Road plan increases state spending and is filled with pork
On May 5, Michigan voters will be called upon to consider a change in the Michigan sales tax law, raising it from 6 to 7 percent. To change the sales tax requires a constitutional amendment, thus requiring a citizen referendum.
The legislature and Gov. Rick Snyder are recommending this change in connection with the need to increase road spending. In short, the proposal sets aside $1.2 billion for the roads, but special interest add-ons bring the total spending to almost $2 billion.
Because this bill, if approved, will have a serious effect on the Michigan economy and your business’s transportation costs, including adjustments in all of Star’s pricing, I thought it appropriate to weigh in — both with my thoughts on the legislation and how the legislation would affect Star pricing.
The referendum is far from simply an increase in the sales tax. This referendum is tied to several other pieces of legislation involving substantial increases in other taxes and fees. Michigan fuel taxes will be raised and shifted to a percentage tax at the wholesale level. This will result in an increase of roughly 4 cents a gallon in the cost of gas and probably about 8 cents in diesel, since the state diesel and gas tax will be brought into parity. License fees for truck plates exceeding 26,001 pounds will be increased 30 percent over a three-year phase-in. Contrary to statements I have heard and read both from high level politicians and the media who ought to know better, this is not a $1.2 billion package. The sum total is close to $2 billion.
Sales tax will no longer be charged on fuel, but that money didn’t go to the roads anyway. The increase in license and fuel tax monies will go to road spending. This change may indeed be good tax policy, but personally I am not sure Michigan taxpayers care much about such matters, caring instead about the level of taxes and how that money is spent.
How is this $2 billion going to be spent? Only $1.2 billion will actually go to road spending (in the first year, $800 million to pay down state road debt and $400 million directly to the roads, with those numbers reversed the second year). The rest of the $2 billion is distributed as follows: $95 million in revenue sharing to localities, $300 million additional for the School Aid Fund, $130 million for public transit, and $260 million in increased Earned Income Tax Credits. (I view this last as an increase in spending, but some would argue it’s a tax reduction. To me, it takes from Peter to pay Paul.) You might ask what these last items have to do with road spending. The answer is: nothing. This pork had to be larded on to get the required two-thirds legislative vote to put the matter to a citizen vote as a constitutional amendment.
If this seems like the pork-barrel politics more characteristic of Washington, I suggest you’ve got it right. Now, like Congress, our legislature is hamstrung on such a critical infrastructure need, despite a Republican majority in both bodies and a Republican governor. If Michigan voters don’t approve the May 5 referendum, all of the other bills will die as well, and we’ll be six more months down the line with no solution.
For the record, it appears road and bridge deterioration does constitute a real and present dilemma and funds must be found. While it appears funds could be found by, for instance, revisions in the corrections budget, repeal of the prevailing wage law, killing film tax credits, or closing the Michigan Economic Development Corp., it does seem new funds are required. Perhaps they should sell the passenger rail cars they leased five years ago for over $1 million a year for a public transit system between Detroit and Ann Arbor — the cars still set idle in Owosso. I don’t necessarily oppose an increase in fuel taxes and perhaps even a more moderate increase in truck license fees. What I do vehemently object to is the larding on of unrelated special interest pork!
Meanwhile, Star will pass these changes through in adjusted lease rates or direct invoices for license fee increases. The sales tax increase will even have a slight impact on our variable mileage rates since our pricing on parts, tires and materials only contemplated a 6 percent tax. Of course, we’ll have to digest a sizeable license increase on our rental fleet; hopefully the market will allow us to adjust. After all, businesses don’t pay such taxes and fees; ultimately only consumers do.
Hopefully, this “thing” will meet with heavy taxpayer resistance and the legislature will be forced to do their jobs. But you can bet they will be spending a pile of your money on advertising for your vote and may even — in a sort of Chris Christie Bridgegate — further defer near-term road spending so we all can see and feel the potholes.
Mark Twain once remarked that he had seen a strange thing: a politician with his hands in his own pockets. Personally, I’d suggest we throw this back in their laps, where it belongs.
Thomas L. Bylenga is president of Star Truck Rentals.