Michigan sales tax hike plan faces rough road

Gary Heinlein and Chad Livengood
Detroit News Lansing Bureau

Lansing — The ballot proposal that is central to $1.2 billion more in annual Michigan road funding faces a rough path to passage in the next four and a half months.

The complicated package has received a lot of verbal support from special interest groups since its mid-day Thursday announcement, but no one formally has stepped forward — yet — to bankroll what is likely to be an expensive television advertising and educational effort. Infrastructure and education lobby groups have a vested interest in the proposal's approval and have signaled they may help finance the campaign.

The ballot measure appears to have an uphill climb because polling during the past several months by The Detroit News has shown that many voters are skeptical of the need for higher taxes for road repairs, but do want more money for public education.

It is essential for supporters of the ballot measure to unwind its complexities so voters understand it and don't feel hoodwinked, said Detroit News pollster Richard Czuba, president and owner of the Chicago-based Glengariff Group Inc.

"My sense is that it's a tough proposal, but it's not impossible," Czuba said. "It needs to be clear exactly what's happening. One thing going for the proposition is if there is an explanation of how it works for schools."

Voters will be asked May 5 to approve a state constitutional amendment raising Michigan's 6-percent sales tax to 7 percent. If they reject the penny-per-dollar tax hike, the whole road-funding plan lands in the ditch and lawmakers must start over.

The general sales tax increase would protect schools and municipalities from losing money as a result of the other part of the plan — eliminating the sales tax on fuel and more than doubling taxes on gasoline and diesel fuel dedicated to road repair funding.

Without the sales tax increase, schools and municipalities would lose about $730 million a year because revenue from sales tax collected on fuel currently goes to them. Approving the constitutional amendment would generate an estimated $300 million increase in annual public school funding.

A challenge for backers

Getting the voters up to speed on such a complex plan and winning their trust will be a challenge for backers, especially when it's sure to face well-funded opposition from conservative groups such as Americans for Prosperity that don't like its higher-tax implications.

Consider the reaction of Ferndale resident Aaron Johnstone, who said he'd like more money for schools but "would rather increase the gas tax as it is now because of the low price of fuel.

"Honestly, to an average man to me, I can't even figure out what they are doing," said Johnstone, a 30-year-old art director. "It seems like bureaucratic maneuvering to me, so I would neither vote for or against it. I would be likely not to vote at all."

The business community, which could put up money for a ballot campaign, appears split.

Business Leaders for Michigan, a collection of chief executives, endorsed it.

"We see this as progress, a step in the right direction," said Tim Sowton, vice president of government affairs and public policy for Business Leaders. "Having it go to the ballot, there's some risk there. But we shouldn't ever be afraid of going to the voters."

The head of the Michigan Chamber of Commerce, however, said he can't guarantee his organization's support.

"Our position will be decided next year," said Richard Studley, the chamber's president and CEO. "I don't have any idea what the reaction will be from our members. I'd expect it to be quite mixed. I have no idea if there's any role we would play in any ballot campaign."

'Chosen not to do their duty'

The chamber had strongly supported an earlier and simpler "user-fee" plan passed by the Senate and previously favored by Gov. Rick Snyder that would have raised the $1.2 billion by the end of a four-year period through the conversion of the state's current flat fuel taxes to a gradually rising proportional levy.

Varied-sized businesses that make up the Chamber's membership oppose a sales tax increase because they see it as an economic damper. And Studley says lawmakers, by risking the future of Michigan road funding on a ballot proposal, "have chosen not to do their duty."

What's certain is an opposition campaign from the Michigan branch of Americans for Prosperity, whose deputy state director, Annie Patnaude, called the road plan "a massive tax hike."

"I think it's disingenuous to put this on the ballot and say citizens have a choice," Patnaude said. "Frankly, they're holding our roads hostage, so to speak. We certainly will educate voters that this is a massive tax hike for families and middle-class citizens in Michigan."

The potential pitch from Americans for Prosperity: A vote in favor of amending the state constitution to increase the sales tax is a vote to increase taxes by $1.8 billion. That is Patnaude's calculation based on the prospective state revenue increases in the sales and gasoline taxes minus sales tax revenue that would be lost when the sales tax on gasoline and diesel are converted to become part of a new, higher fuel tax.

An 'unlevel playing field'

A legislative opponent fears the May election plan will work in favor of voter approval.

Rep. Tom McMillin, R-Rochester Hills, said the road funding deal creates an "unlevel playing field" for the May election because aid for public schools and the working poor will attract support from school groups, teachers unions and liberal political groups.

"There's certainly interest groups that will be motivated to get their people out (to vote)," said McMillin.

The statewide vote also will come about one month after Michigan's spring pothole season usually begins, which one Capitol observer predicted could help proponents sell the need for more tax dollars for road repairs.

"It's an opportune time to run a proposal," said Brad Biladeau, associate executive director of the Michigan Association of School Administrators.

Because the proposed revenue would aid road repairs, public schools and the working poor, support for the sales tax is likely to come from a diverse coalition of business groups, the road building and materials industries, school groups, teacher unions and advocates for the poor.

"Bottom line is the more groups you can get on board supporting a ballot initiative, the more likely we are to pass it," said Don Wotruba, deputy director of the Michigan Association of School Boards.

The road building industry, which has waged a "Just Fix The Roads" campaign to drum up public support for more transportation funding, likes the ballot measure package.

"We're going to get to work on this," said Mike Nystrom, executive vice president of the Michigan Infrastructure & Transportation Association.

Whitmer doesn't like the risk

Senate Democratic Leader Gretchen Whitmer doesn't like the risk involved but said lawmakers will have to speak out for the plan they approved.

"There's a big if here and that's if the ballot initiative passes," said Whitmer, D-East Lansing. "And I don't even want to think about (what happens) if it doesn't (pass). We have a vested interested in making sure that this happens now."

Her worries should be assuaged by voters sharing the view of Matthew Proudfoot. The 48-year-old Rochester Hills physician said bad roads have cost him and his wife $1,800 in auto repairs for damage caused by potholes — two replacement rims for his car and one for his wife's car, plus alignments.

"I felt the roads were so horrendous last year, I'd be for whatever solution they came up with as long as it was reasonable," Proudfoot said. "I definitely don't like that 7-percent sales tax, but the plan sounds reasonable enough that I'd probably vote for it."