The May 5 Election—It’s a Complex Proposal

April 22, 2015  
 
Election time is less than two weeks away. The issue on the May 5 statewide ballot is Proposal 1, which would raise the state’s sales tax from 6% to 7% and increase funding for road maintenance and construction. However, many additional provisions are in the proposal. The ballot language uses about 175 words to explain the complexity as concisely as possible.

No Michigan potato industry organizations are taking a position on Prop. 1 except for a generic “be sure to vote” recommendation since the election outcome will have a significant impact on state government services.

The proposal’s complexity grew from simple public pressure a year ago to gain more revenue for roads because of their severe deterioration over the harsh 2013-14 winter. The legislature finally decided in December on a 1% increase in the sales tax, which would raise the $1.2 billion claimed as the minimum annual need. That tax hike, however, requires a Constitutional amendment, and other interests entered into the horse-trading for the legislative votes needed to put the measure to a public vote. If passed, Prop. 1 would increase taxes by roughly $2 billion per year.

Laws were enacted last year that are conditional upon approval of Prop. 1. The sales tax on fuel purchases would be removed, but a net tax hike at the pump would occur because the state’s fuel tax would be raised by a new formula that also builds in additional increases with fuel-price inflation. The current decline in registration fees on newer vehicles would be eliminated, so costs to affected owners would rise. Electric vehicles would be subject to a tax surcharge. Some heavy trucks would also be assessed higher registration fees.

Since the sales tax provides revenue for the General Fund and the School Aid Fund (SAF) as well as local governments, removal of that tax on motor fuels would cut off a significant flow to those sectors. Prop. 1 raises their allocations from the sales taxes on all other goods. Another provision, according to the ballot language, would “expand use of SAF to community colleges and career/technical education, and prohibit use for 4-year colleges/universities.”

The proposed 7% sales tax is seen as regressive upon low-income persons, so Prop. 1 authorizes increases in the state’s Earned Income Credit for eligible workers and in the Homestead Property Tax Credit for low-income aged and disabled homeowners.

If Proposal 1 is defeated, all the conditional laws linked to it vanish, and their complexities become irrelevant. Then the long-running issue of more revenue for roads reverts to where it was a year ago.

If Proposal 1 passes, how much funding would be readily available for potholes and aging bridges and other road projects? As the ballot language states, the money would go for “roads and other transportation purposes”—that is, public transit would also get a sizeable chunk. In addition, past bonding for road improvements imposes payment obligations on the state of $860 million and $460 million respectively for the next two fiscal years, thus shrinking revenues in the short term for road improvements.

The campaigns regarding Proposal 15-1, as the ballot measure is technically termed, have been vigorous. Supporters argue that passage would set up a stable long-term system for road funding and also benefit other governmental functions deemed worthy of higher revenues. Opponents object to a sizeable tax hike and also to the costly addition of unrelated beneficiaries onto what was supposed to be a narrowly focused road-funding issue.

To help voters make their decisions prior to May 5, Proposal 15-1’s ballot language is available online for study, as are many other resources examining the complex aspects of the measure. Michigan State University Extension last week issued a bulletin containing a detailed, unbiased analysis available online at http://msue.anr.msu.edu/resources/2015_statewide_ballot_proposal

Agricultural organizations that have adopted positions on Prop. 1 include Michigan Farm Bureau and the Michigan Agri-Business Association, both of which support it.
 

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