Taxes paid by Michigan drivers diverted to other projects, programs

Aug 22, 2014 by AFP

by Scott Hagerstrom & Andrew Welch

As everyone from Dearborn to Marquette has heard by now, the Michigan legislature failed to reach an agreement on the issue du jour—funding for road repairs.

The uproar that this has caused among establishment politicians, well-connected business lobbyists and a gaggle of newspaper editorial boards is a rare display of unity. However, the outrage—which big-spending liberals have gleefully exaggerated for what they perceive to be political gain—is misplaced, and frankly wrong.

The true outrage lies in the fact that lawmakers were debating a $1.5 billion tax hike when existing tax dollars generated from gas sales are frittered away on projects that have nothing to do with road repair or construction.

On each gallon of gas purchased in Michigan, drivers pay 19 cents in gasoline excise taxes – on top of an 18.4 cent-per-gallon federal gas tax. No one likes taxes, but fuel taxes in theory are the most equitable, provided that the revenue collected is spent to benefit the users (in this case motorists who pay the tax) in the form of road improvements. In other words, gas taxes are designed to operate more like a user fee than a vehicle (no pun intended) for wealth redistribution.

Theoretically, you and I pay these taxes each time we fill our cars so that the roads that we are about to drive on can be properly maintained by the organization that maintains them, the state. This way, if I don’t want to use the roads, I don’t have to pay for them. If I do choose to use them, I pay for them in the form of the fuel taxes I willingly pay.

Here lies the major problem with Michigan road funding. In addition to the 19 cents-per-gallon excise tax on gas, Michigan levies a 6 percent sales tax on fuel. Unfortunately, that revenue doesn’t get to roads.

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