The Michigan Senate November 13 voted 23-14 to replace the state’s 19 cents-per-gallon motor fuels tax with a 9.5 percent sales tax on the wholesale price of gasoline, gradually increasing to 15.5 percent by January 2018. House Bill 5477 could generate an additional $765.3 million to $1.5 billion per year, according to a November 14 Senate Fiscal Agency analysis.
The Michigan House will vote on the measure when they reconvene in early December. House lawmakers had approved a previous version of HB 5477 by a vote of 85-24 on May 8 2014. However, the Senate changed the tax rate on motor fuel from six percent to 9.5 percent, therefore making a second vote in the House necessary.
HB 5477 is part of a package of transportation funding bills being considered by the Michigan legislature this year. Other proposed measures include increasing fines and permit fees for overweight trucks[i], increasing taxes on vehicle registration[ii], dedicating two-thirds of revenue generated from the six percent sales tax collected on gasoline purchases (currently being deposited in the state’s General Fund) to roads[iii], and earmarking one percent of the state’s use tax for transportation[iv]. Several other bills to increase efficiency and fairness—including bills on competitive bidding for local road agencies and allowing the Michigan Department of Transportation to enter into public-private partnerships—are also under consideration by the legislature.