Thursday, November 5, 2015

Michigan’s New Road Tax Package

It isn’t generally well known, but woodchucks are very good at math and Michigan’s new road tax package made this woodchuck whistle.

One of the more interesting requirements of being a working class person is that you must own and maintain a vehicle mostly for the benefit of your employer so you can get to and from work. A full-time or part-time minimum or low wage employee has the same requirement for basic transportation as someone in the working middle class or the professional class.

Half of all working people earn less than $30,000 per year and 40% earn less than $20,000 annually. A full-time, minimum wage employee earns $16,952.

Imagine that you are that minimum wage worker. You drive the national average of roughly 15,000 miles per year and own a used sedan that gets 22 MPG. Michigan’s fuel tax is currently 19¢ per gallon and you pay about $130 annually in Michigan motor fuel tax or roughly 0.75% of your annual income.

Beginning January 1, 2017, your minimum wage will go up and you will earn $18,512. The fuel tax will also go up to 26.3¢ so you will pay about $180 or roughly 0.9% of your annual income.

The annual ad valorum tax on your vehicle is currently about $95 but it will go up 20% to $114. The combined annual motor fuel and ad valorum tax will be $244 or 1.3% of your annual income.

The working middle class will not feel the same pinch. “The teacher, the firefight or the construction worker earning fifty something”[1] will pay roughly the same tax if they drive an economical vehicle that is at least three years old. The combined annual motor fuel and ad valorum tax will be just 0.45% of their incomes.

Six-digit earners will hardly even feel this tax increase but low income earners will be punished badly. Part-time, minimum wage earners are hurt the most. They may have to work more than a week just to pay motor fuel and ad valorum tax; a six-digit earner will pay it with just a few hours labor.

For those who purchased hybrid or electric vehicles to reduce their fuel costs, think again. You will be charged an additional $30 to $100 annually at the time of vehicle registration.

In a cruel stroke of irony the package of bills will not even begin to fix the fiscal mess called road funding. A complicated package of reformulated distribution of tax revenues and earmarks from the general fund will be implemented over a period of six years beginning in 2016 and ending in 2022. Increased funding during this period is heavily dependent on reductions in funding for other state programs and assumptions about increased revenue based on inflation.

Talk about kicking the can down the road, this package takes seven years to implement and almost all of the money comes in the last two years with most of it coming from reductions in other spending.

So why does this woodchuck whistle?

Because once again, the Republicans have failed to recognize and implement the most fiscally sound and responsible solution … increase taxes on big corporations. Instead they have increased the burden on the working class, especially on low income earners while setting up future reductions in funding for state programs that help the same low income working people.

Most of the people who are hurt by this and hundreds of other bills moved through Michigan’s legislature since the Republicans have taken over don’t vote. This woodchuck thinks that maybe they are not doing the math.

[1] “President Obama Speaks to the Middle”, Vine Street Report, December 6, 2013,