November 7, 2011|
Gov. Rick Snyder last week underscored the need to increase investments in roads and transit systems. Unlike his predecessor, Snyder showed leadership on this issue by acknowledging that the current funding system has failed to provide enough money even to maintain Michigan's crumbling transportation network.
Snyder, however, avoided any talk of a gas tax increase in laying out ideas to increase transportation revenues, including raising vehicle registration fees and abolishing the current state gas tax and switching to a wholesale tax on fuel. Still, a short-term increase in the current per-gallon gas tax must remain an option.
Such an increase, including a sunset provision after five years or so, would provide the fastest way to drive needed cash into the system until a better funding stream can be put in place. Michigan's 19-cents-a-gallon gas tax was last raised by four cents in 1997. There's no magic number, but a temporary increase of nine cents a gallon is reasonable.
To be sure, the wholesale tax cited by Snyder would provide a more stable funding source by replacing the per-gallon tax on gas and diesel fuel with a percentage tax paid by gasoline wholesalers. Instead of users paying taxes directly at the pump, gasoline wholesalers would pay the taxes and pass the added costs on to consumers. Unlike per-gallon taxes, however, wholesale taxes would rise as the price of fuel went up -- and, inevitably, it will. Moving to a tax structure that brings in more revenue as oil prices increase would eventually increase dollars for needed road and transit projects.
In the short run, however, the wholesale tax would be "revenue neutral," as Snyder stated. It would not collect more money immediately.
At any rate, politicians and policymakers should not regard the wholesale fuel tax as a permanent solution. Gas taxes, in any form, are becoming obsolete. Revenue will keep falling as people continue to drive more fuel-efficient vehicles -- and drive less.
After years of neglect, even a large increase in vehicle registration fees -- politically, no sure thing -- would not meet the state's immediate transportation needs. A 2008 report by a task force appointed by former Gov. Jennifer Granholm concluded that Michigan must double its transportation funding to more than $6 billion a year just to keep roads and transit systems in good shape.
As Snyder stated, replacing the gas tax with an odometer tax or other mileage-based user fee is a long way down the road. In facing the immediate funding problem, politicians and policymakers must decide whether a per-gallon gas tax increase is preferable to a tax on the wholesale price of fuel. The answer will depend partly on whether state politicians and local voters will approve vehicle registration fees, and how long it will take to switch to an entirely new way to pay for transportation needs.
The state must move, with urgency, toward transportation funding that does not rely on fuel consumption. Until then, Michigan cannot afford to rule out a temporary increase in per-gallon gas taxes.