The 2015 roads plan: Helps wealthy and hampers budget

Added December 16th, 2015 by Rachel Richards | Email This Entry Email This Entry
Rachel Richards

It seems like all we’ve talked about in Michigan for the last four or more years are roads. Despite the annual construction work on seemingly every road we’re taking in the summer, our roads were getting worse. Hitting a pothole had become an understandable excuse for running late to work, a date or family dinner. And we have all heard the one about the pothole so large you could probably swim in it.

The road funding plan enacted last month should not silence the constant hum about roads. The main components of the plan, as outlined in a recent League fact sheet, include raising taxes and registration fees on the people who use Michigan’s roads, some tax relief for low- to moderate-income families, and increased reliance on our already-strained General Fund. While it’s been called the best we can get, it’s not good enough for our roads, our future or our taxpayers.

For starters, the plan doesn’t get us anywhere close to what we need for roads for several years. It’s been reported that the minimum that we need to fix and maintain our roads is $1.2 billion a year, and this plan does not provide that amount until budget year 2021, five years from now. Over the next five years, our roads will continue to deteriorate to the point where $1.2 billion a year might not be enough, and we will still endure season after season of orange barrels.

At the same time, the increasing diversion of General Fund (GF) revenues to roads will require the state to make some very hard decisions about its budget. Programs that help our most vulnerable, including Medicaid and human services, account for the largest portion of the state’s GF; additionally, some of these programs have federal matches which would be at risk if the state lacked sufficient revenues to fund them. In the past, both the School Aid Fund and statutory revenue sharing have been raided to help balance the budget. And if lawmakers look for revenue enhancements to help relieve the tightening squeeze, the Earned Income Tax Credit, one of the state’s most effective tools for promoting work and reducing poverty, could be on the chopping block, as it was in the House road funding plan.

Finally, the income tax rollback that was thrown in as a sweetener has implications on the budget as well as tax fairness. Under the plan, if General Fund revenues grow by more than the rate of inflation, the rate of the income tax would be reduced. According to the House Fiscal Agency analysis, if these provisions had been in place, the income tax rate for 2016 would drop from 4.25% to about 3.96%, which would reduce revenue by $593 million. Additionally, this allows Michigan’s wealthiest to receive the biggest benefit. Modeling by the Institute on Taxation and Economic Policy shows that without the income tax rollback, Michigan’s lowest income taxpayers receive the best tax benefit under the plan; however, once the income tax rate reductions occur, the plan provides the biggest tax benefit to the top 1% in income.

This plan is not enough. It was more focused on fixing the roads debate than fixing the roads. It doesn’t get us to where we need to be on roads for at least five years, it squeezes our already strained General Fund and endangers vital programs, and it caps revenue growth through the income tax rollback at times in which program costs are increasing. At the same time, it provides the biggest benefit to those who need it least and offers little relief to those who are already struggling. We need to continue talking about roads until a truly comprehensive, fair plan is reached.

— Rachel Richards


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