Governor Snyder to Propose Gas Tax Change
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Updated: 11:49 PM Oct 25, 2011
Governor Snyder to Propose Gas Tax Change
The Governor will propose eliminating the state's 19 cent per gallon fuel tax in favor of a new tax on the wholesale price of gas during a planned speech Wednesday.
Posted: 11:35 PM Oct 25, 2011
Reporter: Alex Goldsmith
Email Address: alex.goldsmith@wilx.com
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When you put a gallon of gas in your tank, you're also putting 19 cents back into the roads and bridges you'll use that gallon driving on.

That 19 cent per gallon tax the state assesses to pay for infrastructure projects around Michigan hasn't gone up even though the price of gas has more than doubled since then.

But when prices do go up faster than inflation or more fuel efficient cars are on the road, consumption tends to go down.

"If there's fewer gallons being sold, we're seeing less revenue," said Mike Nystrom with the Michigan Infrastructure and Transportation Association.

So Wednesday, Governor Snyder will propose a plan to make that tax a little more flexible during a speech on his vision for improving infrastructure in the state. Under the proposal, the current state fuel tax would be scrapped and replaced by a new tax on the wholesale price of gas.

A source at the Governor's office told WILX Tuesday the change wouldn't initially raise more money or prices at the pump because the initial rate set would be equivalent or close to equivalent to the current 19 cents per gallon currently levied.

But that wouldn't be the case forever.

"The percentage is nice because it grows with inflation," said Nystrom. "As the price of fuel goes up, we'd be bringing in more revenue."

Which would mean more money for fixing roads.

Governor Snyder's proposal also includes the elimination of a similar 15 cent per gallon state tax on diesel fuel, replacing it with a similar wholesale tax.

Combined, the fuel and diesel taxes bring in around $1 billion in state road funding a year, a number that has declined as Michigan's population and cars become more fuel efficient.

Mark Griffin with the Michigan Petroleum Association agrees getting rid of the current 19 cent tax is a good idea, but wants to replace that tax with a 1 percent sales tax hike on everything eligible for sales tax in the state. The money would go directly towards infrastructure in the state.

"It spreads it over a broader area of the economy instead of putting all your eggs in one basket," said Griffin.

The trouble with that idea is it would take a vote of both the state legislature and the people to go forward. Even if that idea goes nowhere, Griffin doesn't necessarily like the Governor's plan.

"If you base it on a per-gallon basis, at least everyone is paying the same tax per gallon," said Griffin. "If you do it on a percentage basis, it's going to vary based on actual cost."

According to Griffin, depending on the price of gas, retailers pay more 50 cents worth of taxes per gallon up front.

The Governor's speech on infrastructure will be made at 3:00 PM Wednesday in Southfield. Additional proposals on state registration fees are expected, but specifics could not be confirmed Tuesday night.