Whitmer to propose 45-cent gas tax hike to fix roads

Jonathan Oosting
The Detroit News
A large hole exposing rebar forced the closing of the ramp from the southbound Southfield Freeway to eastbound Interstate 96 Feb. 26, 2019.

Lansing — Michigan Gov. Gretchen Whitmer's first executive budget will propose phasing in a 45-cent per-gallon fuel tax increase to "fix the damn roads," her administration confirmed Monday ahead of her highly anticipated budget presentation. 

The tax increase would be phased in over three separate intervals, beginning in October, said spokeswoman Tiffany Brown. The rate would increase again in April 2020 and be fully phased in by October of that year. 

The governor's budget will also include "protections to help offset the cost to people's pocketbooks, which she will talk more about tomorrow," Brown said. 

Whitmer will present her budget proposal to lawmakers Tuesday morning during a joint meeting of the House and Senate appropriations committees. WJBK-TV (Ch. 2) first reported the plan will include a 45-cent fuel tax hike.

An increase of that magnitude would generate around $2 billion a year in additional revenue for roads, which is near the $2.2 billion recommended in 2016 by a 21st Century Infrastructure Commission created by former Gov. Rick Snyder, a Republican.

It would also give Michigan one of the highest fuel tax rates in the country. Motorists here pay a 26.3-cent per gallon state gas tax, but because Michigan also applies its 6 percent sales tax to fuel purchases, total at-pump costs are already the sixth highest in the nation. 

It's not clear if Whitmer will attempt to exempt fuel from the state sales tax, a potential solution pushed by House Speaker Lee Chatfield, R-Levering. Doing so could lessen the burden on motorists but create a $900 million hole that lawmakers would have to fill to prevent cuts to schools and local governments that rely on sales tax revenue. 

While Senate Majority Leader Mike Shirkey, R-Clarklake, has acknowledged that new revenue may be needed to fix Michigan roads, he and Chatfield last month both criticized a bipartisan proposal offered by former legislators to raise the gas tax by 47 cents per gallon over nine years.

Shirkey called that trial balloon "crazy" and said he does not think gas taxes are a "long term" solution to road funding because of increasingly fuel efficient and electric vehicles.

But officials say gas taxes remain one of the most immediate funding sources and note that electric vehicles account for just a fraction of all cars using Michigan roads.

Lawmakers raised gas taxes by 7.3 cents as part of a 2015 road funding law signed by Snyder, but the state projects that Michigan roads will continue to deteriorate without additional spending. 

Whitmer's proposal is "big, bold and it solves the problem," said former Senate Majority Leader Ken Sikkema, a Republican co-chair of the Michigan Consensus Policy Project group that pitched a 47-cent gas tax increase over nine years. 

"By front loading it as much as she is, you’re able to accomplish more right away," Sikkema said. 

But Michigan Republican Party Chair Laura Cox panned Whitmer's fuel tax proposal, saying in a statement that residents "deserve real solutions on this critical issue, not a tax and spend solution which places the burden on the state's overtaxed families."

Chatfield's office declined to comment Monday ahead of Whitmer’s formal budget presentation, while a Shirkey spokeswoman said Senate Republicans would first like to work with the governor on reforming the state's no-fault auto insurance law.

"Saving people (money) is the caucus priority before considering a gas tax increase," said Amber McCann. "Past that, (Shirkey) and his colleagues will wait to hear complete details of the governor's budget during tomorrow's presentation."

Tony Daunt, executive director of the conservative Michigan Freedom Fund, called the proposed fuel tax hike a "terrible idea" for motorists and suggested his group could fight Whitmer's plan in the Legislature. 

"I think a show of contempt of this magnitude for Michigan voters and taxpayers will certainly get our attention and the attention of millions of hardworking Michiganders across the state," Daunt said. 

As a candidate, Whitmer said she would ask the legislature to fund road repairs through "user fees," the most common of which are registration fees and gas taxes.

“The fact of the matter is that word (taxes) has been vilified, and it’s destructive to a conversation,” the governor said Sunday in an interview with WDIV-TV (Ch. 4). “We have to talk about investing in ourselves. If we want anyone to come and invest in Michigan, we’ve got to invest in ourselves.”

Fixing roads will only get more expensive the longer the state waits because it costs more to replace a failed road that to maintain a decent one, Michigan Department of Transportation Director Paul Ajegba said Monday. The department needs $1.5 billion for state roads, he said, and Whitmer's proposal will address local roads as well. 

"It’s been a long overdue thing we have to tackle. Its not sustainable," Ajegba said after a panel discussion hosted by Business Leaders for Michigan.

The business group, which represents executives at some of the state's largest companies, is backing calls for additional road funding and release a "call to action" report Monday. Bad roads cost the average motorist $686 a year in vehicle damage and increased fuel consumption, according to the report.

"Business Leaders for Michigan is not an organization that likes to talk about raising taxes," said President and CEO Doug Rothwell. "But we’re on record saying we need to make significant increases in investment, and we believe user fees — which could be a gas tax — is the best and fairest way to do it."

Looking for waste, fraud or abuse in state government is not a realistic solution to the state's road funding struggle and would be a tough argument for GOP lawmakers to make "because they've been in total control for eight years," said former Senate Majority Leader Ken Sikkema, a Republican who is part of a group that recently proposed a 47-cent gas tax increase over nine years. 

"If there's a lot of it there, why didn't you go after it?"

The 2015 road funding plan signed into law by Snyder raised fuel taxes and registration fees to generate about $600 million in new revenue. It also phased in a general fund dedication that will reach $600 million by fiscal year 2021.

But "many knew then — and we all know today — that just wasn't enough," Mark Davidoff, a managing Michigan partner for Delloitte, said Monday at the Business Leaders for Michigan event. 

Nearly one in four state-operated roads was graded in poor condition last year by the Michigan Transportation Asset Management Council. Roughly half of those roads are expected to be in poor condition by 2025.