Brandon Twp.- Having trouble understanding Proposal 1? The Road Commission of Oakland County would like to help.
Representatives from RCOC have been conducting presentations on the ballot proposal that if approved would increase the state sales tax to 7 percent and raise funds for maintenance of Michigan roads.
The RCOC will present their program on Proposal 1 from 7-8:30 p.m., April 29, at the library, 304 South St.
‘Our goal is to educate voters, not tell them how to vote,? said Craig Bryson, public information officer for the RCOC. ‘Hopefully at the polls, voters understand what Proposal 1 is and the impact it will have on Oakland County. We will explain how we are funded, why there is a problem, and review the proposal, the revenue generated and the difference that would make for the roads in Oakland County.?
Voters at the polls May 5 will be asked whether the state should adopt Proposal 1. The ballot language will appear as follows:
‘A proposal to amend the State Constitution to increase the sales/use tax from 6 percent to 7 percent to replace and supplement reduced revenue to the School Aid Fund and local units of government caused by the elimination of the sales/use tax on gasoline and diesel fuel for vehicles operating on public roads, and to give effect to laws that provide additional money for roads and other transportation purposes by increasing the gas tax and vehicle registration fees.
Should this proposal be adopted??
Bryson acknowledges that the proposal has caused a great deal of confusion amongst voters, perhaps because it significantly changes how road maintenance is funded. The ballot proposal will restructure how gas taxes are collected. Currently, there are two taxes charged on gasoline? a 19 cent tax on each gallon of gasoline, as well as the 6 percent sales tax consumers pay each time they go to the pump. Revenue from the 6 percent sales tax paid on gasoline goes to schools, cities and villages, he explained, which generates $1 billion per year. Proposal 1 would eliminate both taxes and replace them with a 14.9 percent tax on the wholesale price of gas. Wholesalers would pass along the tax to the consumer. The new tax is equivalent to about 41 cents per gallon in gas taxes, about 4 to 7 cents above what is currently paid per gallon with sales and flat gas tax combined.
However, the restructuring that eliminates sales tax on gas at the pump would also take $1 billion of funding from schools and local municipalities, Bryson said. To make up for that, the state is proposing the overall state sales tax be raised by 1 percent to 7 percent to make up the difference as well as give additional funding.
‘This is a vast oversimplification, but it gives the general picture of the biggest changes this proposal would make,? said Bryson. ‘Because the proposal is so complex, we can’t explain everything and are accused of trying to hide things, but we’re not.?
One area of debate is the effect the proposal has on the earned income credit, which gives an income tax credit to low income residents. The EIC was dramatically reduced by the state during the recession and proposal 1 would restore the EIC to the level it was prerecession. Some argue this is fair, because proposal 1 is a tax increase on all, regardless of income and the ability to afford the increase and the EIC will provide relief to lower-income residents. However, others are opposed to the cost of increasing the EIC, roughly $267 million per year, which comes out of the sales tax increase.
A total of about $3.2 billion is expected to be collected annually between the new tax structure if proposal 1 passes, and vehicle registration fees. The $3.2 billion will be enough to maintain the roads. More, between $3 and $5 billion, would be needed to improve the system, but Bryson recognizes that is not realistic in the current economic environment.
‘People are willing to pay to maintain the system, but not move us from a Chevrolet system to a Cadillac system,? said Bryson. ‘Maintenance does mean more than patching? it means restructuring and repaving existing roads, but does not mean widening or replacing intersections. We will continue to do that kind of work with federal funds. The proposal would allow us to get a new surface on much of the system and keep it from falling apart, like it is today.?
Michigan has been in the bottom 10 states in the nation since at least 1964 in per capita state and local spending on roads, he added. In the most recent data from the 2010 census, Michigan was last in the nation in per capita spending on roads.
‘Compared to every other state in the nation, we are not investing adequately in our road system,? said Bryson. ‘There were a couple studies by the legislature to determine the need to maintain Michigan roads. We need at least $1.2 billion per year just to maintain the roads, not to dramatically improve, just to maintain and keep them from further deterioration. The legislature has been struggling with how to generate $1.2 billion for roads and that led to proposal 1.?
Funding for the proposal is ramped up over three years. The Michigan Department of Transportation has borrowed money over the past two decades under previous governors Jennifer Granholm and John Engler, and as a result, has a massive $1.8 billion debt. If proposal 1 passes, in the first year, two-thirds of the money generated will be used to pay off debt. In the second year, one-third of the money will be used to pay down debt. In the third year, RCOC will get the full amount of money that will be annually allocated. Since 2007, the road commission has reduced their staff by 35 percent and Bryson said there are not enough road contractors to do all the road work the commission wants to do, but if proposal 1 passes, with a dedicated revenue source the contractors could ramp up hiring and equipment purchases to be ready to roll by year three, when RCOC gets full funding.
‘We expect 12,000 to 15,000 good paying jobs to be created from proposal 1 that can’t be exported to China,? Bryson said. ‘As you may expect, a lot of people don’t want to pay more taxes, but we haven’t been paying as much as residents in other states and if we want good roads, we have to pay more.?
As for the argument that the state legislature should be able to find the money somewhere else in the budget, Bryson said that is highly improbable, as they would have to take money from state police, education or corrections.
Currently, 44 percent of roads in Oakland County are in poor condition, 42 percent are in fair condition, and 14 percent are in good condition. If proposal 1 passes, Bryson said in five years, those percentages could flip, with 65 percent of roads in good condition, and 16 percent in poor. If the proposal fails, he estimates in five years, 66 percent will be in poor condition and only 8 percent in good condition.
The proposed constitutional amendment would:
* Eliminate sales / use taxes on gasoline / diesel fuel for vehicles on public roads.
* Increase portion of use tax dedicated to School Aid Fund (SAF).
* Expand use of SAF to community colleges and career / technical education, and prohibit use for 4-year colleges / universities.
* Give effect to laws, including those that:
* Increase sales / use tax to 7 percent, as authorized by constitutional amendment.
* Increase gasoline / diesel fuel tax and adjust annually for inflation, increase vehicle registration fees, and dedicate revenue for roads and other transportation purposes.
* Expand competitive bidding and warranties for road projects.
* Increase earned income tax credit.