Bolger floats an alternative Michigan road plan

Chad Livengood
Detroit News Lansing Bureau

Lansing — House Speaker Jase Bolger is pushing an idea to boost road funding that seeks to ensure all state taxes on motor fuel are dedicated to repairing Michigan roads while not affecting prices at the pump.

With the December lame-duck legislative session a week away, Bolger is floating a plan to gradually repeal the 6 percent sales tax on gasoline and replace it with a tax on the wholesale price of fuel by a rate of 1 cent annually over six years. The Legislature has the power to make the move — unlike other sales tax road proposals that require voter approval under the state Constitution.

The Marshall Republican says if the current 19-cents-per-gallon gas tax is converted to a percentage-based tax at the wholesale level of 7 percent, the 6 percent tax could be added on over six years. That would raise the overall fuel tax to 13 percent — the minimum tax rate needed to raise an estimated $1 billion more annually for roads.

"You could get to 13 percent that way and not have to raise taxes," Bolger told The Detroit News. "And you could make sure that all of the money paid at the pump would go toward roads."

Bolger contends projected economic growth will boost overall sales tax revenue, making up for money schools and cities would lose by eliminating the sales tax on gas and diesel. State economists in May projected sales tax receipts would increase $230 million annually in the 2017 fiscal year and subsequent years.

"You'd have a billion dollars more for roads and you'd have a billion dollars more for schools and you wouldn't raise taxes," Bolger said.

The Snyder administration appears cool to the idea. It embraced the state Senate's approval earlier this month of a plan to replace the 19-cent gas tax and 15-cent-per-gallon diesel tax with a wholesale tax. That tax would start at 9.5 percent April 15, increasing over four years to 15.5 percent by Jan. 1, 2018. Senate Majority Leader Randy Richardville's plan would at least double gas taxes within four years.

"The governor is open to ideas, but he's asking House members to join Senate members in supporting the administration plan to provide a needed $1.2 billion investment in transportation," said Jeff Cranson, spokesman for the Michigan Department of Transportation. "He doesn't want to take funding away from other critical needs like schools."

But Richardville, R-Monroe, is "open to discussing any long-term solution," spokeswoman Amber McCann said Monday.

"His goal is a sustainable plan that fixes the roads," McCann said.

Still, one Democratic lawmaker says Bolger's plan could spell deep cuts for public education in the future if there's an unforeseen decline in consumer spending.

"I can't imagine there's many people who think that just funding schools based on faith-based economics is a good idea," said Rep. Brandon Dillon, D-Grand Rapids. "Any proposal that doesn't actually raise new revenue is not a serious proposal for road funding."

Gas tax backs schools

Based on a retail price of $3.30 per gallon, the sales tax on gasoline is expected to raise $755 million this fiscal year, with the majority dedicated to the School Aid Fund, according a report published last week by the non-partisan House Fiscal Agency.

Most road funding proposals involving sales taxes on gasoline envision gas costing more than the $2.85-a-gallon statewide average pump price Michigan motorists were paying Monday.

Based on a static wholesale price of $2.81 per gallon, the state fuel tax would rise from 19 cents per gallon to 43.6 cents by 2018, generating an additional $1.2 billion for road repairs, according to a Senate Fiscal Agency analysis published Friday. The projections for Richardville's bill do not account for the 6 cents of sales tax tacked on for every dollar of gasoline purchased at the pump.

Bolger's proposal is being fueled by a desire he and other lawmakers have to make taxes on gasoline more transparent.

"Funding schools by taxing motor fuels doesn't make sense — that's the root of the problem," said Mark Griffin, president of the Michigan Petroleum Association, which represents wholesale gasoline distributors.

To ensure schools are made whole, some lawmakers have discussed placing a 1-cent sales tax dedicated to schools on a statewide ballot. But a proposed constitutional amendment needs a two-thirds majority approval of both chambers — a steep political hill to climb in the final month of the legislative session. A sales tax proposal has failed multiple times in the Senate this year.

Bolger's plan wins support

With nine scheduled legislative working days in Lansing until Christmas, Bolger's alternative to Richardville's plan is getting a warm reception from some influential fellow Republican House members, including his likely successor, Rep. Kevin Cotter of Mount Pleasant.

"I do like some of the ideas that the speaker's put out there on the phasing out of the sales tax on gasoline," said Cotter, who is poised to wield the speaker's gavel next year. "It's stepping back and saying, 'If we could do this thing from scratch, how would it look like?' "

Rep. Rob VerHeulen, sponsor of the bill the Senate amended to tack on the gas tax hike, said he prefers Bolger's approach to Richardville's straight gas tax hike.

"I'm not a huge fan of the gas tax as the permanent solution, because of the fuel economy and so forth," said VerHeulen, R-Walker, who prefers asking voters to approve a sales tax increase. "It's sort of a more sustainable long-term solution, regardless of what kind of fuel we use to get around in automobiles."

Dillon noted Snyder just fought a re-election battle that centered on his 2011 tax policy changes that resulted in nearly $700 million in less business tax revenue for schools.

"I can't imagine after spending millions and millions of dollars to refute the claims that he cut money from education ... (that Snyder would) sign a bill to demonstrably cut funding for education," Dillon said. "We'd be open to other ideas — but not this one."

Bolger, who is term-limited and leaves office at year's end, said he expects spirited debate in the coming weeks over which road funding can get the minimum votes needed in the House and Senate to make it Snyder's desk.