My Opinion “Dodge the Potholes.”
Three-year, 45-cent gas increase
Who pays to fix the _ _ _ _ roads?
Fire up those wreckers and keep mixing the body fender paint because Michigan motorists seem headed for overtime in the game of “Dodge the Potholes.”
Worse yet, the game looks like it may never end, given the opening political thunder in Lansing between the new governor’s road repair proposal and a Legislature wary of the political risk in any call for raising new revenue.
Gov. Gretchen Whitmer, who announced a three-year, 45-cent increase in the gas tax to finally address the state’s crumbling roads while unveiling her new budget proposal last week, didn’t help herself when, while campaigning for the office, she scoffed at the idea of having to raise even half that much to “fix the damn roads.” Now, she says, after taking office and assessing the problem more closely, she didn’t realize how much money it would take to get the job done.
That’s a little hard to understand. In her Feb. 12 State of the State address, Whitmer reminded us of all her experience as a legislator. She became a freshman member of the state House of Representatives at age 29, eventually was elected a senator and, in that time, watched three governors give that same address. As a Democratic governor, Whitmer comes with experience, enough to know that proposing a tripling of the gas tax will be dead on arrival in a Republican-controlled House and Senate.
Whitmer’s contentions are correct. The American Society of Civil Engineers gives Michigan infrastructure an overall grade of D-minus. Only 18 percent of Michigan roads are rated in “good” condition.
“By one estimate, the vehicle damage due to poor road conditions costs the average motorist $562 a year in repairs. We’re paying a road tax that doesn’t even fix the damn roads,” Whitmer says, suggesting that money could be used for other needs. “If we don’t do something now over the next decade, the share of Michigan highways and trunklines in poor condition will more than double – worsening the severity of the danger and costing drivers across the state even more.”
Whitmer says no one wants to raise taxes but investments in state infrastructure have been neglected for 40 years. Under her plan, Michigan’s gas tax would go up by 45 cents per gallon by Oct. 1, 2020. That would raise more than $2 billion annually to fix Michigan’s crumbling roads but would leave motorists with the largest gas tax in the nation. If approved, Whitmer’s proposed increase would come in three 15-cents-per-gallon installments, phased in every six months.
Whitmer’s suggested budget also includes another politically controversial plan: an overhaul of how the state would divvy up the $2.1 billion in new annual revenue. The focus would change to highly traveled roads from the current plan that takes into consideration rural communities, such as Barry County.
Many Michigan motorists also are wondering what happened to the plan that went into effect in 2015 after lawmakers approved a package to increase the gas tax by 7.3 cents per gallon and the tax on diesel fuel by 11.3 cents per gallon, equalizing both taxes at 26.3 cents per gallon. The 2015 plan also increased vehicle registration fees and added some additional funds from the general budget. That legislation also included an annual increase on fuel by 5 percent or by the rate of inflation, whichever is less. All of that was expected to raise about $880 million per year.
Michigan Department of Transportation officials knew that the 2015 plan was never going to be enough to solve the problem, it would only slow the rate at which the state’s roads were deteriorating. The 2015 plan also came under attack by anti-tax groups, by associations that felt the tax would take money from other priorities such as education and social services and even by Democrats who campaigned against the plan.
Now, Whitmer has taken up the charge, maintaining that not fixing the roads, “endangers our lives and robs us of our time and our hard-earned money. It hurts our businesses’ bottom lines. It jeopardizes our edge in mobility and limits our economic potential. No one wants to invest in a state that doesn’t invest in itself.”
From their perspective, though, Republicans don’t consider higher taxes to address infrastructure needs as an investment. In a recent Bridge Magazine article, Laura Cox, chairwoman of the state GOP, noted that a similar proposal to raise money for roads was rejected in a landslide by state voters in 2015. She went on to say that the governor’s proposal would “break many Michiganders’ budgets. The people of Michigan deserve a real solution for this critical issue, not a tax-and-spend solution which places the burden on the state’s overtaxed families.”
Monday, Business Leaders of Michigan, the state’s business roundtable of CEOs and university presidents, released a report calling Michigan’s crumbling roads and bridges “a growing threat to our state’s economic vitality.” The report, which endorsed placing the tax burden on users rather than the state budget, estimated Whitmer’s proposed gas tax increase would cost a motorist who drives 15,000 miles per year in a car that gets an average of 30 miles per gallon another $225 per year. What that report overlooked, though, is the impact the additional tax would have on small businesses, farmers, mail carriers and others who use their own vehicles as part of their daily routine.
Whitmer maintains that motorists who are averaging approximately $562 in annual road-related damage repair costs might consider the additional tax for fixing the roads a value. Yet, under her proposed plan, the average cost per gallon of gas across the state would hover close to $3 per gallon or more, impacting any suggested savings. Plus, some also see the proposal as a regressive tax that would hit low- to middle-income workers much harder. Some also have suggested that a major tax hike could put gasoline stations near the borders of Indiana and Ohio – where fuel taxes are much lower – out of business.
Michigan roads need attention, but is tripling the gas tax the best way to get it done? I think not. First of all, we should restrict all gas and sales taxes paid on fuel to be used only for roads and infrastructure, something that’s never been guaranteed in Michigan’s budget funding. Based on findings from a 21st Century Infrastructure Commission appointed by former Gov. Rick Snyder, the state needed an extra $2.6 billion per year just to maintain the roads and bridges it has today.
The commission also estimated that close to $2.5 billion could be raised in total over nine years by increasing the state’ regular and diesel fuel by 5 cents per year. It estimated the proposal would raise an additional $275 million the first year, $559 million in Year 2 and $825 million by Year 3, eventually nearing the $2.5 billion by Year 9. That’s just over the amount Whitmer is suggesting can be raised with her proposed 45-cent gas tax over the next three years.
It appears legislative leaders on both sides of the aisle in Lansing understand the importance of dealing with road funding, it just comes down to the political risk they’re willing to take to solve the problem that has plagued our state for decades. It’s time to come together with a reasonable plan – a plan that is acceptable to citizens and the business community.
Whatever the eventual solution might be, though, we know it will be all of us paying the bill.
Fred Jacobs, CEO,
J-Ad Graphics Inc.