Traverse City Record-Eagle

Michigan

June 12, 2014

Michigan Senate rejects sales tax hike for roads

LANSING, Mich. (AP) — Michigan senators soundly defeated a proposal Wednesday that could have led to a sales tax increase as lawmakers scrambled to try to raise taxes and vehicle registration fees to improve deteriorating roads with one day left before the Legislature adjourns for much of the summer.

The Senate rejected a proposal to ask voters if they support raising the state's 6 percent sales tax to 7 percent and dedicating the extra revenue to transportation. The proposed state constitutional amendment won 14 votes, far short of the 26 needed in the 38-member Senate.

But the Republican-led chamber may vote Wednesday night on doubling Michigan's 19 cents-a-gallon gasoline tax to raise at least $1 billion more annually for transportation, which would require a simple majority vote instead of the two-thirds threshold needed to amend the sales tax.

The bill — linked to a tax reduction for homeowners and renters — would increase the gas tax to roughly 41.5 cents within five years, if fuel prices stay flat. The tax could rise or fall no more than 5 percent in future years to account for any major year-to-year fluctuations in price.

If the gas tax increase wins approval in the Senate, its fate could be uncertain in the House a day before lawmakers plan to break before August's primary election. The House last month passed a more modest $450 million increase in road and bridge spending that mostly diverts money from elsewhere in the budget, yet Senate Minority Leader Gretchen Whitmer, D-East Lansing, said she doubts the Senate would have started to move ahead without assurances its plan could pass in the House.

Michigan spends less per driver on roads than any other state yet also has some of the country's highest taxes at the pump because the sales tax applied to motor fuel mostly goes to schools and local governments under the state constitution. Republican Gov. Rick Snyder has said at least $1.3 billion more per year is needed at a minimum to bring roads up to par or else the system will fall further into disrepair.

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