With clock ticking, Dems pitch fuel taxes, fees and tolls to fix Michigan roads

• Michigan Democrats introduce competing options for long-term road funding in last days of legislative session
• Proposals include a gas tax hike, increased vehicle registration fees and a new tolling authority
• Gov. Gretchen Whitmer and incoming Republican House Speaker Matt Hall met this week to discuss options

LANSING — New proposals to "fix the damn roads" are gaining momentum at the Michigan Capitol, where legislative leaders and Gov. Gretchen Whitmer are ramping up negotiations in the last days of the legislative session.

House Democrats — poised to lose their majority at year's end — this week introduced several new options, including a 19-cent fuel tax hike, which would take the state’s current 30-cent per-gallon rate to 49 cents. 

Other new bills would hike annual registration fees by $100 per vehicle and create a new tolling authority to consider adding tolls to some of the state's busiest freeways.

Those ideas come on the heels of a plan advanced by incoming House Speaker Matt Hall, a Richland Township Republican who proposed shifting nearly all money generated by the state’s corporate income tax to road funding. 

Hall also wants to exempt fuel purchases from the state sales tax and increase fuel taxes by a similar amount to shift all taxes paid at the pump to road repairs. 

That route may not sit well with Whitmer, however. Corporate income tax revenue funds her Strategic Outreach and Attraction Reserve program, a key part of her administration’s economic development strategy. 

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The slew of new bills represent the first concrete road funding proposals introduced since Democrats won the state House and Senate in 2022 to take full control of state government. 

But finding common ground on a long-term solution could still be tough, with just two weeks left in the lame-duck session.  

Whitmer spokesperson Stacey Larouche said the governor met with Hall this week to discuss shared policy goals, noting Whitmer hopes “to make progress on economic development and fixing the damn roads.” 

Road funding has long vexed lawmakers, who have been reluctant to raise taxes, which last increased in 2015 under then-Gov. Rick Snyder, a Republican. 

During her first year in office, Whitmer proposed a 45-cent gas tax increase, a plan that was almost immediately rejected by the Legislature. Whitmer then opted to go it alone, issuing $3.5 billion in state bonds to fund state road upkeep. 

Still, industry experts estimate Michigan needs to spend up to $3.9 billion more per year to fully fund the infrastructure needs, even when taking into account recent federal investments, current state spending and Whitmer’s bonding.

Senate Majority Leader Aric Nesbitt, R-Lawton, and other top Republicans have denounced attempts to raise taxes or fees, with Nesbitt saying Friday that he’s a “hell no” on the latest bills from House Democrats.

The sales tax currently levied on gas purchases funnels funding to the state’s public schools. Education advocates have long fought against efforts to exempt gas from the state sales tax, arguing that lawmakers haven’t put forward ideas on how to backfill resulting school funding losses.

Rep. Alabas Farhat, a Dearborn Democrat who sponsored some of the new road funding bills, said there’s “bipartisan consensus” in his chamber for spending corporate income tax dollars on road repairs, though an exact amount would be up for negotiation. 

“I think there’s a good chunk of it that we can use towards the roads,” he said, adding, “it's time for us to have a serious roads conversation.” 

One of Farhat’s bills would increase the corporate income tax by 2.5% and direct most of the new money to the state’s school aid fund. That would clear the way to backfill any losses sustained if lawmakers moved ahead with removing the sales tax on fuel.

The toll roads concept, introduced by Rep. Jasper Martus, D-Flushing, would create a five-member "Michigan tolling authority" to implement tolls on certain roads designated by the state transportation department.

The authority would also be empowered to issue bonds to borrow against future toll revenue. As it sets tolling rates, the authority could consider exemptions or reductions based on the "economic needs" of motorists.

Michigan currently has tolls in place in certain tunnels and bridges, but not on any roads. A study ordered by lawmakers in 2020 determined 14 of Michigan’s 31 highways could theoretically support tolling, including large portions of Interstates 75, 94 and 96 — but setting up a tolling system would take years to get off the ground.

In 2019, when Whitmer took office, 61% of state roads and 49% of local roads were in good or fair condition, according to the Michigan Transportation Asset Management Council. About 68% of state roads and 53% of local roads are now in good or fair condition. 

Whitmer’s bond program did not help county or municipally-maintained roads, and construction inflation cut into the state’s spending power.

Transportation industry officials told Bridge Michigan they’re encouraged by the latest talks and aren’t picky about how state policymakers come up with more funding. 

They just hope to see something done to prevent more long-term deterioration. 

“I think they're serious,” Lance Binoniemi of the Michigan Infrastructure and Transportation Association said. “I don't think that it's fully soup right now, but I think the ingredients are there.”