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Michigan Considers Raising Sales Tax to Fix Roads

  • Dec 18, 2014 | Gail Cole

 Fixing them takes money.

Update, 5.6.15: Voters have rejected Proposal 1, which sought a sales tax rate increase to raise funds for transportation.

Update, 1.14.2015: Governor Rick Snyder has signed a transportation funding package that includes a constitutional amendment requiring voter approval in the May 5, 2015, general election. If approved, the amendment will raise the state sales tax rate from 6% to 7%, exempt motor fuel from all sales and use tax, and dedicate certain revenue for transportation purposes.

Finding revenue to fund education, transportation, and assorted services isn’t easy. Sometimes it can seem like a shell game: add a tax to this; take a tax away from that. Consider the situation in Michigan, where the state sales tax rate is currently 6%. In May 2015, voters may be asked to raise that rate to 7% and eliminate the sales tax on motor fuels.

Early Thursday, Governor Snyder and a bipartisan coalition of lawmakers together announced a plan that would:

  • Provide funding for roads and bridges
  • Protect schools, communities, public transit and rail
  • Ensure transportation taxes go to transportation
  • Maintain competitive prices at the pump
  • Provide tax relief for lower-income Michiganders

The plan would achieve the above goals through the following measures:

  • Repeal the sales tax on gas
  • Replace the gas sales tax with a motor fuels tax dedicated to funding transportation
  • Increase the state sales tax to provide funding for schools and local governments

The Michigan legislature needs to approve the plan by a two-thirds majority. Late Thursday, the mood among lawmakers was optimistic, with talk of a late night or early morning vote.

Not everyone is happy, however. Both the Michigan Chamber of Commerce and the Detroit Regional Chamber expressed disappointment that voters may be asked to resolve the issue, saying that "lawmakers should have done their jobs and voted to raise extra money for roads."

Stay on top of sales tax changes in Michigan and other states. Learn more.

photo credit: oatsy40 via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.