Senate OKs payments suspending state taxes on gas for summer time

Lansing — The Michigan Senate on Thursday approved a series of bills to lift the state’s 6% sales and use tax and 27-cent-per-gallon excise tax on gasoline from mid-June through mid-September. 

The tax pause passed with Democratic support and would save drivers a “ballpark” 40 to 50 cents a gallon, depending on the cost of gas, state Sen. Tom Barrett estimated. The Charlotte Republican is a sponsor of one of the bills in the four-bill package. 

The rising cost of fuel due to the Russia-Ukraine conflict is in large part driving another vote on gas tax relief, two months after Gov. Gretchen Whitmer vetoed similar legislation. 

The average price of gas in Michigan as of Thursday was about $4.56 a gallon, compared to the average price a year ago of about $2.98 a gallon, according to AAA data.

“As the cost of fuel goes up, government is making more money because it is a percentage of the cost of fuel,” Barrett said of the state sales tax. “As the cost of gasoline goes up … the pain of that is more pronounced on people paying that sales tax.”

There are also provisions in the package passed Thursday to push about $192.6 million toward county road commissions and another $107.4 million to cities and villages to make up for the lost tax revenue that would have usually come from the 27-cent-per-gallon fuel tax. 

Senate Democratic Leader Jim Ananich, D-Flint, assured Michigan residents that their worries about cost inflation are heard. 

“This is the right step to take today,” Ananich said. 

Whitmer’s office said it was “encouraged” by the action in the Senate Thursday. The governor had previously supported a pause on the 6% sales tax but vetoed a bill to lift the 27-cent-per-gallon fuel tax, in part because its effect was delayed into 2023.

“We will monitor this legislation as it advances,” said Bobby Leddy, a spokesman for Whitmer’s office. “The governor looks forward to working with the Legislature on a broader bipartisan agreement that puts Michigan first by cutting taxes and providing real relief right now for our seniors and working families.”

Ananich warned that if consumers continue to see high prices through the summer, despite the relief the bills offered, they should place the blame on gas company CEOs seeking to over charge consumers. Ananich also assured groups and programs relying on gas tax revenues that the state would work to make them whole. 

The package would move to the House next for approval, where the bills aren’t likely to be taken up for at least another week since many lawmakers will be attending the Detroit Regional Chamber’s Mackinac Policy Conference next week.

Thursday’s vote comes roughly two months after Whitmer vetoed a separate bill that would have suspended Michigan’s 27-cent-per-gallon excise tax on fuel.

In her April 1 veto, Whitmer noted the bill’s effective date would be delayed until 2023 because of a lack of support for immediate effect in the Senate. Whitmer also argued the bill would hinder road work projects because proceeds from the fuel tax go toward road and bridge repairs.

Whitmer has asked the federal government to suspend its 18-cent-per-gallon fuel tax, while also voicing support at the state level for a separate gas tax relief plan suspending the 6% sales tax on gasoline.

The lifting of the 6% sales tax is also likely to make some waves since the sales tax helps feed the school aid fund. But Democratic supporters of lifting the 6% sales tax have said the School Aid Fund would largely be held harmless due to higher than expected revenue during the first six months of the fiscal year.

“The Democrats at the time said they wanted to do something on the sales tax; this does that,” Barrett said. “So I would hope that this is something they would support. And, frankly, since then the cost has gotten worse and it’s now projected to get even worse than it is now. So I think the circumstances have changed.”

State financial leaders last week estimated the state had about $6 billion in surplus tax revenue in the current fiscal year, a tally that’s led to dueling tax relief plans from the GOP-led Legislature and the Democratic governor.

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