Michigan gas tax hike coming in 2022

Michigan gas tax hike coming in 2022

The increase is prescribed by a 2015 law that indexes the gas tax to the rate of inflation.

Michigan drivers will soon be paying more at the pump. Beginning in 2022, Michigans gas tax will increase annually according to the rate of inflation.

Gov. Rick Snyder signed the increase into law in 2015 after it passed the Republican-controlled legislature. The goal of the tax hike was to fund repairs to deteriorating roads and bridges throughout Michigan. This is the largest investment in transportation in Michigan in the last 50 years,” Snyder said in 2015 when he signed the bills at the Michigan Infrastructure and Transportation Association.

Under the legislation, the gas tax and the diesel tax both increased to 26.3 cents per gallon in 2017 (from 19 cents a gallon and 15 cents a gallon, respectively). The further automatic increases were scheduled to occur each year starting in 2022. The 2015 Michigan law also included a 20% increase in vehicle registration fees beginning in 2017. Owners of hybrid and electric cars need to pay even more.

When the gas tax increase kicks in just months from now, Michigan residents will find themselves paying as much as 1.4 cents more per gallon. The exact amount of the 2022 increase will depend on the inflation that occurs between Oct. 1, 2020, and Sept. 30, 2021. So far in 2021, inflation has been unusually high.

An analysis in June by the nonpartisan Tax Foundation found Michigans state gas taxes and fees were the 10th-highest in the nation, at 45.12 cents per gallon. The “user-pays principle”,  the idea that the people who use transportation infrastructure should fund it through paying taxes, justifies such a scheme. However, the gas tax is a regressive tax, which means it hits low-income residents hardest.

In 2019, Democratic Gov. Gretchen Whitmer proposed increasing the gas tax by 45 cents in order to repair Michigans roads. But both Republicans and lawmakers from her own party balked at the proposal, which would have almost tripled Michigans gas tax, giving the state the highest gas taxes in the nation.

The state fuel tax is levied in addition to the federal gas tax, which has remained at 18.4 cents per gallon since 1993. Although the U.S. Highway Trust Fund for infrastructure spending is in dire financial straits, Congress has resisted increasing the federal gas tax because such a move is viewed as politically toxic.

Federal lawmakers are considering a proposal that has the potential to raise the cost of driving even further. The bipartisan infrastructure bill that passed the U.S. Senate on August 10 contains numerous provisions, one of which is a National Motor Vehicle Per-Mile User Fee Pilot” to test the feasibility of taxing people for every mile they drive.

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