Republican leaders in the Michigan House and Senate have pledged to temporarily repeal the state’s 27-cent gas tax, intending to present the idea to Gov. Gretchen Whitmer next week.
However, one research warns that there is no certainty that buyers would see any savings at the pump.
The House approved the hastily drafted bill 63-39 Wednesday afternoon, primarily with Republican support but also with support from a handful of Democrats. The Senate is scheduled to vote on the bill next week. That would theoretically place the measure on Whitmer’s desk by March 18.
Senate Majority Leader Mike Shirkey, R-Clarklake, and House Speaker Jason Wentworth, R-Farwell, issued a joint statement Wednesday morning stating that the decision was essential in light of escalating gas prices. Additionally, they cited Whitmer’s recent participation in a letter to Congress urging Congress to suspend the federal gas tax, which is lower than the state’s.
Additionally, Whitmer joins other governors in urging Congress to repeal the federal fuel tax.
“Why on earth would we write a letter to Congress requesting a reduction in gasoline prices someday when we can just stand up and fix it ourselves?” Wentworth said in a statement.
“Michigan has billions of dollars in surplus revenue and one of the highest state fuel taxes in the country. The solution is straightforward in this case. Republicans are going to act today and send a serious plan to the governor that will actually cut gas prices.”
The GOP plan would eliminate the state tax on April 1 and extend it until the end of September, the fiscal year’s conclusion. Michigan lawmakers calculated that drivers would save $750 million over that time period, equating to a similar amount of tax income lost to the state.
According to the nonpartisan House Fiscal Agency, the measure would cost around $725 million to the state. Additionally, analysts emphasised that even if the tax is eliminated, there is no assurance that gas station owners will adjust their rates.
“The law contains language forbidding anyone other than an end user from benefiting from a suspension of the motor fuel tax, albeit how this provision would be detected and enforced in practise is unknown,” the report reads.
“Given the historical volatility of motor fuel costs in response to external events, there is no way to determine whether the consumer receives the entire benefit or only a portion of it.”
While Whitmer has not commented on the proposal, a prominent legislative Democrat said he had approached the governor about repealing another gas tax.
Senate Minority Leader Jim Ananich, D-Flint, told the Free Press that he wants the state to suspend collecting of sales taxes on gasoline for at least the next year. Eliminating the 6% tax corresponds to a savings of around 24 cents per gallon, assuming gas costs $4 per gallon. The higher gasoline prices rise, the greater the sales tax savings, Ananich claimed.
“I believe there is a way to provide real help to people without deteriorating the roads, without disinvesting in schools, and while providing people with more, immediate relief,” Ananich said, noting that state tax collections had increased in part as a result of rising gas costs.
“I want to ensure that when we discover money, we discover it and return it to people’s purses, not that it becomes a windfall for the public treasury. Let’s return that money to the people to ensure they can continue to drive.”
The plans come as Whitmer and state lawmakers debate how to spend billions in surplus revenues generated in part by stronger-than-expected tax collections.
Bobby Leddy, Whitmer’s spokesman, reaffirmed a statement he made Tuesday, when Whitmer joined other governors in a letter to congressional leaders urging them to abolish the 18.3 percent federal gas tax before the end of the year.
“At the moment, the most effective approach to reduce gasoline prices without jeopardising our ability to repair the darn roads is to suspend the federal gas tax,” Leddy told the Free Press on Tuesday.
Prices of gasoline and diesel have been rising for months, but have surged about 50 cents on average across the country in the last week as a result of Russia’s invasion of Ukraine and the United States’ decision to stop importing petroleum from Russia.
In 2020, at the height of the epidemic, gasoline consumption in the United States reached an all-time low, as many commuters worked remotely. However, when communities reopen their offices and businesses, drivers are increasing their gasoline consumption, according to US Energy Information Administration data.
According to the EIA, gasoline demand and the average price per gallon have increased in recent weeks. As of Tuesday, the average gallon of petrol in the Midwest cost more than $3.91, up from around $3.35 on February 21.
In effect, this implies that someone driving a Ford F-150 pickup today will pay around $14.56 more to fill up than they did two weeks ago.
Additionally, Wall Street and automobile owners are on edge as the US prohibits Russian oil imports.
Republican legislative leaders also urged Whitmer to endorse a $2.5 billion tax cut proposal that was just approved by the Legislature. The bill would eliminate the state’s personal income tax in exchange for new tax credits for elderly and families.
Whitmer will reject the measure, citing that it is too broad and that the state’s tax cuts should be more targeted. She has argued for the repeal of certain pension taxes and the expansion of the Earned Income Tax Credit, a tax credit for low-income families.