Spinal Column: An overview of road funding

By Sen. Mike Kowall
15th Senate District
 
As summer winds down and the days get shorter, we will be seeing fewer orange barrels on the road. As in previous years, there was a substantial amount of road construction throughout the state in 2013.
 
Road work is a never-ending job. As soon as one road is fixed, another is in need of repair. But while road repair will always be with us, are we in Michigan currently approaching the problem the right way? Might there be better ways to fund our roads?
 
Once again, road funding is an issue before the state Legislature. Three main questions arise when the topic of road funding is considered: 1) Are we building our roads the best way possible given Michigan’s transportation needs and other considerations, such as climate and environment? 2) How much money is sufficient to fund better roads on an ongoing basis? and 3) What is the best method for raising these funds?
 
There are significant differences of opinion regarding the amount of funding necessary to maintain our roads. What most people seem to agree on, however, is that our current system is not raising enough money to build better roads and keep them in good repair. A large part of the problem is that less money is being raised through fuel taxes due to the increase in automobiles’ fuel efficiency, an increase in the use of electric and hybrid vehicles—which require little or no fuel—and other factors.
 
There are four key approaches to solving the problem of inadequate funding. One approach is to raise the necessary funding by using a traditional “user-fee” mechanism via a registration tax and fuel tax increases. This would raise the tax on gasoline and diesel fuels, raise vehicle registration taxes and eliminate carve-outs for certain types of commercial vehicles. Consumers would see an increase in gas prices at the pump under this approach.
 
I don’t think increasing gas prices is an effective way to raise the money needed to maintain our roads.
 
Another proposal is to eliminate fuel taxes and raise the sales tax to replace and increase transportation revenues. This would eliminate the excise taxes on fuel, raise the sales and use taxes by 2 percent—from 6 to 8 percent total—and constitutionally dedicate the revenues to transportation purposes. This option would mean a decrease in gas prices. 
 
A third plan would eliminate the sales tax on fuel and replace the revenue for schools and locals via a sales tax increase. This would:
  • Exempt gasoline and diesel fuels from the sales tax;
  • Eliminate the flat tax on gasoline and diesel;
  • Establish an indexed tax rate on fuel based on the average rack price of fuel;
  • Replace revenue for the School Aid Fund (SAF), revenue sharing, and/or other programs with a 1 percent increase in the sales and use taxes— from 6 to 7 percent total. Funds would be dedicated to the SAF, revenue sharing, and/or other programs at levels determined by the Legislature; and
  • Possibly restore some of the percentage of the Earned Income Tax Credit (EITC) that was reduced last term.
Under this proposal, prices at the pump would remain the same, on average.
 
Finally, a fourth approach would raise the sales and use taxes 1 percent— from 6 to 7 percent total—and constitutionally dedicate the revenues to transportation purposes. Prices at the pump would increase under this proposal.
 
I hope you find these explanations of the various approaches helpful. Determining the best solution to the problem of road funding will be an ongoing debate in the Legislature. 
 
What do you think about the different proposals? Do you think one approach clearly stands out as the best? Do you favor a modified version of one or more of them? Please do not hesitate to contact my office at (517) 373-1758 or at SenMKowall@senate.michigan.gov to share your opinion. 
 
I look forward to hearing from you!
 
Senator Mike Kowall, R-White Lake, is the vice chair of the Senate Transportation Committee and chair of the Senate Economic Development Committee. He serves the residents of the 15th Senate District, representing western Oakland County.
 
Note: This column first appeared in the Spinal Column.