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Lawmakers Propose Funding Road Repair with Car Registration Hike, Gas Tax Increase

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Late yesterday, state lawmakers passed a plan to fund road repair in part by increasing vehicle registration fees by 40% and via increases in gas taxes. For some, higher fuel taxes would be offset with an expanded tax credit included in the legislation. Many could also see future income tax cuts under the proposal.

The main components include:

· Increasing the state's 19-cents-a-gallon gas tax to 22 cents a gallon
· Increasing the state's 15-cents-a-gallon diesel tax to 19 cents a gallon
· A 40% increase is car registration fees beginning in October 2016
· Diverting money from Michigan's $9.9 billion general fund into road repair

And then there were sweeteners that have nothing to do with road repair, and seem likely to benefit the wealthy far more than they help any Michiganders who will struggle to come up with an extra $40 on their annual car registration:

· Dropping the state's income tax rate by 4.25% a year (starting in 2022)
· Expanding income tax credits to homeowners and renters earning up to $60K a year (currently, it's $50K a year)

Overall, the spate of nine bills would add $400 million to Michigan's transportation budget starting next year. If the bills go into effect, they'd ad $1.2 billion a year by 2021. This sounds good, assuming you don't care about the registration fees and gas tax hikes, except that according to the House Fiscal Agency, this plan would reduce tax revenue by $680 million if it were in effect today. The net gain to the state is less than it seems when all of the changes are considered.

The vote went predictably along party lines, with Republicans claiming some kind of grand bargain, while House Democratic leader Tim Greimel describes it as an "embarrassment," according to Crain's. Democrats dislike the fee hike in particular, but also criticized the bills because they won't raise the bare minimum needed to bring roads up to par for five years. It could also zero out income taxes for some residents, and the changes to the general fund may result in cuts to services.

·Legislative Analysis: [House Fiscal Agency]
·Michigan House OKs new roads plan with gas tax, fee hikes [Crain's Detroit Business]
·Lawmakers Plan to Fix Michigan's Roads…in 2017 [Curbed Detroit]
·Fixing Michigan's Roads: Get a Shovel and DIY? [Curbed Detroit]