Whitmer backs federal gas tax holiday, resists Michigan fuel tax cut

Top Michigan officials resist suspending gas taxes, a step some other states have taken amid rising prices
Michigan motorists are facing some of the highest fuel prices in the nation, with average gas prices hitting $4.82 per gallon
Michigan taxes gas at 52.4 cents per gallon, most of which goes to state and local road repairs under recently revised law

LANSING — With Michigan motorists facing some of the highest fuel prices in the nation, Gov. Gretchen Whitmer is backing calls to suspend the federal gas tax — but not pushing to join other states that paused taxes to provide additional relief.

At least three states — Utah, Indiana and Georgia — have either fully or partially suspended their taxes on fuel to help alleviate the pain residents are feeling at the pump. Whitmer has not committed to doing the same.

Asked about the prospect Monday, Whitmer spokesperson Stacey LaRouche said the governor “would support a federal gas tax holiday to give drivers some relief from these sky-high prices.”

“Michiganders shouldn’t have to pay more at the pump because of the federal government’s decision to go to war,” LaRouche said in a statement.

Related:

A pair of US Senate Democrats in March introduced a bill to suspend the federal 18.4-cent per gallon gas tax through Oct. 1. But the legislation has not advanced in the Republican-led chamber and is unlikely to become law.

Gas is taxed at 52.4 cents per gallon in Michigan, where lawmakers last year exempted fuel purchases from the state sales tax but raised the gas tax by an equivalent amount as part of a long-term road funding plan.

Now, 98% of all funds generated at the pump go back to state and local road agencies for construction, maintenance and upkeep, according to the Department of Treasury.

Lawmakers appear hesitant to suspend the tax as a result.

“Now the money is going toward the roads, and I think it’s really important that we continue to make those investments in roads,” House Speaker Matt Hall, R-Richland Township, said last week.

He told reporters a state gas tax holiday might have made more sense in years past, when less money was going from the pumps to state and local roads.

No free lunch?

Whitmer in April issued an executive order allowing for several counties to sell higher vapor pressure gasoline in summer, which is less expensive but not great for the environment, especially during the warmer weather.

Still, Michigan gas prices have climbed higher than many. As of Tuesday, the state average of $4.82 per gallon was 34 cents higher than the national average, according to AAA.

Legislative Republicans in 2022 led a push to temporarily suspend gas taxes amid even higher prices that year, when unleaded gas in Michigan hit a record $5.22 in June, according to AAA.

Whitmer vetoed the measure, however, citing concerns it wouldn’t immediately help people financially and would come at the detriment of local and state road repairs. The six-month gas tax holiday was projected to save motorists — but cost the state — about $725 million.

Expensive gas station sign — As of May 5, average gas prices in Michigan hit $4.82 per gallon according to data from AAA — and in some parts of the state, like Detroit, are much higher. (Jena Brooker/BridgeDetroit)

While it may result in short-term economic relief for Michigan residents, suspending the state gas tax would be like “robbing Peter tomorrow to pay Paul today,” since it would come at the expense of future road repair funding, said Patrick Anderson, founder and chief executive of the East Lansing-based Anderson Economic Group.

“There’s no economic free lunch to be had, but politicians are sensitive to what consumers are mad about,” Anderson said. “Right now, they’re mad about gas and diesel prices, and there’s an attractive, quick fix right there in front of them.”

Indiana, Michigan’s neighbor, has seen only slightly cheaper gas after temporarily exempting fuel purchases from its 7% sales tax. As of Tuesday, the average price of unleaded was 4 cents cheaper than in Michigan.

“Gas tax holidays sound great because it is immediate, very short term price relief,” said Adrian Hemond, a Democratic strategist with Grassroots Midwest, a bipartisan consulting firm based in Lansing.

“But, it doesn’t actually do anything to restrain gas prices … gas prices will continue to go up or down based on market conditions.”

‘Trying to write a budget’

Unlike 2022, when Michigan lawmakers raced to suspend the state gas tax, there appears little appetite to do so this year in the wake of a bipartisan road funding deal.

That law pushes about $2 billion annually toward state and local roads. Hall, the state House speaker, last week argued it is necessary to keep the tax to help with infrastructure repairs.

Whitmer last week told reporters that there “will be conversations with the legislature” about suspending the gas tax. But, she added, “at this point we’re going to try to write a budget.”

Both the House and Senate passed their own budget bills last month. Whitmer and legislative leaders hope to reach a deal by summer.

Senate Majority Leader Winnie Brinks, D-Grand Rapids, was noncommittal when asked if lawmakers might consider suspending fuel taxes.

Like Whitmer, she argued the fastest way to bring down prices was “to end the unsanctioned conflict in Iran and allow oil to be moved safely through the Strait (of Hormuz) again.”

“Senate Democrats are looking at all possible options for relief from painful gas prices,” Brinks said in a statement. “The numbers we’re seeing at the pump right now are untenable.”