248-409-1900 dburke@mi-worklaw.com

By:  Bill Pilchak – 7/24/14

           Depending on which source one consults, Michigan’s taxes on gasoline, and hence Michigan’s gasoline prices, are the fifth or sixth highest in the nation. This point was brought home after a trip to Toledo to visit two recently-retired Michiganian couples, who relocated to take advantage of lower costs of living. In Ohio gas was selling for $3.43 a gallon, just hours after I filled up with $3.87 petrol in Michigan. Only California, New York, Connecticut, and Hawaii (and sometimes Pennsylvania) assess more than Michigan in gasoline taxes. Despite some of the highest taxes in the nation (60.3¢ per gal.), Lansing is telling us we need to assess $120 million more in taxes per year for the next ten years to maintain our roads.   That’s a 12.4% increase over our current $967M in state gas tax revenue – about 2¢ more per gallon.

          How can we assess more tax per gallon than forty-five states and still have terrible roads?

          One reason is that only 19¢ of Michigan’s 60.3¢ per gallon tax stays in Michigan to fix roads, while 28¢ of Ohio’s 46.4¢ per gallon tax goes to road repair in that state. Here’s the breakdown:


Price/Tax Michigan Ohio
Federal Fuel Tax (funds Federal Highway Trust Fund, redistributed to states for highway and public transportation projects.) .184 .184
State Gasoline Tax (devoted to road building and repair) .19 .28
Sales Tax (upon the federal Fuel Tax + price of gasoline) (on hypothetical price of $3.41/gal.) .22 0
Michigan underground storage tank financial assurance (MUSTFA) fee. .00875 0
Total .603 .464

           That 7¢ per gallon difference in state gasoline tax means Ohio dedicates 36% more of its State Gasoline Tax revenue to roads than Michigan.

           Michigan is one of only approximately eight states that imposes sales tax upon gasoline. Worse, for some reason, the sales tax is also imposed on the amount the consumer pays in federal gasoline taxes.   Sales taxes are used for schools, the general fund and revenue sharing. That means 36% of the taxes on gasoline is spent on matters unrelated to roads or transportation.

          Why does Michigan need to tax gasoline for non-transportation purposes?

          Maybe it’s because we have bitten off more government than we need to chew. Our leaders need to realize that their mission is not to grow their operation as if it were IBM, Google or Microsoft. The more they “create,” the more we pay. In the current global economy, we can no longer afford the vicious circle we have subsidized for the past 40 years: Create a state agency to do what the feds do (MIOSHA, for example), assess taxes in Michigan to fund it, increase the cost of doing business to comply with its regulations and greater scrutiny, so that those costs must be passed on as higher prices, which we cannot pay, because we have raised taxes to fund agencies… and so on ad infinitum. It’s time to prune the dead wood from the system. Fund the basics. Don’t duplicate federal agencies. At the state level take care of police, fire, roads and the essentials – only.