Taxes that increase every year to keep up with inflation.
We have used the 16.7% tax increase in the stop sign logo, (at the right) and will continue to do so. However, it is hardly a complete look at the tax implications if proposal 15-1 were to pass. We are attempting to find all the ways in which our prior legislative session gave us the shaft, including train to nowhere projects, redistribution of wealth, and the fuel tax replacement components.
Folks might actually be aware of the replacement fuel tax and that it will be more than what the was tax was before. Presumably, it simply replaces the sales tax that has been collected on fuel, that does not go toward roads. However, when one looks at the analysis done by the House Fiscal Agency, there is a paragraph that explains the mechanism accurately; and in particular, a line at the end of that paragraph points out an easily missed point.Part of the breakdown of HB 5477:
The bill defines the initial average wholesale prices as the 12-month rolling averages for gasoline and diesel from July 2013 through June 2014, which means the initial tax rates would be 41.7 cents per gallon for gasoline and 46.4 cents for diesel. For future years, the 12-month rolling average period ends on the last day of the month that is three months prior to the month the new rates would take effect. The bill contains an inflation adjustment mechanism to limit large swings in the cents-per-gallon levy that may result from volatile gas prices so that the levy cannot increase by more than 5 cents per gallon above the rate of inflation. Additionally, the levy could not fall below the initial rate, adjusted for inflation or 5% per year, whichever is less.
The ‘wholesale percentage’ tax on fuel never drops. The ‘wholesale percentage’ is only the starting point, 12 cents a gallon above today’s fuel tax rate on unleaded regular This fraudulently labeled tax does not follow the ups and downs of the wholesale fuel price, only the ups. When the wholesale price of fuel does drop over a year, the tax rises by a the rate of inflation or 5% per year, whichever is less.
There is a five cent per gallon tax rate increase ceiling in HB 5477, but it is of little relief. Do the math in HB 5477, Section 5 (1)(b) – you will see that the Michigan fuel tax rises by $ 1.00 per gallon every 20 years. This tax ratchet increases Michigan’s fuel taxes to the highest in the nation by FY 2017, the second year of this fuel tax scheme. In only one year it will exceed even the very best efforts of the tax drunk political thieves in New York State. And the sky is the only limit from there!
That level will continue to rise each year due to inflation. Using the initial rolling averages, it amounts to a permanent doubling of the fuel taxes compounded yearly based on inflationary forces. It means that all the taxes can do is literally ‘ratchet’ higher each successive season.
All of this to feed a machine that works so well, right?
Seen enough yet?