How 2015 Snyder plan allowed Michigan's state fuel tax to quietly creep up
Gov. Gretchen Whitmer outlined a plan Monday she said would raise an extra $3 billion for roads. It would require approval from the Legislature, including from the GOP-controlled state House.
A plan approved by state lawmakers under former Gov. Rick Snyder, back in 2015, increased the fuel tax from 19 cents to 26.3 cents per gallon. But the plan also called for the fuel tax to be indexed to inflation going forward, up to a maximum of 5% annually. That's how Michigan's total fuel tax has increased an additional 4.7 cents per gallon since then, with no legislative action required.
The fuel tax is expected to generate a little over $1.6 billion for the Michigan Department of Transportation to spend on roads in the 2026 fiscal year that begins Oct. 1, with a little over $1.3 billion coming from the gas tax, about $286 million from taxes on diesel fuels, and just under $2.4 million from taxes on liquefied petroleum and alternative fuels, according to the Michigan Department of Transportation and the Treasury Department.
In 2015, the motor fuel tax generated a little over $1 billion, according to the House Fiscal Agency. That increased to about $1.5 billion in the 2024 fiscal year.
The inflationary increases in the fuel tax have allowed fuel tax revenues to continue to increase, despite a decline in overall fuel consumption since 2015, as vehicles have become more fuel-efficient and many motorists have shifted to electric vehicles or hybrids.
In 2023, the most recent year cited in a 2024 report from the House Fiscal Agency, about 5.1 billion gallons of gasoline and diesel fuel were sold in Michigan, the report said. That was down from close to 5.5 billion gallons in 2015, the report said.
The 31-cent-per-gallon fuel tax, by itself, puts Michigan near the top third of states, with 17 states having a similar or higher state excise tax on fuel, according to data from the U.S. Energy Information Administration. But when Michigan's 6% sales tax on fuel is included, total state taxes of about 48 cents a gallon in Michigan are only exceeded by five states: California (69 cents); Illinois (66 cents); Pennsylvania (59 cents); and Indiana and Washington (53 cents).
Whitmer's plan would remove the sales tax from Michigan fuel sales and replace it with an equivalent amount of fuel tax, so that the overall price of a gallon of fuel does not change. All revenues from fuel taxes go toward roads, while most sales tax revenues go to support schools. Whitmer says her plan would ensure that schools would be held harmless.
According to the National Conference of State Legislatures, Michigan is one of 24 states where the fuel tax is adjusted periodically, based on inflation or other metrics, with no legislative action required.
Contact Paul Egan: 517-372-8660 or pegan@freepress.com.
This article originally appeared on Detroit Free Press: Michigan's fuel tax has crept up nearly 5 cents a gallon over 10 years
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29 minutes ago
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