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Booth: Coalition Pushes for Gas Tax Hike

Thursday, October 18, 2007   (0 Comments)
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LANSING -- A gas tax is a job creator, while the service tax is a job killer. So say the interest groups out to hike the one and scrap the other. Despite the pressure, lawmakers are tax averse at the moment.

On Wednesday, a coalition of road builders, union leaders, local governments and general business groups renewed their push for a $1 billion annual increase in fuel tax and vehicle registration fees to replenish shrinking road repair budgets.

A bill package quickly shelved after introduction in April would raise the state's 19-cent gas tax to 28 cents per gallon by 2009 and boost vehicle registration fees by 50 percent. The state would get 40 percent of the new money. Counties and cities would share the rest. The proposal has languished because neither Gov. Jennifer Granholm nor lawmakers have made road revenue an element in a year-long struggle to balance the state budget.

"At the state and local level, there's a minimum of a $2.7 billion funding gap between that which is needed and that which is available," said Mike Nystrom of the Michigan Infrastructure and Transportation Association. "We've stuck to our guns on this proposal because that's the minimum of what the state needs to come up with."

Thanks to borrowing and increased federal funding, Michigan is spending $1.3 billion on state trunkline highway projects this construction season. Given declines in gas tax revenue and increased costs for debt service, however, annual highway spending is expected to drop to around $900 million in 2009.

Tax advocates argue spending cuts will cost thousands of Michigan construction jobs as road crews move to southern states such as Florida. Overall construction payroll employment in Michigan has declined by 17,000 in the past 12 months, according to job figures released Wednesday by the Department of Labor and Economic Growth. Michigan's unemployment rate grew to 7.5 percent last month.

Recall-inducing income and sales tax hikes passed by lawmakers Oct. 1, combined with record-high oil prices, means there is little appetite in the Legislature for raising a gas tax last increased in 1997.

House Democrats already are worried they will lose their majority next year. Senate Republicans don't want to raise taxes, period.

"That's just something that people ought to get used to," said their spokesman, Matt Marsden.

Wednesday, a broader coalition of 39 business groups vowed to repeal, one way or the other, an extension of the sales and use tax to dozens of consumer and business services.

The group "Ax the Tax" is pushing for legislative repeal of the new services tax before it takes effect Dec. 1. Failing that, the group said it would collect the 304,000 valid signatures required to force either a repeal vote in the Legislature or a public vote through the November 2008 ballot.

"Our message is simple: repeal this tax and repeal it before Michigan consumers and job providers take a financial hit they can't afford," said Aaron Samson, owner of Lush Lawn Inc. of Grand Blanc.

Landscaping services are among those included in the tax extension expected to generate $613 million in fiscal year 2008 and more than $750 million in 2009.

There is little sentiment in either party to repeal the tax without replacement revenue. One approach backed by business groups last month would raise the income tax rate from 4.35 percent to 4.7 percent or more.

Granholm spokeswoman Liz Boyd said any replacement has to be bipartisan and revenue-neutral.

"If someone wants to propose an adjustment or an alternative, we'll take a look at it," she said.

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