Senate may vote on road plan today

LANSING — Senate Republicans passed a package of bills Tuesday that will raise roughly $1.4 billion for Michigan's crumbling roads and bridges, and could provide some relief for state taxpayers.

The Senate Government Operations committee passed nine bills Tuesday on 3-2 party line votes that would raise the tax on gasoline by 15-cents over the next three years, tie the rate to inflation, provide some income tax relief to Michigan residents if the economy is growing and eliminate the Earned Income Tax Credit for working poor families.

Although he expressed concern about the elimination of the EITC for the working poor, Sen. Mike Kowall, R-White Lake, said: "We have to move things forward. We're one bridge collapse away from a tragedy. I'm willing to move forward to continue the discussions."

The full Senate is expected to vote on the package as soon as Wednesday. The session begins at 10 a.m.

The bills would:

Increase the gasoline tax from 19-cents per gallon to 24-cents per gallon on Oct. 1, 2015; to 29-cents per gallon on Jan. 1, 2016; and to 34-cents per gallon on Jan. 1, 2017. The increase would raise $475 million in fiscal $2015-16, $733 million in fiscal 2016-17 and $822 million in fiscal 2017-18.

Increase the diesel fuel tax to 22-cents per gallon on Oct. 1, 2015; 29-cents per gallon on Jan. 1, 2016; and 34-cents per gallon on Jan. 1, 2017.

Beginning Jan. 1 2018, adjust the tax rates on gasoline and diesel fuel, based on the U.S. Consumer Price Index, rounding up to the nearest 1/10 of a cent.

Eliminate motor fuel taxes effective Jan. 1, 2033.

Reduce the individual income tax beginning on Jan. 1, 2018, if the percentage increase in general fund revenues from the prior fiscal year exceeds a positive inflation rate.

Require that $350 million from income tax revenues be deposited in the Transportation fund in 2016-17 fiscal year; and $700 million in each subsequent year.

Eliminate the Earned Income Tax Credit given to working poor families. The credit amounts to roughly $143 a year for working poor families and will save the state $118 million in fiscal year 2015-16 and $121.5 million in fiscal year 2016-17.

Require MDOT and local road commissions to get warranties for full replacement on projects of more than $1 million.

Require competitive bidding for local and state road projects of more than $100,000.

Increase registration fees for hybrid and electric vehicles. The rate would change depending on if a vehicle was a hybrid or an electric, and a commercial or non-commercial vehicle.

The biggest area of concern for those attending the Senate committee hearing was the elimination of the EITC. Tom Hickson, of the Michigan Catholic Conference, said while roads are a crisis in the state, so is poverty. And the EITC is a tool to help families who are trying to get by on low wages.

"This (EITC) was an incentive for folks to simply have a job and assist in getting them out from under a life of poverty," he said. "Eliminating it would do nothing to help our poverty situation."

State Sen. Goeff Hansen, R-Hart, said he would prefer to see the EITC portion removed from the roads package, but he voted for it in committee in order to move the roads package to the full Senate.

There also was concern that there weren't any specifics given on where the budget would be cut to give $700 million a year from income tax revenues to the state's transportation fund.

West Bloomfield School District Superintendent Gerald Hill predicts lawmakers will turn to education funding to pay for the roads – a prospect he finds frightening.

"The biggest existing budget is education. That's a tempting amount of money to look at," Hill said. But, "schools will be left in a worse situation financially."

Those cuts haven't been detailed in the Senate plan but would come during the annual process of approving the state's budget, said Senate Majority Leader Arlan Meekhof, R-West Olive.

If the state's economy and subsequently income tax revenues grew by more than the rate of the inflation, that additional amount would be returned to taxpayers in the form of an income tax reduction. If the state's economy didn't grow, the income tax would stay frozen.

The income tax now stands at 4.25%. Every 10th of a percent represents about $230 million in revenues from the tax, according to the Senate Fiscal Agency.

So for every $100 million that the general fund revenue growth exceeded the rate of inflation, it would trigger a rate reduction of approximately .04%, which would reduce the rate in the first year from 4.25% to 4.21%, according to the SFA.

"First it's important to solve the roads funding issue," Meekhof said. "And if the growth in revenue is there, (the income tax) could ultimately go to zero. It might take 100 years to get there. If we believe that the economy continues to grow and the people are the ones who are paying the income taxes, then the benefit should go to them."

It was unclear if the plan had enough support from Republicans, who hold a 27-11 majority in the Senate, or if Democrats were on board with the plan. Democratic Sens. Jim Ananich of Flint and Morris Hood of Detroit, voted no on all the bills Tuesday.

"We have several priorities, and a comprehensive long-term solution for roads is one of those priorities. But we don't want to balance it on the backs of hard working taxpayers alone," Ananich said. "From what we can tell from the draft of the bills, school districts across the state have already laid off 575 teachers and support staff, and this is before $700 million in cuts go into effect. The effort to fix roads should not start by making things worse."

The plan comes after the House of Representatives passed its own plan in early June for road improvements, which included: shifting state budget funding to roads, including $135 million from the Michigan Economic Development Corp.; raising the diesel tax to match the tax on regular fuel; raising registration fees on hybrid and electric vehicles; and cutting the Earned Income Tax Credit for working poor families.

That plan materialized after voters soundly rejected - by an 80%-20% margin - the Legislature's compromise plan passed in the waning days of the Legislature's lame-duck session in December to ask voters to raise the state's sales tax from 6% to 7%, to generate $1.2 billion for road improvements, as well as more cash for schools, local governments and the working poor.

The business community applauded the Senate for the movement on road funding.

"Maintaining Michigan's transportation infrastructure is a core function of state government and lawmakers need to take bold action now to fix the roads," said Rich Studley, president and CEO of the Michigan Chamber of Commerce. "The Senate plan represents another positive step in the legislative process and we are pleased the Senate is taking action before July 4th."

But Richard Tyndorf, 63, of Troy, was livid with the Senate's plan.

"It just seems to me that if the people voted on this thing a few months ago and were adamant about it, why would they pass a 15-cent increase," said Tyndorf, who's retired from the Budd Company in Detroit. "We're left out and we can't voice our opinion. That's a lot of money. What's to say that the price of gas won't go up."

Contact Kathleen Gray: 517-372-8661, kgray99@freepress.com or on Twitter @michpoligal. Staff writer Lori Higgins contributed to this report.

Michigan's income tax facts

Michigan's income tax was established in 1967 at 2.6%. since then, it's gone up or down a dozen times as the state's economic fortunes have fluctuated. Here are some highlights

■ The income tax was established in 1967 at 2.6%

■ It increased three times over the next two decades, reaching a peak of 6.5% in 1983.

■ The tax's lowest point happened in 2004 when the rate dropped to 3.9% generating revenues of $5.3 billion.

■ The economic recession forced the rate back up to 4.35% in 2007 and it settled in at 4.25% in 2012, when it generated $7 billion because of retirement pensions becoming subject to the income tax.

■ Each 10th of a percent represents about $230 million in revenues from the income tax.



