Opinion | Want to help Michigan’s poor and middle class? Scrap the gas tax

The fact that taxes are the price we pay for a civil society notwithstanding, most of us flinch when the taxman cometh. Good schools, police and fire protection, a corrections system, adequate public infrastructure and many other good things done with public money do not mitigate the resentment engendered by an unfair state tax code that gives advantage to the very well-to-do, never mind Michigan’s middle class and disadvantaged folks’  tax burden.

In Michigan, the federal gasoline tax is 18 cents per gallon while the state levies an additional 44 cents per gallon, a grand total of 62 cents per gallon. Altogether, that amounts to a 27 percent tax on a gas price of $2.25.

According to the Tax Foundation, Michigan levies the sixth-highest gas tax rate in the nation.

But then, gasoline is no longer a luxury. It is a costly necessity because people do not, generally, live close to where they want to go. They do not walk to work; they drive. School districts spend enormous amounts of money on buses and gasoline because children live far from schools.

Children require transportation to sporting events, libraries and other after-school activities. Shopping and entertainment opportunities are often present only beyond walking distance. We no longer live in small, self-sufficient communities where our friends and life’s amenities are close by. Modern existence is dependent upon energy and gasoline. Like food, gasoline is essential to survival. Like food, gasoline should be free of all forms of taxation.

Michigan's gasoline tax is regressive in that low- and middle-income taxpayers pay a higher portion of their income for both the gas tax and Michigan’s sales tax than high-wealth taxpayers. At a time when the price of gasoline has been near $2.25 a gallon and the overall tax system is burdensome and regressive, this reality is intolerable.

Let’s provide context.

Today, fewer and fewer are pocketing a larger and larger share of the nation’s wealth. Edward N. Wolff, in his book, “A Century of Wealth in America,” notes that the top 1 percent in this country are in possession of 40 percent of the entire amount of wealth in the country. The top 20 percent own 90 percent of “stuff” in America. That leaves 10 percent for the bottom 80 percent.

According to researchers at the Federal Reserve, the top 10 percent of working age households were the only ones who, when adjusted for inflation, were richer on average in 2016 than they were in 2007. Everyone else was somewhere between 17 percent to 35 percent poorer. That’s most of us in Michigan.

There is no credible economic theory in existence that justifies such a level of economic inequality.

Indeed, the Institute on Taxation and Economic Policy finds the Michigan tax code to be a matter of “soak the poor and middle class, spare the wealthy.” According to ITEP, the total Michigan tax rate on the top 1 percent, with average income of $1,164,700, is 5.1 percent. This includes all Michigan taxes.

The lowest 20 percent pays 9.2 percent rate. Not all that long ago, Michigan was one of the 10 most regressive tax systems in the country, according to ITEP.

The total tax package reduces the standard of living of those taxed the most. Low income families spend most of their income just to attain a minimum level of physical and mental comfort. Even middle income families spend most of their earnings to maintain a reasonable standard of living with, perhaps, a couple weeks of vacation thrown in.

A tax on these groups can directly diminish their quality of life. Unlike low- and middle-income families, the quality of life for very wealthy folks is minimally impacted by a higher level of taxation.  

Few would call a tax code fair if middle class and low-income citizens paid a higher portion of their income than the wealthier among us. Yet, that is exactly what we do in Michigan. Clearly, discretionary income has been shifting dramatically upward and away from America’s middle class.That reality ought to be integrated into the tax code. Bottom line is that we need to eliminate the gasoline tax, the flat rate income tax, the sales and excise tax and any other taxes that burden middle class and low income citizens more than the wealthy.

On the other hand, a fair tax system maintains that citizen contributions to government services be based on ability to pay. The level of taxation that taxpayers experience should depend upon what they can afford, not necessarily what they earn. A progressive income tax, like a consumption tax on luxuries, is not only fairer, it’s immensely more logical.

Opinion: Everyone – not just drivers – should pay for Michigan roads