A roads solution for Michigan

Like the aftermath of a sudden spring snowstorm, the ground is blanketed with various proposals to fix Michigan’s roads. And most have something else in common with spring snow: They’re likely to have melted into the ground once the sun comes out.

Michigan Speaker of the House Kevin Cotter (R-Mt. Pleasant) has proposed a complex plan that assumes an added $700 million in state tax revenue resulting from growth in the economy, does away with the Earned Income Tax Credit for the working poor, and shifts “restricted” money to roads from the 21st Century Jobs Fund, tribal casino taxes and what remains of film production subsidies.

Democrats are screaming bloody murder, while Detroit Free Press columnist Brian Dickerson and others called the proposal a “fairy tale,” mainly because it relies on assumptions.

What is clear is that the Cotter plan is by no means the last word. Acknowledging that road funding is complicated and careful thought is required, the state Senate has scheduled 29 extra session days this summer.

Other legislative ideas floating around for finding the estimated $1.2 billion needed yearly to fix our roads include using interest income from the $18 billion Michigan Catastrophic Claims Fund, raiding the state’s Rainy Day Fund or the Natural Resources Trust Fund, and a 10 percent across-the-board cut in the state budget.

But it seems to me that a simpler and more elegant solution is suggested by looking at the way Proposal A – Michigan’s current school funding system – was adopted back in 1994.

Schools at that time were funded mainly by local property taxes, which over time became very unpopular, provoking tax revolts and citizen initiatives to limit taxation. Moreover, differences between wealthy and poorer communities produced enormous disparities in school funding from district to district.

Political leaders, school officials and ordinary citizens joined in arguing for change. But during the 25 years before Proposal A, Michigan voters rejected no less than 12 initiatives designed to reform school funding. During the summer of 1993, state Senator (now U.S. Senator) Debbie Stabenow proposed the legislature abolish local property taxes to fund schools. Gov. John Engler astonished most observers by agreeing, and the legislature went along. Faced with the threat of no funding for education in the state – lawmakers finally agreed to present to Michigan voters two options:

Proposal A, which appeared on the ballot, was a constitutional amendment to increase state sales and use taxes from 4 percent to 6 percent, limit annual increases in annual property assessments, and give all districts a minimum per pupil “foundation allowance.”

Not on the ballot but adopted by the legislature and signed by the governor in December 1993 was a Statutory Plan, which would have increased the state individual income tax by 1.4 percent to accomplish the same goal. This would have kicked in only if Proposal A had been rejected.

Only Proposal A actually was on the ballot. But voters understood taxes would rise either way – and so were, in effect, not given an option to vote “no.” Voters decided they liked the sales tax option better, and in March, 1994 adopted Proposal A, 69-31.

That model offers a simple, understandable mechanism for deciding how to pay for road improvement.
We already know that voters overwhelmingly want to fix the roads, and results from both the Center for Michigan’s community conversations and other statewide polls suggest citizens are indeed prepared to pay more in taxes to get it done.

So I believe the legislature and governor should put before Michigan voters a choice similar to what they did with Proposal A:

On the ballot, place a Sales Tax Increase increasing the state sales and use tax from 6 percent to 7 percent, with the incremental revenue allocated solely to fixing roads. The Mackinac Center estimates that would bring state government an extra $1.4 billion. Under our Constitution, raising the state sales tax requires an affirmative vote of the people.

As an alternative, not on the ballot but which would be adopted by the legislature and signed by the governor: Increased Gas Tax and Registration Fees. This would resurrect Gov. Snyder’s original proposal to replace the 19-cent-per-gallon gas tax and 15-cent-per-gallon diesel tax with a single percentage-based tax that comes out roughly to 35 cents per gallon, plus increased vehicle registration fees. The governor’s plan originally called for doing this by 60 percent for cars and light trucks and 25 percent for large trucks and trailers.

If voters were to defeat the sales tax increase, the vote would automatically trigger increases in the gas tax and registration fees. If the increase passes, the tax and fee legislation goes away.

Of course, there will be lots of debate about the details. Regardless of what any proposal looks like, the “no tax increase ever” folks will scream, although most experts I talk to say it’s simply impossible to find an extra $1.2 billion for roads out of existing state tax revenue without doing enormous damage.

This proposal is simple. It’s understandable. It’s financially doable. And it would get the roads fixed.

Sounds pretty good to me.