Michigan gas-tax suspension bill could be headed for veto

Beth LeBlanc
The Detroit News

Gov. Gretchen Whitmer indicated Friday she was likely to veto GOP-led legislation seeking to suspend Michigan's 27-cent per gallon gas tax to help decrease the impact of rising gasoline prices. 

The Michigan House voted Wednesday to suspend the tax and the Senate is expected to give the bill final passage next week. The Legislature's effort emerged a day after Whitmer signed a letter with other governors asking the federal government to suspend the 18-cent federal tax on gasoline.

When asked about the fate of the state gas tax plan at a press conference Friday, Whitmer instead promoted her plan to give taxpayers relief through tax repeals for some retirement incomes and an increased Earned Income Tax Credit. 

Gov. Gretchen Whitmer indicates she may veto a gas-tax suspension.

Any sort of tax relief should have "a real laser focus" on those who are "struggling to keep their head above water," Whitmer said. When pressed again on whether she would sign the bill, the governor said: 

"It won't have lived up to any of those things I just said so you can draw your own conclusions."

Whitmer said she invited the Legislature to the table to negotiate over what type of tax relief the state can deliver to Michigan residents.

"We've got to negotiate a budget and get a balanced budget done, and we can also afford to get people some relief," she said.

The governor currently has on her desk a separate legislative package that would deliver a roughly $2.5 billion tax cut by increasing exemptions on senior income, cutting the personal income tax and creating a $500 child tax credit. Whitmer has not voiced support for the proposal.

The gas tax proposal pushed through the House Wednesday on a 63-39 vote would suspend the state's 27.2-cent gas tax from April 1 through Sept. 30 and is expected to result in a revenue loss of about $725 million. House leadership indicated the budget hole could be backfilled in the annual budget with general fund surplus, which is pegged at about $4 billion. 

Michigan's average gas cost stands at about $4.26 per gallon, up more than 40 cents from a week ago and 90 cents from a month ago, according to AAA data.

The increase is believed to be a result of rising inflation as well as U.S. sanctions on Russia because of its invasion of Ukraine. 

Michigan's total gas tax — the 27-cent excise tax and the 6% sales tax — was the 11th highest in the nation in 2021, behind states such as California, Hawaii, Illinois and Nevada, according to the Washington, D.C.-based nonprofit Tax Foundation.

Senate Minority Leader Jim Ananich, D-Flint, proposed this week to instead suspend the state's 6% sales tax on gasoline, which would come to about 24 cents per $4 gallon. 

Ananich argued schools and other beneficiaries of sales tax revenue could be held harmless, based on the higher-than-expected revenue the sales tax on gasoline has already brought in. If what's collected so far falls short, Michigan's general fund surplus could bridge the difference, he said.

About 73% of Michigan sales tax revenue goes to the School Aid Fund, 10% to local revenue sharing and some goes to a transportation fund, according to a 2014 House Fiscal Agency analysis.