Proposal 1: Michigan Sales Tax Increase for Transportation Amendment

The Michigan Sales Tax Increase for Transportation Amendment, Proposal 1 is on the May 5, 2015 ballot as a legislatively-referred constitutional amendment. The measure, upon voter approval, would increase the state’s sales tax from six percent to seven percent, but eliminate the sales tax on gasoline, for the purpose of increasing transportation infrastructure funding. The measure would affect other vehicle-related fees and increase spending for education and increase the earned income tax credit.[1] Michigan Bureau of Elections Director Chris Thomas described the ballot measure as “a very complex proposal that is based on an interplay between proposals to change the constitution and the laws of Michigan.”[2]

Specifically, the measure would do the following:[1][3]

  • Eliminate the sales and use tax on vehicle gasoline and diesel fuel.
  • Increase the state’s sales tax from six percent to seven percent.
  • Dedicate 60 percent of the first five percent of the sales tax and an amount equal to 12.3 percent of the first five percent of the use tax to the School Aid Fund. Currently, 60 percent of the first four percent of the sales tax is earmarked for the fund.
  • Provide for the School Aid Fund to be used exclusively for aid to “public community colleges, public career and technical education programs, scholarships for students attending either public community colleges or public career and technical education programs.” This removes aid to public institutions of higher education as an allowable use for the fund.
  • Dedicate 15 percent of the first five percent of the sales tax to be used for revenue sharing with townships, cities, and villages. Currently, 15 percent of the first four percent is earmarked for revenue sharing with local governments.
  • Increase the fuel tax to 41.7 cents per gallon from 19 cents per gallon of gasoline and 15 cents per gallon of diesel.
  • Remove the depreciation discount for annual vehicle registration fees.
  • Create a $75 annual surcharge for electric vehicles and a $25 surcharge for hybrid vehicles.
  • Allow municipalities to finance road projects through competitive bidding.
  • Increase the Earned Income Tax Credit (EITC) from six percent to 20 percent.

The House Fiscal Agency estimated that the sales tax increase would generate more than $1.6 billion per year, with $1.2 billion going towards roads, $130 million to mass transit, $300 million to the school aid fund and $95 million to local governments.[4]

The proposed amendment was introduced into the Michigan Legislature by Rep. Joe Haveman (R-90) as House Joint Resolution UU.[5]

Text of measure

Ballot title

The official ballot text is as follows:[6]

A proposal to amend the State Constitution to increase the sales/use tax from 6% to 7% to replace and supplement reduced revenue to the School Aid Fund and local units of government caused by the elimination of the sales/use tax on gasoline and diesel fuel for vehicles operating on public roads, and to give effect to laws that provide additional money for roads and other transportation purposes by increasing the gas tax and vehicle registration fees.The proposed constitutional amendment would:
• Eliminate sales / use taxes on gasoline / diesel fuel for vehicles on public roads.
• Increase portion of use tax dedicated to School Aid Fund (SAF).
• Expand use of SAF to community colleges and career / technical education, and prohibit use for 4-year colleges / universities.
•Give effect to laws, including those that:

o Increase sales / use tax to 7%, as authorized by constitutional amendment.
o Increase gasoline / diesel fuel tax and adjust annually for inflation, increase vehicle registration fees, and dedicate revenue for roads and other transportation purposes.
o Expand competitive bidding and warranties for road projects.
o Increase earned income tax credit

Should this proposal be adopted?
YES [ ]
NO [ ][7]

Read more on how Prop 1 will affect Michigan’s constitution, who supports the measure, who is against it and more on


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