By Meg Peters
Review Co-Editor
As Orion Township’s roads have cracked open over the last couple of weeks, like many roads in Oakland County experiencing the freeze-thaw cycle, many residents are left wondering’how much of the current gas tax is directly spent on fixing Michigan’s roads?
The answer is, not the majority of it.
In May, voters have another option. Passing Proposal 15-1 for the Special State Wide Election’Tuesday, May 5, would ensure that almost all of the taxes paid at the gas pump would go to the Michigan Transportation Fund.
The question now becomes whether or not voters understand what the heck to proposal would be doing.
The current way
Each time a driver fills up at the pump, they are paying a federal, state and sales tax on the wholesale price of gasoline.? About 18 cents goes to the federal government and 19 cents to the State, based on $3.50 per gallon retail price.
Drivers are also currently taxed on the six percent sales tax on the retail price of gasoline and diesel, which is also about 19 cents per gallon based on a $3.50 per gallon retail price.?
Nearly 75 percent of the funding from the six percent sales tax goes to the Michigan School Aid Fund for k-12 education (14 cents); about 15.9 percent ends up in the State general fund? (2 cents), about 10 percent is distributed to local governments through revenue sharing (2 cents), and roughly one percent is allocated for the CTF (1 cent), the Comprehensive Transportation Fund, which funds various public transportation systems around the state, and freight programs.
The total amount of taxes on gasoline, therefore, is about 56 cents per gallon, with only about 19 cents going to the Michigan Transportation Fund.
But, the Michigan Transportation Fund is cut up even further, with only 10 cents going to local roads, seven cents going to state roads, and two cents going to mass public transit.
So, not much if any of the sales tax is repairing pot holes, laying out new asphalt or funding other increasing road problems in Orion Township.
The Road Commission for Oakland County (RCOC) owns almost all over Orion Township’s roads, apart from Lapeer Rd. which is state-owned, and therefore is in charge of Orion’s road maintenance.
The RCOC is funded through the Michigan Transportation Fund, and gets a slice of the 10-cent-pie when the formula breaks it down.
That’s about it, which comes down to approximately $150 per person in Michigan that is spent on roads, compared to about $214 per person Ohio spends on its roads.
The proposal
Proposal 15-1, which voters will be approving or denying’Tuesday, May 5, intends to eliminate the six percent sales tax on gasoline and increase it from six percent to seven percent on all other non-fuel items, apart from food that you purchase at the grocery store.
The proposal would replace the sales tax on gasoline with a wholesale tax dedicated to roads. The wholesale tax would add an additional 23 cents to the current 19-cents-per-gallon gas tax for a total of 42 cents this October, based on the average wholesale price of $2.82 per gallon, according to State Notes: Topics of Legislative Interest.
The wholesale tax would only be adjusted once a year based on 14.9 percent of the average wholesale price of gasoline or diesel, and would be capped at the lesser of the five percent change in fuel price or inflation, according to the document.
In other words, the new tax would be based on the wholesale price of a 12 month period beginning in October 2015, and each year after that it will be multiplied by 14.9 percent to adjust for inflation. For example, if the wholesale price of gasoline is $2, the inflation adjustment would equate to approximately 23 cents for the new wholesale gas tax ($2 X 14.9 percent).
Under the new tax rates, the Michigan Transportation Fund would see an increase of about $1.2 billion in the 2015/16 fiscal year.
The effects
‘One of the key elements under the new provision is everything you pay in taxes at the gas pump that goes to the state will be going into transportation,? 46th’District State Representative Brad Jacobsen, who represents northern Oakland County, said.
Jacobsen serves on the Transportation and Infrastructure, Energy Policy and Elections committees, and chairs the Communications and Technology and Government Operations committees.
Including the one percent sales tax increase on non-fuel items, the entire proposal would raise about $2.1 billion, according to the House Fiscal Agency.
But pay attention, this is where it gets even trickier.
Of the $2.1 billion in revenue, about $1.4 billion comes from the increase in the sales tax from six to seven percent. The remaining $700 million would result from the estimated wholesale tax at the gas pump combined with an increase in registration fees on trucks and cars for the current fiscal year.
Monies from the one percent sales tax increase’the $1.4 billion’will pay off $800 million in losses incurred from the removal of the sales tax on gasoline, which paid schools, revenue sharing in local governments, the general fund and the CTF fund.
If the proposal passes, schools would lose about $570 million, revenue sharing would lose about $100 million, the general fund would lose about $100 million, and the CTF would lose about $30 million.
Apart from completely paying back the losses described above, the school aid fund would receive an additional $300 million, revenue sharing would get an additional $100 million, and the general fund would gain another $16 million.
‘I want to make it clear that I am not advocating support’either for or against Proposal 1, rather, I’m just answering the question of what’Proposal 1 is’expected to?’do for schools,? Lake Orion schools Superintendent Marion Ginopolis said. ‘It is my understanding that Proposal 1’would give Constitutional protection for the School Aid Fund, directing 100 percent of’School Aid Fund revenue to K-12 schools and community colleges and’would’increase education funding by approximately $300 million annually.?
The net gain, after paying off holes created from the sales tax removal on gas, would be about $650 million.
All money raised by the wholesale tax on gasoline would be added to the Michigan Transportation Fund, which is divided into three main components: the State Trunkline Highway System Fund (maintained by the Michigan Department of Transportation or MDOT), to the Comprehensive Transportation Fund or CTF, or to local agencies for roadwork, Jacobsen said.
If the proposal passes, monies added to the Michigan Transportation Fund would be divided up as follows: $180 million to the State Trunkline (MDOT); $280 million to local road agencies, $25 million to CTF, and $815 million in debt service payment for fiscal 2015/16. For the first two years of the new tax incentives, any new revenue greater than $800 million would be directed to paying of existing transportation debt, which according to MDOT is close to $2 billion.
All in all, about $1.2 billion of the $2.1 billion in total revenue would go to roads, $112 million to mass transit, $300 million to schools, and $94 million to local governments, according to the Michigan Farm Bureau News.
Additional info
In the next five years, no funding will be directed towards the roads in Orion Township according to current distribution formulas utilized by the RCOC, Supervisor Chris Barnett said.
Annual road funding for RCOC projects in Oakland County is roughly $15 to $16 million per year, and for perspective, it costs about $1.5 million to pave one mile of road.
If the proposal does not pass, Barnett said the township could consider implementing a township-wide special assessment to repair Orion’s worst roads.
For anyone still confused, the Oakland County Republican Party is having an informational forum’April 7 at 7 p.m.’at King’s Court in Canterbury Village where two advocates and two opponents of the proposal will be speaking about the proposal.