Michigan House approves Republican road funding package

• The Republican-led plan passed the House with mostly Republican support.
• Republicans and Democrats agree that sales tax should be removed from fuel sales, so all taxes paid at the pump go to roads.

House Republicans on Wednesday approved a plan they say will raise an extra $3.1 billion annually to fix Michigan roads, but the nine-bill plan, opposed by most Democrats who say it would force cuts to other important programs, faces many obstacles and almost certain changes before it reaches the desk of Gov. Gretchen Whitmer.

The governor outlined an alternative road funding plan in February and said any long-term plan must include new revenues.

Both plans would shift the taxes Michigan drivers pay at the pump to ensure that 100% goes to roads, eliminating the current 6% sales tax on motor fuels and replacing it with an equivalent amount of fuel tax, so the price motorists pay remains the same.

Legislation passed by House lawmakers would replace the sales tax with an increase in the motor fuel tax from 31 cents per gallon to 51 cents, continuing the annual adjustments for inflation that are already in place. The Republican plan would backfill school funding impacted by removing the sales tax from fuel with $755 million redirected from the general fund — the state's main checking account.

The unknown impact of that shift was a major concern Wednesday for House Democrats, who said education, housing, and health care could all be affected.

"It is nothing more than a shell game," state Rep. Stephen Wooden, D-Grand Rapids, said of the road funding plan.

But Republicans argued that state surpluses in recent years show the state has plenty of money, which only needs to be properly spent. They say their plan does not raise taxes.

"I am getting really tired of talking about the damn roads, so let's actually fix them," said state Rep. Jamie Thompson, R-Brownstown Township.

The GOP plan would create an incentive for businesses to forego their legacy tax credits from a shuttered economic development program by raising the tax rate for those with outstanding credits.

Whitmer voiced concerns about that move. "I know that a lot of our big companies, big employers have made long-term decisions based on long-term commitments from the state," she told reporters last Wednesday. "I think it would be a mistake to upend that."

A separate bill in the road funding plan would also shift corporate income tax revenue currently earmarked this year for housing, placemaking and corporate subsidy funds to roads. In subsequent years, up to $2.2 billion in corporate income tax revenue would go to roads with the bulk of the funds supporting local road agencies.

The Republican plan has drawn opposition from some business groups.

The Michigan Manufacturers Association has raised concerns about the Republican plan for targeting companies with legacy tax credits. A press release from the association earlier this month argued the legislation would make businesses looking to expand or locate to Michigan think twice. Detroit Regional Chamber Vice President of Political Affairs Brad Williams expressed concerns about the proposal to encourage companies to forgo tax credits by increasing the business tax and allowing funding for the state's largest corporate subsidy fund to lapse. "Removing these incentives would send the wrong signal to companies both here and abroad who are considering investing in Michigan," he told lawmakers during a committee hearing on the legislation last Tuesday.

House Speaker Matt Hall, R-Richland Township, defended the plan. "If we prioritize roads above corporate giveaways we can fix our roads without raising taxes," Hall told reporters during a press conference Wednesday. Hall celebrated the bills as the closest lawmakers have come to a deal on road funding under Whitmer.

Lawmakers rejected the first plan Whitmer unveiled in 2019 calling for a 45-cent gas tax increase. But the State Transportation Commission later approved Whitmer's request for $3.5 billion bonds to rebuild state highways and bridges. Local roads didn't benefit from the funding which will soon run dry.

"If we don't find a solution, our roads will get worse and more dangerous and that means expensive car repairs and delays on your drive home," Whitmer said in a Jan. 15 speech at the Detroit Auto Show. She pledged during her 2018 gubernatorial campaign to "fix the damn roads."

While Republicans want a road funding plan that doesn't require raising new revenue, Whitmer has called for one that features a mix of new revenue and cuts. Last month, Whitmer outlined the broad strokes of her plan that proposes raising new revenue from large corporations and technology companies without providing specifics and a new marijuana tax. She also called for $500 million in unspecified budget cuts.

Republicans and Whitmer generally agree on the amount needed to fund roads with both plans providing around $3 billion. The House bills next head to the Michigan Senate, which is narrowly controlled by Democrats, for consideration.

Senate Majority Leader Winnie Brinks, D-Grand Rapids, on Wednesday described the GOP plan as "nonsense" and said it asks Michiganders to "pay more but get less."

The House bills passed on mostly party-line votes, with each bill receiving between 61 and 65 yes votes and between 43 and 47 no votes. A few Republicans voted no on one or more of the bills, just as a few Democrats voted yes on selected bills.

Contact Clara Hendrickson at chendrickson@freepress.com or 313-296-5743.