Michigan Ballot Proposal 2015-1

The Michigan Sales Tax Increase for Transportation Amendment, Proposal 15-1 is a referendum on May 5, 2015, concerning a legislatively-referred ballot measure. The measure's approval would cause one constitutional amendment and 10 statutes to go into effect. It is estimated that Proposal 1 would raise state revenues from sales and use taxes by $1.427 billion, fuel taxes by $463 million, truck registration fees by $50 million, and vehicle registration fees by $10.1 million in the first year.[1] If approved, the proposal would result in average tax hike of $545 per household in 2016, according to estimate by the Associated Press.[2]

History

Proposal 1, consisting of House Joint Resolution UU of 2014 and associated bills, was passed on the last day of the 97th Legislature of Michigan, December 19, 2014. The legislation was created as a solution to a legislative impasse on road funding, with the state House and Senate unable to agree on legislation to create new funding for Michigan roads. Both the House- and Senate-approved plans would have allocated an additional approximately $1.2 billion annually for road and bridge maintenance. The House-approved plan would have allocated this money by cutting spending increases increases in other areas, including schools. The Senate-approved plan would have raised the money through higher fuel taxes.

The two chambers unable to compromise, both plans were discarded in favor of Proposal 1. House Joint Resolution UU was passed with the requisite supermajority vote in either chamber, and ten additional bills were passed and signed into law containing enacting clauses that stipulate they only take effect if HJR UU is adopted by voters.

Text

Proposal 1 consists of an amendment to the Michigan Constitution of 1963, House Joint Resolution UU of 2014. Separately from the constitutional amendment, Public Acts 467 through 476 of 2014, signed into law by Governor Rick Snyder in January 2015, contain enacting sections that specify they do not take effect "unless House Joint Resolution UU of the 97th Legislature becomes a part of the state constitution of 1963 as provided in section 1 of article XII of the state constitution of 1963."

The language of the proposal that appears on the ballot describes some aspects of these ten additional laws, acknowledging that giving effect to these ten laws is a major part of the proposal.

House Joint Resolution UU of 2014

Public Act 467 of 2014

Public Act 468 of 2014

Public Act 469 of 2014

Public Act 470 of 2014

Public Act 471 of 2014

Public Act 472 of 2014

Public Act 473 of 2014

Public Act 474 of 2014

Public Act 475 of 2014

Public Act 476 of 2014

Ballot language

Per Michigan law, Michigan Bureau of Elections Director Chris Thomas wrote the language for Proposal 1 as it appears on the ballot. The language was approved 3–1 by the Board of State Canvassers; the dissenting voter was Norman Shinkle, a Republican-appointed member of the Board, who noted, "This is a very complex proposal based on interplay of changing the constitution and the laws of Michigan".[3]

The proposal reads:

PROPOSAL 15-1

A proposal to amend the State Constitution to increase the sales/use tax from 6% to 7% to replace and supplement reduced revenue to the School Aid Fund and local units of government caused by the elimination of the sales/use tax on gasoline and diesel fuel for vehicles operating on public roads, and to give effect to laws that provide additional money for roads and other transportation purposes by increasing the gas tax and vehicle registration fees. The proposed constitutional amendment would:

  • Eliminate sales / use taxes on gasoline / diesel fuel for vehicles on public roads.
  • Increase portion of use tax dedicated to School Aid Fund (SAF).
  • Expand use of SAF to community colleges and career / technical education, and prohibit use for 4-year colleges / universities.
  • Give effect to laws, including those that:
    • Increase sales / use tax to 7%, as authorized by constitutional amendment.
    • Increase gasoline / diesel fuel tax and adjust annually for inflation, increase vehicle registration fees, and dedicate revenue for roads and other transportation purposes.
    • Expand competitive bidding and warranties for road projects.
    • Increase earned income tax credit.[4]

Policies that would be enacted

Sales tax increase

The largest tax increase in the proposal is the raising of Michigan's state sales tax from 6% to 7%.[1][5] An additional law passed in December 2014 and taking effect in October 2015 will require certain Internet retailers, such as Amazon.com, to collect Michigan's sales tax at the point of purchase.[6] The constitutional amendment would allow for the sales tax increase, and a law put into effect by the proposal would immediately raise the sales tax to the newly authorized rate.[7]

Fuel tax modification and increase

The proposal would exempt gasoline and diesel fuel used to operate a motor vehicle from the state sales tax; it would replace the exempted retail sales tax with an increase in the wholesale fuel tax.[5]

The Mackinac Center for Public Policy reports, "The state currently imposes both sales tax and a per-gallon excise tax on motor fuel. This excise tax along with vehicle license and registration fees are the primary source of revenue for the state’s road maintenance budget. Under the measure, sales tax would no longer be imposed on fuel and the motor fuel tax would be replaced with a new wholesale tax levied at higher rates than currently. At a listed price of $2 per gallon, the state is currently collecting 29 cents per gallon in sales and excise taxes on gasoline. This proposal would increase those collections to 41.7 cents per gallon."[1]

Additionally, the retail sales tax on gasoline is expressly eliminated only for vehicles "driving on Michigan roads." It is not eliminated for off-road vehicles, including boats, agricultural machines, ATVs, snowmobiles, and other gasoline-powered vehicles and tools.[8]

Vehicle registration fee increase

Vehicle registration fees would no longer depreciate with the value of the vehicle, raising fees overall. Additionally, because vehicle registration fees are no longer ad valorem (based on value) they would no longer qualify as a federal tax line-item deduction. The Anderson Economic Group estimated Michigan residents would pay an additional $102 million in federal taxes caused by this change.

State Rep. Mike McCready, who sponsored the vehicle registration fee bill, said that legislative leaders knew that change would eliminate the federal deductions. McCready said that the legislature chose to eliminate the depreciation discounts for new vehicles, rather than increase the tax rate for all vehicles, because the legislature "felt this would be the least painful [option]".[9]

Funding for roads

Michigan's proposed fiscal year 2015–16 budget contains cuts in discretionary funding for roads from $285 million the previous year and $451 million in 2014. The proposed amount for fiscal year 2015–16 is $113 million, according to the House Fiscal Agency.[10]

Governor Rick Snyder described the continuing cuts as intentional: "The point is, that's why this needs to get approved," he said.[10]

Proposal 1 would increase spending on roads by approximately $400 million in the first year, $800 million in the second, and $1.2 billion in subsequent years. Under House Bill 5477, part of the proposal, for the 2015–16 fiscal year, $400 million of $1.2 billion raised from increasing fuel taxes would go to the Michigan Transportation Fund (MTF); the remaining money would be used to pay down a portion of the state's debt from previous road construction projects. For the 2016–17 fiscal year, $800 million of the $1.2 billion would go to the MTF, and starting in the 2017–18 fiscal year, nearly all of the projected $1.35 billion in fuel tax revenue would go to the MTF. "However, the language in the bill does not earmark a portion of the additional revenue resulting from the bill, but a portion of the total revenue generated by the Act. As a result, the language would result in a 56.6%, or $522.2 million, decline in MTF revenue available for roads."[5]

Earned Income Tax Credit expansion

The Michigan Earned Income Tax Credit (MEITC) was amended in 2011, reducing the credit to eligible taxpayers from 20% of the federal Earned Income Credit to 6%. Proposal 1 would give effect to a law that increases that credit back to 20% of the federal amount.[11] This is estimated to provide $260 million in tax relief to qualified individuals in the first year.

The Institute on Taxation and Economic Policy estimated that if Proposal 1 passes, the average recipient of the MEITC who earns less than $20,000 will see a net tax break of $24. The Mackinac Center for Public Policy estimated that, if passed, Proposal 1 would result in typical Michigan families seeing an increase of $500 in taxes per year. Taxpayers who qualify for the MEITC would have, on average, a net tax break of $69; however, some MEITC recipients might see a tax increase.[12]

New competitive bidding rules

[13]

Warranty expansion and affirmative action rules

Public Act 473 of 2014,[14] which takes effect if and only if Proposal 1 is adopted by voters, modifies rules for road contraction, including new affirmative action rules and warranty requirements.

MichiganVotes.org summarized the bill as "to expand to local road agencies a requirement to warranties from contractors for road construction and preservation projects valued at more than $1 million. Under current law the warranty requirement only applies to the state Department of Transportation. Also, to require the Department of Transportation to give extra assistance (possibly including grants and loans) to "disadvantaged" businesses that bid on state funded road projects; and to take other steps to steer more state-funded road work to such firms, including annual consultations with certain ethnic- and race-based organizations."[15]

Most policies subject to change

Proposal 1 consists of a constitutional amendment that could be modified without a subsequent vote of the people of Michigan, but ten laws that take effect if Proposal 1 passes, PA 467 through 476 of 2014, comprising most of the significant policy changes, are ordinary laws that are written so as to only take effect if the Proposal 1 is adopted. These laws, however, could be modified by the legislature at any time, before or after May 5, 2015, and before or after they are scheduled to take effect.

Therefore, it is possible that the language describing these laws' effects on the May 5 ballot may be made false, before or after the election, by legislative action.

Public polling

A late-March statewide poll by Lansing-based EPIC-MRA found that 70 percent of voters were opposed to Proposal 1. Only 21 percent said they were in favor of the ballot issue. The remaining 9 percent were undecided.[16]

Arguments

MLive Lansing published statements representing either side of the proposal on March 31, 2015: "Pro vs. Con on Proposal 1: Is it the best option or a political money grab?".[17]

Arguments in support

There are three principal arguments advanced by "Safe Roads Yes!", the ballot committee supporting the proposal: Proposal 1 (1) guarantees that all taxes on gasoline are allocated to transportation; (2) guarantees that all money in the School Aid Fund goes toward K-12 education; and (3) extends pavement warranties so that road builders pay for repairs to poorly constructed roads.[18]

Nolan Finley, editor of The Detroit News, which has endorsed the proposal, wrote in support of the proposal, noting that "There is no Plan B". Finley argued that the option of cutting spending from other areas of the budget will not work, because"Republicans aren't going to make substantial cuts to prison spending, Democrats aren't going to hack welfare spending, and neither party is going to touch school spending." Finley noted that, in his opinion, the best course of action would be to raise the money through an increased fuel tax; however, the legislature had been unable to pass such a bill last session and would likely be unable to do so now. Finley concluded by saying that if the proposal fails, revenue increases will be off the table, making Proposal 1 the only option. "So the real message to voters should be this: Hold your noses and vote for Prop 1, or keep driving on what may be the deadliest roads in America. Guaranteed."[19]

MLive Media Group, in its editorial endorsement of Proposal 1, argued that has been under investing in infrastructure, schools, and municipalities for too long, and that the only way to rectify this is through a tax increase. The editorial argued that "[t]here is no viable alternative." The editorial also contested claims by opposition groups, saying, "Schools and municipalities are not 'special interests,' as Proposal 1 opponents cynically call them."[20]

Arguments in opposition

Opponents of Proposal 1 argue that tax increases are unnecessary to fix the roads. They use as an example an alternative proposal passed by the Michigan House that would not raise taxes in December 2014, supported by then-speaker Jase Bolger.[21]

In an op-ed published by MLive, Rep. Tom McMillin made three arguments to show that tax increases were not necessary: (1) Noting that the state's budget increased close to $5 billion from 2012 to 2015 and that the tax increase only raises $2 billion annually, the new taxes would only offset new spending, which has not gone to roads; (2) in 2014, the state House passed a bill "to fully fix and fund roads without any tax increases, by simply prioritizing new spending", but the governor blocked the legislation; and (3) "[r]oads are an ordinary budget item in forty-nine states", and road funding should just be "budget discussions, not some political hostage brought before voters to demand higher taxes".[17]

An editorial in the Battle Creek Enquirer contested the assertion that there is no alternative to fixing roads but Proposal 1: "Proposal 1 proponents are calling the initiative our best—even only—hope for addressing the state's crumbling infrastructure. The governor and others remind us that 'there's no Plan B.' That's a lot of bunk, and it's insulting to voters who shouldn't be in this position. We pay legislators to legislate, and we expect the governor to lead. No elected leaders should be hiding behind voters on this."[upper-alpha 1]

Concerned Taxpayers of Michigan, a group opposed to Proposal 1, argued that the political ramifications of Proposal 1 were an additional reason to vote no: "If Proposal 1 is passed, the public will have shown to the politicians that they accept their worst. That We the People will settle for anything: the worst they can do, we'll accept as the best."[23]

Critics of Proposal 1 have also pointed out that just over half of the tax revenue raised by Proposal 1 would go toward road funding, with 40% going toward schools, revenue sharing with local governments, and other projects unrelated to roads.[24]

People and groups in support

The campaign supporting Proposal 1 is being led by the Safe Roads Yes committee. The largest contributor to Safe Roads Yes as of the February 2015 disclosure was the Michigan Infrastructure Transportation Association[25] .

Groups in favor of Proposal 1 include AFL-CIO of Michigan,[26] the Michigan Association of School Administrators,[27] the Michigan Education Association,[28] the Michigan Environmental Council,[29] the Michigan Farm Bureau,[30] the Michigan Municipal League,[31] the Michigan Public Transit Association,[32] and Michigan School Business Officials.[33]

People and groups in opposition

Four ballot committees are filed in Michigan opposing Proposal 1: Concerned Taxpayers of Michigan, led by former State Rep. Tom McMillin; Coalition Against Higher Taxes and Special Interest Deals, led by former congressional candidate and businessman Paul Mitchell; Protect Michigan Taxpayers, led by Keith Allard; Citizens Against Middle Class Tax Increases, led by political consultant John Yob.[34]

At least four county and congressional district Republican committees have passed resolutions expressing official opposition to Proposal 1.[35][36][37][38] In a news release issued by district chairman Tom McMillin as his committee passed such a resolution, McMillin commented "In my 25 years of activism within the Republican party, I've never seen anything like this— so many District and County Republican party committees coming out against a significant proposal by a sitting Republican Governor."[36]

Republican Attorney General Bill Schuette criticized the proposal, saying, "From a policy perspective, this proposal has a lot of potholes and pitfalls. It's a massive $1.9 billion sales tax increase that goes well beyond road funding. There's just too much under the tree."[39]

Numerous other organizations have made official statements opposing Proposal 1, including several Tea Party groups,[40] the Michigan Taxpayers Alliance,[41] the National Federation of Independent Business,[42] the Wayne County Taxpayers Association, Inc.,[43] Our America Initiative,[44] the Libertarian Party of Michigan,[45] and the Green Party of Michigan[46]

Alternatives

A package of three bills supported by then-Speaker Jase Bolger were passed in December 2014 to fund roads by redirecting new spending to roads. Bolger published an op-ed in the Detroit Free Press defending the plan.[47] The plan has been re-introduced by Rep. Gary Glenn and Todd Courser. Thirteen additional House representatives are co-sponsors of the legislation in 2015.[48] [49]

Senator Patrick Colbeck has also proposed multiple solutions.[50]

Notes

  1. ↑ "We're no fans of the shell games that typify monetary policy in Lansing, so it's an understatement to say we're dismayed by the circuitous route the Legislature has taken to raise revenue for Michigan's crumbling roads. It amounts to extortion, and as much as we support new taxes to maintain—or, more accurately, rebuild—our state's infrastructure, we won't be endorsing Proposal 1 on the May 5 ballot"[22]

References

  1. ↑ 1.0 1.1 1.2 "Michigan's May Tax Proposal". Mackinac Center for Public Policy. Retrieved April 22, 2015.
  2. ↑ Prop 1 would cost households hundreds more in taxes by The Detroit News
  3. ↑ "Prop 1 ballot language for road funds approved". Detroit Free Press. February 27, 2015. Retrieved April 22, 2015.
  4. ↑ "May 5, 2015 Proposal 15-1 Official Ballot Wording" (PDF). Board of State Canvassers. Retrieved April 23, 2015.
  5. ↑ 5.0 5.1 5.2 Steffens, Glenn; Zin, David (April 15, 2015). Bill Analysis: Transportation Funding H.J.R. UU & H.B. 4251, 4539, 4630, 5167, 5460, 5477, 5492 & 5493: Revised Summary as Enacted (PDF) (Report). Senate Fiscal Agency. Retrieved April 23, 2015.
  6. ↑ "Public Acts 553 and 554 of 2014". Retrieved April 23, 2015.
  7. ↑ "Public Act 474 of 2014". Retrieved April 23, 2015.
  8. ↑ Spencer, Jack (February 13, 2015). "Double Tax on Some Fuels is Problematic for $2 Billion May 5 Proposal". Michigan Capitol Confidential. Retrieved April 23, 2015.
  9. ↑ "Road plan costs taxpayers $410M in lost deductions". The Detroit News. Retrieved April 23, 2015.
  10. ↑ 10.0 10.1 Oosting, Jonathan (February 12, 2015). "Calley makes case for road funding, but ballot proposal money not in budget proposal". MLive. Booth Newspapers.
  11. ↑ Oosting, Jonathan (January 8, 2015). "Earned Income Tax Credit expansion tied to Michigan road funding ballot proposal". MLive (Booth Newspapers). Retrieved April 23, 2015.
  12. ↑ Oosting, Jonathan (April 13, 2015). "Working poor may see modest tax break under Michigan roads Proposal 1". MLive (Booth Newspapers). Retrieved April 23, 2015.
  13. ↑ "Public Act 472 of 2014".
  14. ↑ "PA 473 of 2014". Retrieved April 23, 2015 – via MichiganTaxpayers.com.
  15. ↑ "2014 House Bill 5460: Require local road agencies get warranties on road projects". Mackinac Center for Public Policy.
  16. ↑ "EPIC-MRA Statewide Poll March 2015" (PDF). EPIC MRA Statewide Poll. March 2015. Retrieved April 22, 2015.
  17. ↑ 17.0 17.1 "Pro vs. Con on Proposal 1: Is it the best option or a political money grab?". EPIC MRA Statewide Poll March 2015. Retrieved April 22, 2015.
  18. ↑ "About Prop 1". Safe Roads Yes!. Retrieved April 23, 2015.
  19. ↑ Finley, Nolan (February 22, 2015). "No Prop 1, no good roads. Guaranteed.". The Detroit News. Retrieved April 23, 2015.
  20. ↑ "Vote yes on Proposal 1 for better Michigan roads, schools and cities". MLive. Booth Newspapers. April 2, 2015. Retrieved April 23, 2015.
  21. ↑ Oosting, Jonathan. "Michigan road funding: House votes for Bolger plan to remove sales tax, replace with fuel tax". MLive (Booth Newspapers). Retrieved April 22, 2015.
  22. ↑ "Editorial: Prop 1 a referendum on trust, not our roads". Battle Creek Enquirer. April 4, 2015. Retrieved April 23, 2015.
  23. ↑ de Angeli, Adam. "We Should All Be Disgusted and Deeply Offended By Proposal 1". Concerned Taxpayers of Michigan.
  24. ↑ "About Us". Coalition Against Higher Taxes and Special Interest Deals. Retrieved April 23, 2015.
  25. ↑ Livengood, Chad; Gary Heinlein (February 18, 2015). "Backers of sales tax hike for roads raise $3.2M". The Detroit News.
  26. ↑ "Michigan AFL-CIO Endorses Safe Roads Yes Campaign". Michigan AFL-CIO. Retrieved April 23, 2015.
  27. ↑ "MASA Works with Safe Roads Yes Coalition". Michigan Association of School Administrators. Retrieved April 23, 2015.
  28. ↑ "Safe Roads YES! Michigan Education Association". Michigan Education Association. Retrieved April 23, 2015.
  29. ↑ "Proposal 1 - What it is and why the MEC supports it". Michigan Environmental Council. Retrieved April 23, 2015.
  30. ↑ "Michigan Farm Bureau Joins Safe Roads Coalition". Michigan Farm Bureau. Retrieved April 23, 2015.
  31. ↑ "League Board Unanimously Supports Proposal 1". Michigan Municipal League. Retrieved April 23, 2015.
  32. ↑ "Who Supports and Opposes Proposal 1?". BridgeMI.com. Retrieved April 23, 2015.
  33. ↑ "MSBO Joins Safe Roads Yes Coalition". Michigan School Business Officials.
  34. ↑ Livengood, Chad (February 5, 2015). "Fourth group forms to lobby against sales tax hike". The Detroit News. Retrieved April 23, 2015.
  35. ↑ LewAllen, Dave. "Livingston County Republican Party Comes Out Against Proposal 1". Detroit: WXYZ-TV. Retrieved April 22, 2015.
  36. ↑ 36.0 36.1 McMillin, Tom. "News Release". Concerned Taxpayers of Michigan.
  37. ↑ 12th Congressional District Republican Committee. "Resolution Against Proposal 1 - Wayne 12 CDRC" (Facebook post). Retrieved April 22, 2015.
  38. ↑ 13th Congressional District Republican Committee. "Resolution Against Prop 1" (Facebook post). Retrieved April 22, 2015.
  39. ↑ "Roads proposal 'has a lot of potholes,' says Michigan Attorney General Bill Schuette". MLive. Booth Newspapers. March 4, 2015. Retrieved April 23, 2015.
  40. ↑ Young, Stephen. "Letter to the Editor: Why Isn't the GOP Fighting Proposed Tax Increase?". MLive. Booth Newspapers. Retrieved April 22, 2015.
  41. ↑ "Michigan Taxpayers Alliance". Michigan Taxpayers Alliance. Retrieved April 22, 2015.
  42. ↑ Owens, Charles. "Fight for Small Business in Road Funding Debate". NFIB Michigan. Retrieved April 22, 2015.
  43. ↑ "NO NO NO! To the Sales Tax Increase". Wayne County Taxpayers Association.
  44. ↑ Boman, Scott. "Our America Initiative: Michigan". Our America Initiative. Retrieved February 1, 2015.
  45. ↑ "Libertarians Issue Statement In Opposition To Proposal 1". Libertarian Party of Michigan. Retrieved April 22, 2015.
  46. ↑ Doonan, David. "Michigan Greens Urge "NO" Vote May 5 on Sales-Tax Hike, Transportation-Funding Shift". Green Party.
  47. ↑ Bolger, Jase (December 12, 2014). "Fixing Roads Without Raising Taxes Makes Sense". Detroit Free Press. Retrieved April 23, 2015.
  48. ↑ "House Bill 4335 of 2015". Retrieved April 23, 2015.
  49. ↑ "House Bill 4317 of 2015". Retrieved April 23, 2015.
  50. ↑ Oosting, Jonathan (March 11, 2015). "Option B for roads? 'Bolger plan' returns in Michigan House, but former speaker backing Proposal 1". MLive (Booth Newspapers). Retrieved April 23, 2015.