The Michigan Legislature and Governor Rick Snyder have come to an agreement on the controversial road funding issue. Voters in May will be asked to approve a one cent, or 1%, sales tax increase to pay for repairs for our state’s moribund road system.

The road fix plan includes swapping the sales tax on fuel for a new motor fuels tax dedicated specifically to roads with an eye toward raising as much as $1.34 billion in new funding. $1.2 billion for roads, and public transit would get $112 million. It’s expected the average price of the gallon of gas would go up three cents in fuel taxes, and sales tax would be removed from fuel sales.

There would also be an increase in vehicle fees raising $45 million for registrations and $50 million in heavy truck fees.

The sales tax increase would also be used to offset lost revenues for cities and schools that would occur by repealing the sales tax on fuel. In fact, according to officials, schools would see an addition $300 million.

Democrats have been pushing for restoring 2011 cuts made to the Earned Income Tax Credit for low-wage earners and it looks like they’ll get that under the deal, as well.

There are still some major hurdles. Since this change isn’t just a law but requires a constitutional amendment, two-thirds of the Michigan legislature (both Senate and House) must approve putting it on the ballot which will require a lot of herding by the leadership of both political parties, and then there would be a public vote in May of 2015.

If the increase is approved by voters, $400 million would be made available for roads as early as this year by pulling forward funds from future revenues.

The sales tax increase to 7% would put Michigan in line with other Midwest states. Expect a large media push and campaign around this in the coming months as we get closer to the May 5 voting date. However, with Senate Majority Leader Randy Richardville, House Speaker Jase Bolger, Senate Minority Leader Gretchen Whitmer, and House Minority Leader Tim Greimel all appearing together it look like it’s going to be a bi-partisan full court press.

The advocacy group Business Leaders For Michigan has already jumped on board with the plan.

“The proposal will fix our roads and represents a big step toward a broader long-term solution to expand the capacity of our roads to grow the economy,” said Doug Rothwell, President & CEO. “While there is some risk in relying on a ballot measure that requires a strong public awareness campaign, this proposal offers some very positive benefits for citizens, schools, communities and businesses alike.”

What do you think? Are you on board with the sales tax increase to fix Michigan roads?

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