Snyder wants wholesale tax on fuel

7:30 AM, Oct 26, 2011   |    comments
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Kent County

LANSING, Mich. (AP) -- Gov. Rick Snyder plans to propose dropping the tax Michigan charges on each gallon of gasoline and diesel fuel in favor of a tax on the wholesale price of fuel, Snyder senior adviser Bill Rustem told The Associated Press on Tuesday.

The tax switch is part of a major speech the Republican governor plans to give Wednesday at Lawrence Technological University in Southfield laying out ways to improve the state's roads, bridges, water and sewer systems, Internet access and regional transit.
The wholesale tax initially wouldn't cost drivers any more than existing taxes, Rustem said. But as inflation pushes up the price of fuel, the state could gain more money to fix roads and bridges.

"We're not looking to have a windfall," he said. But "everyone in the state recognizes we need to do a better job of maintaining our roads. ... It's all about making sure Michigan is competitive in the 21st century."

Michigan is steadily raising less money each year for roads as motorists drive less to save money or switch to electric or more fuel-efficient vehicles. It's growing ever closer to not having enough state road dollars to bring in all the federal transportation dollars it's owed and could give up around $400 million in federal road funds next year if it sticks with charging motorists 19 cents per gallon on gasoline and 15 cents per gallon for diesel fuel. The state gasoline tax was last raised in 1997.

A bipartisan legislative commission issued a report last month warning the state needed about $2.7 billion a year to maintain its federally aided roads but had only about half of what it needed, leaving $1.4 billion in unmet needs each of the next four years. The shortfall could grow to $2.6 billion annually by 2023, the report said.

Their conclusion was blunt: If the money wasn't raised and the improvements weren't made, "either the deferred cost of maintaining our roads will be much higher or we choose to accept lower quality roads."

The governor is determined to come up with a long-term way to address the problem, Rustem said. He wouldn't comment on whether Snyder might also propose higher vehicle registration fees, which could help ensure electric and hybrid vehicle owners pay toward road upkeep even though they're buying little or no gasoline.

Lawmakers would have to approve legislation switching the taxes and setting the upper and lower limits for tax revenue under a wholesale tax. Rustem said the limits would be put in place so that sudden spikes or drops in fuel prices wouldn't drastically change pump prices.

Snyder also plans to announce a new contract state allowing more use of fiber optic lines attached to the Mackinac Bridge, making high-speed Internet access more available in the Upper Peninsula.

From the Associated Press

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