.

As a trade-off for support on higher gas taxes, Senate Democrats want the GOP majority to roll back cuts they made in 2011 to the Earned Income Tax Credit for the working poor, Whitmer said.

“I want some tax relief,” Whitmer said after session. “(The Republicans) won’t talk about it. No interest in negotiating. I’m hoping at some point they do want to start talking.”

Some Republican senators have said they would rather ask voters to approve a 1-cent sales tax dedicated to roads instead of raising Michigan’s tax bill at the gas pump, which is already among the nation’s highest.

“Raising the gas tax will hurt the poor in this state tremendously,” Sen. Bruce Caswell, R-Hillsdale, said on the Senate floor. “If there’s something I’ve heard from my constituents in the 16th District, it’s ‘Don’t make it more expensive for me to get to work.’ ... The gas tax will hurt the working poor.”

The Senate made some progress Thursday on road funding. Senators approved the first two bills in a House-passed plan to boost road repair revenue by $450 million annually through budget shifts and higher fees on overweight trucks.

Those bills shift a portion of the sales tax on gasoline from the general fund — the main state government checkbook — to the transportation budget. Richardville said it would add about $130 million to the road repair kitty.

Michigan’s 6 percent sales tax is collected on gasoline and diesel fuel sales, atop the fuel tax. But the state sales tax is earmarked mostly for K-12 education and state revenue sharing with local governments.

Separately, a joint House-Senate conference committee on Thursday approved $144.5 million in general funds for targeted road and bridge projects next fiscal year and set aside another $127 million to match federal matching funding for roads.

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