Analysis of State Tax Increase Proposal

Our friends at the Livonia Chamber of Commerce have compiled a brief overview of the competing arguments for and against the proposed statewide sales tax increase to help fund road repairs in Michigan. They’ve tried hard to state the case as objectively as possible, and we thank them for allowing us to share this with you.

ANALYSIS OF STATE VOTE TO INCREASE SALES TAX RATE

Voters are being asked to increase Michigan’s sales tax rate from 6% to 7%, which would increase state revenues by about $2 billion per year, create a series of Constitutional and statutory changes that impact rates and methods for collecting fuel taxes and vehicle registration fees, and mandate spending increases for certain programs. If approved, the proposal would provide at least $1.2 billion more for road and bridge maintenance, $300 million more for school aid, nearly $100 million more for local governments, $130 million more for public transit, increase earned income tax credits for low-income families by $260 million, add $40 million more for at-risk school programs, and revise competitive bidding and warranties for road work.

The Livonia Chamber’s Government Affairs Committee, Executive Committee, and Board of Directors analyzed the proposal and noted there were strong opinions among Chamber members who support and oppose this proposal. Accordingly, the Board of Directors concludes the following:

The Livonia Chamber of Commerce will not take a position involving this matter, but the Chamber prepared this balanced analysis of the proposal to better educate chamber members.

While there is agreement that additional investment is needed to better repair our roads, there are many questions about the long-term impact of the constitutional and statutory provisions in this proposal. We could not find consensus among our membership to take a position for or against the measure. Each side offers debate as to the ways to adequately fund necessary road repairs.

Those who support the measure contend:

  • Michigan invests the least per capita in road repair compared to any other state in the Midwest, and increasing the sales tax to 7% would keep Michigan near the national median for this tax.
  • The earmarked increased spending from this proposal is mandated and cannot be manipulated by legislative action. Supporters add there is widespread support for more state investment in the other programs beyond roads and bridge repairs.
  • They acknowledge there is no perfect proposal to fund roads, but the roads are in need of repair and there is no alternative plan in place to increase road repair funding if voters defeat this measure.

Those against the measure argue:

  • This is a poorly-constructed proposal developed in an 11th hour deal during December’s lame duck legislative session where lawmakers deferred their responsibilities to increase road funding to the voters.
  • They are more likely to support a measure to exclusively provide more road repair funding. They do not like the “Christmas Tree” approach to funding several other elements when polling indicates that most residents are in favor of boosting funding only for roads.
  • They also fear there are long-term detrimental issues with the Constitutional changes in this proposal which only can be reversed through another statewide referendum.

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