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What you need to know before voting on Proposal 1

If passed proposal one would raise fuel taxes, the sales tax, and vehicle registration fees. The proposal and the tie-barred bills would also make several other changes to the Michigan Constitution.



On May 5, voters will have some big decisions to make. One of those decisions is how to vote on Proposal 1.



The proposal has a lot of layers, and if passed would raise some taxes here in Michigan.



James Hohman is the Assistant Director of Fiscal Policy for the Mackinac Center for Public Policy. According to Hohman the Mackinac Center is a state based, non-partisan and non-lobbyist free market think tank devoted to providing research and education on Michigan policy issues.



Hohman recently published an analysis on Proposal 1 to try and better explain some of the complex language.



â??While it is legislatively complex, itâ??s a constitutional amendment and ten bills that go into effect if that amendment is approved,â?? said Hohman.



If passed Proposal 1 would raise fuel taxes, the sales tax, and vehicle registration fees. The proposal and the tie-barred bills would also make several other changes to the Michigan Constitution.



Right now, drivers pay several different taxes at the pump which include a 19 cent per gallon excise tax, an 18.4 cent Federal tax, and a 6 percent sales tax.



According to Hohman, the sales tax largely goes into funding for Michigan schools.



If Proposal 1 passes, â??fuel purchased for use by motor vehicles on public roads would be exempt from the state sales tax,â?? wrote Hohman.



There will also be a new and higher wholesale tax on fuel, which would increase the current excise tax of 19 cents per gallon to 41.7 cents per gallon.



â??On the one hand, taxpayers are going to see some savings from not having to pay sales taxes when they purchase a gallon of fuel. But on the other hand theyâ??re going to see an increase in their fuel taxes whenever they purchase a gallon of fuel,â?? said Hohman.



Hohman believes that under current gas prices, drivers could expect to see an increase of about 10 cents a gallon at the pump. Only when prices exceed $4.20 a gallon would taxpayers actually begin paying less in fuel taxes under Proposal 1, according to Hohman.



â??However $4.20 is higher than what youâ??re paying now,â?? said Hohman.



Governor Snyder has spent months trying to convince voters to vote â??yesâ?? on Proposal 1.



â??It will go from 19 cents to 42 cents at the pump and would be constitutionally guaranteed for transportation,â?? said Gov. Snyder.



Eliminating a state sales tax at the pump would also take away some of the funding for schools and local government, which is why the state sales tax rate would also be raised from 6 percent to 7 percent under Proposal 1.



â??At least for the first year of implementation, the School Aid Fund will come out $293 million ahead,â?? said Hohman.



Hohman says the SAF goes towards public and charter schools as well as community colleges. He says itâ??s still unclear whether or not Michigan schools would receive more funding than they are now with the proposed changes.



â??The SAF, which we use to fund the schools is going to go up but itâ??s up to legislators to actually implement that in ways to increase funding for education,â?? said Hohman. Now thatâ??s likely to happen but the SAF also has a lot more revenue sources than just the sales tax. Thereâ??s a six mill state education property tax, thereâ??s money from the lottery. There are other sources of revenue and those sources are going to be highly subject to state economic growth. So this $293 million is on top of the economic growth thatâ??s already helping to fund schools to a greater degree.â??



Representative Lee Chatfield (R) of northern Michigan doesnâ??t think a higher sales tax is the best answer.



â??Raising it from 6 percent to 7 percent is in fact a 16.7 percent increase in our sales tax. I consider that irresponsible and when you look at the overall proposal with all of the sweeteners that are put in it, I consider this a money grab really,â?? said Chatfield.



Vehicle registration fees are another thing that some drivers would have to pay more for under Proposal 1. According to Hohmanâ??s analysis, Proposal 1 would make changes to three different types of vehicle registration fees including passenger vehicles, commercial vehicles, and electric vehicles and hybrids.



â??Unless you own a hybrid car or an electric car, youâ??re not going to really see too much,â?? said Hohman.



Altogether Hohman says that Proposal 1 would increase state taxes by about $2 billion in 2016. He says the added revenue would largely go to pay for road construction and maintenance.



â??Every day our roads and bridges are getting in worse condition,â?? said Gov. Snyder. And the price tag that itâ??s going to take to improve them goes up dramatically.â??



In 2016 taxpayers and drivers would devote about $1.24 billion dollars to paying down the debt owed by MDOT and putting more money into the Michigan Transportation Fund, according to Hohmanâ??s analysis.



Hohman says in the first year, the added revenue will help maintain the roads as they are now.



â??Under this proposal itâ??s probably going to take around a decade before most of the roads are in good shape,â?? said Hohman.



Hohman says the typical household can expect to pay between $477-$525 more in state taxes in 2016 under Proposal 1.



â??You are going to be paying more on your sales and use taxes but youâ??re also going to get something for that money that youâ??re paying. This proposal will eventually fix the roads and it will also do a number of other things,â?? said Hohman.

To read Hohmanâ??s complete analysis about the other changes involved in Proposal 1, click here.
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