Gas tax cuts in Michigan could provide relief from inflation

With inflation at its highest in 40 years, Michiganders need a break

Around the country, people are struggling to make ends meet as inflation rises. When paired with excessive gas taxes in the state, Michiganders are currently paying 83 cents more per gallon than they were this time last year.

The Consumer Price Index rates current inflation at its highest in nearly 40 years. Meanwhile, the price of gasoline peaked at a 50.8% increase since December 2020. Accounting for the fact that fuel prices had dropped drastically in 2020 due to extremely low demand during the pandemic, prices are actually 20% higher than pre-pandemic levels – higher than any other commodity on the CPI.

On January 1, 2022, Michigan’s state gas tax increased from 26.3 to 27.7 cents per gallon in accordance with legislation passed in 2015 concerning inflation-adjusted tax rates on gasoline. The legislation requires Michigan’s Department of Treasury to increase tax rates concomitant to inflation. The Department has set the current rate at 3.3%.

Michiganders are also subject to a 6% state sales tax on gasoline as well as the federal gas tax at 18.4 cents per gallon. That’s $0.62 in taxes for each gallon of gas at the average price of $3.20. Alaska has the lowest state tax rate at $0.17 per gallon ($0.34 including federal taxes), and California the highest at $0.66 ($0.86 including federal taxes).

Gov. Whitmer, who proposed tripling the state gas tax in 2019, shows no sign of halting or reducing gas taxes anytime soon.

The average gas tank holds 12-16 gallons of gas, which means that these taxes add $7.44-$9.92 to every tank of gas. With Michiganders driving an average of 14,307 miles a year, that adds up quickly. Lowering gas taxes would provide much-needed relief from the toll inflation has already put on their budgets.