Gas taxes, electrics and hybrids – is Michigan paying attention?

17 Dec 2014

Tesla

A sharp, environmentally friendly car, but also a “free rider”?

Everyone agrees that Michigan’s roads are in awful shape.  Everyone seems to agree on the amount of money to get them into good shape and keep them there (an additional $1.2 Billion a year – although MDOT argues that it may be closer to $2 Billion/year).  What no one seems to be able to agree on is how to pay for that.  With a week left to go this year (and I wonder why they aren’t working through the 31st on this), the House has passed two bills and the Senate has passed another.

Michigan, desperate to fund much-needed road repairs, appears unwilling to take on this issue

The first House bill would amend the General Sales Tax Act to eliminate, over 6 years, the sales tax on motor fuels. The proposed exemption would first reduce the portion of the sales tax that existed before the approval of Proposal A on March 15, 1994. After January 1, 2021, eligible fuel would be exempt from the sales tax. The Legislature’s own financial analysis shows reductions in State and local revenue by approximately $1.1 billion by fiscal year 2021-2022.  The second bill would amend the Motor Fuel Tax Act to replace the current excise taxes on gasoline and diesel fuel with a single excise tax that would be adjusted annually.  The current gasoline fuel tax is 19 cents per gallon and under the bill, the tax rate could go up every year but could not exceed 32.5 cents.

the number of miles driven is a good proxy for wear and tear on the roads but I wonder if there should be some weighting based on, well, vehicle weight

Reportedly, the Senate has its own plan which is more of a straight gas tax increase and conferees will be working until the 18th (which apparently is the last day of the year for the Legislature if not for the rest of us).  While there was previously some discussion of ballot initiatives and raising the State sales tax by one cent to fund the roads, it appears that this is heading either to stalemate or something that looks like the Senate plan.

One thing that no one seems to want to take on is what to do about hybrid and electric cars that pay less or no gas taxes and yet still drive on the same roads and impose the same wear and tear as the rest of us.  Frankly, as gas efficiency has improved overall, gas tax revenues are at risk while miles driven do not decline.  A few states (Washington, North Carolina, Colorado, Virginia and Nebraska) have imposed additional, special fees on such vehicles and one state, Oregon, is beginning to transition from a gas tax to mileage tax – charging 1.5 cents per mile to 5000 drivers as the State transitions.  Wisconsin is also considering a flat fee. Pro-electric vehicle lobbyists and environmentalists have found common ground to challenge these fees as a disincentive to an important but small (and perhaps fragile) growing environmentally greener business.

I feel that the number of miles driven is a good proxy for wear and tear on the roads, but I wonder if there should be some weighting based on, well, vehicle weight.  I believe that a Cooper Mini likely causes less road wear per mile than does a Hummer.  However, Michigan, desperate to fund much-needed road repairs, appears unwilling to take on this issue. Some may chalk it up to protection for the auto industry or that it’s too small an issue to deal with today, but I suspect it’s simply the result of a lack of recognition that the old model may not work in the future.  I’d like to see Michigan get to the cutting edge both in terms of its infrastructure and how to fund it.

 

 

 

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