Legislation introduced this week in the Michigan Senate would suspend sales tax collection on fuel through the end of March next year.
Senate Minority Leader Jim Ananich (D-Flint) said competing Republican-backed bills to get rid of sales tax on fuel would hurt revenue more than his plan without a way to replenish lost funds.
“Theirs is permanent. Mine is a temporary pause. I mean, I’m open to having a conversation about long-term, but I think we’d have to replace revenue at least in some way, and I don’t think that’s going to happen in an election year,” Ananich said.
Republican sponsors of the competing plan said they’re also open to discussion.
“Because we’re one of only a handful of states that even charges sales tax in the first place, I really want to open up that conversation about how we can move the sales tax off of gasoline all together and really provide meaningful relief for motorists in our state,” Sen. Tom Barrett (R-Charlotte) said.
Barrett joined Sen. Aric Nesbitt (R-Lawton) and Sen. Dan Lauwers (R-Brockway Twp) in unveiling their plan last Thursday.
Gideon D'Assandro, spokesperson for House Speaker Jason Wentworth (R-Farwell), said permanent removal of the sales tax was the better move. “Pausing the sales tax temporarily is a smaller savings for drivers than the plan on Gov. Whitmer's desk. More savings is better savings."
Barrett said higher consumer spending means the state’s overall sales tax collection is strong enough to afford cutting it on fuel.
“Our sales tax beneficiaries have been growing disproportionate to the rest of the state budget," Barrett said. "The School Aid Fund, local governments, and some others that are recipients of sales tax, those revenue streams have been really enhanced quite a bit lately."
Both plans come after both the state House and Senate signed off on a Republican-led plan that would have suspended Michigan’s fuel tax for six months. Supporters of that plan said they were following Gov. Gretchen Whitmer’s lead when she called for a suspension of the federal fuel tax.
All of those efforts were in response to rising gas prices resulting from the Russian invasion of Ukraine.
But the state legislation failed to gain immediate effect once passed in the Senate, meaning it wouldn’t have gone into place until after the tax-free period was already over. Whitmer ultimately vetoed that bill, citing concerns over its projected hit on road funding.
Ananich floated suspending the sales tax on fuel as an alternative. But Republican House leadership has been skeptical of the plan, saying it wouldn’t provide as much relief as the fuel tax suspension would have.
The minority leader said he’d been in contact with the other three legislative leaders and the governor’s office about his plan.
“I think giving people relief at the pump is important. Not cutting our roads or cutting services is a better way to do it. I’ll just keep working ‘til they figure out that this is a better plan,” Ananich said.
