If you currently pay $100 per month in sales tax, which is the average for median income households in Michigan, you’ll pay an extra $1 per month. Because the sales tax is regressive — it falls disproportionately on the poor — Proposal 1 evens the playing field by expanding the Earned Income Tax Credit, which was cut in 2011.
The fuel tax changes will result in an additional 2 to 10 cents per gallon, depending on gas prices. Some of these costs will surely be offset by reduced damage to vehicles as the roads are improved.
Governor Snyder’s FY 2015 Executive Budget projects that Michigan’s current 6% sales tax will collect $ 7.89 billion in FY 2015 on $ 131.5 billion in taxable products. This is $ 797 per year, per Michigan resident. The U.S. Census says that the average Michigan household is composed of 2.53 persons. Thus the current 6% sales tax is projected to collect $ 2,016 per household in FY 2015, or $ 168 per household, per month. Not $ 100 per month.
Looking at FY 2015 as if Proposal 2015-01 was in effect, the 7% sales tax would collect $ 8.5 billion on $ 121 billion in taxable products. Keep in mind that road fuel will no longer be subject to the sales tax, so we have to back out S 10.2 billion in formerly taxable fuel sales on just over 4 billion gallons in road fuel. This is $ 855 per year, per person. Thus the proposed 7 % sales tax would collect $ 2,165 per household in FY 2015, or $ 180 per household, per month.
So the difference is $ 12 per month, per Michigan household. Not MLive’s $ 1 per month fantasy factoid.
Sales Tax Retention on Off-Road Fuel Will Trigger Pandemonium in Michigan's Fuel Distribution Network
As Proposal 2015-01 stands now, ORV operators, snowmobilers, boaters, lawn mowers, generator users, and others purchasing non road use fuels from gas stations will be in violation of PA 167 of 1933, the Michigan sales tax act. The way PA 167 of 1933 is worded, compliance is primarily the responsibility the fuel retailer. However those who, for whatever reason, escape paying the sales tax become liable for the Michigan use tax under PA 94 of 1937. This includes tourists who trailer in fueled boats from out of state. The ‘Amazon tax’ returns with a vengeance in a new guise.
Barring further convoluted legislative action, on October 1st Michigan gas stations will have to collect the 7% sales tax on gasoline and diesel fuel sold for any purpose other than propelling a vehicle “used to operate a motor vehicle on the public roads or highways of this state”. Seems simple enough given the electronic calculation capabilities of most modern gas pumps, right? Just push a button and the sales price increases by 7%.
Sales Tax Retention on Off-Road Fuel Will Trigger Pandemonium in Michigan's Fuel Distribution Network
Let’s walk through the numbers and consequences of the most disastrous aspect of Proposal 2015-01: the retention of the sales tax on fuels used almost everywhere but on the roads. Most disastrous because this will be enshrined in our Constitution if Proposal 2015-01 passes. No act of our Legislature or sleight of hand by our Governor can correct the Michigan Constitution if Proposal 2015-01 passes. They can only decide to impose astronomical costs on the petroleum distribution network, create a lot of new criminals, spawn a black market in fuels, forego sales tax revenues, or some combination thereof. The Michigan Constitution gets its first intractable dilemma.
HCJR UU contains the actual language amending the Michigan Constitution. Sales and use tax rates go from 6% to 7%, and the sales tax is no longer permitted on “gasoline or diesel fuel used to operate a motor vehicle on the public roads or highways of this state”. So the plain language of HCJR UU authorizes continued sales tax collection on all gasoline and diesel oil which is not used to operate a motor vehicle on the public roads or highways of this state, at the new 7% rate.
This 7% ‘ORV’ fuel sales tax will be over and above the motor vehicle fuel tax, which continues to be applied to recreational off-road vehicle and marine fuels as a ‘privilege tax’ under PA 451 of 1994. To make things even more confusing for fuel suppliers and consumers, there will be a third category of fuel subject to the sales tax, but not the motor vehicle or privilege tax: fuel used industrially, for construction, for farming, for lawn care, generators, and other miscellaneous purposes.
Less noticed, the 7% sales tax is also authorized on fuels other than gasoline and diesel oil used to operate vehicles on the public roads or highways of this state. This is quite a surprise since PA 468 of 2014, the motor vehicles fuels tax law of the road tax package, goes to great lengths to bring alternate transportation fuels such as liquid or compressed natural gas and lighter alternative petroleum products (LPG, propane, etc.) into the general road fuels tax regimen. This is significant; the U.S. Energy Information Agency estimates that these alternate transportation fuels currently account for about 6% of ground vehicle propulsion on the public roads in 2009 and their usage is increasing sharply. The sales tax liability on these ‘green fuels’ will put them at a serious economic disadvantage to gasoline and diesel fuel. But this did not deter the Sierra Club and their fellow environmental wackos from endorsing Proposal 2015-01. David Holtz and the Michigan Sierra Club board would appear to have a ‘Common Core’ reading comprehension level.
Will Proposal 15-1 become a bridge too far for the GoverNerd?
According to a colleague of mine, the power of government (at any level), over its law-abiding citizens, is directly derived from the taxation authority. Think about that for a moment or two. In a truly free society, the government has no means to control the behavior of its citizens who aren’t actual criminals, nor will those citizens tolerate any such action from their duly-elected public servants. And while the citizenry does indeed pay taxes – because even in a free society, the government still has the authority to tax – control of the taxation mechanism isn’t left to the arbitrary whims of government functionaries, and the true tax burden is plainly visible for all to see.
By that measure, it’s been at least five decades since Michigan was a truly free state. Since being gifted with an income-based taxation model, and a full-time legislative model, the state that was once the engine of freedom has progressively mutated into a socialist laboratory, at best a generation between now and whatever bankruptcy chapter awaits a nominally sovereign state collapsing into receivership. And in that regard, I don’t think it overly dramatic to suggest that this statewide special election to decide the fate of a legislative piece of sausage is similar to Gettysburg . . . if we don’t stop them here, then where will we ever be able to stop them at all?
The upside is that We the People received a bit of good news on this front yesterday, though how this’ll ultimately play out is still an open question.
Safe Roads YES! is already running media ads . . . why aren’t their opponents?
So, about three weeks ago, Safe Roads YES! launched their radio and television ad campaign, designed to convince us that jacking up our per-person state tax-and-fee burden by roughly $248.12 – permanently (not including inflation adjustments to the wholesale fuel tax) – is a good idea. To do so, they’re using the standard tactics of bogus statistics and emotional appeals, praying that the typical low-information voter isn’t going to do even the basic homework into the legislative piece of sausage that the GoverNerd and his hodge-podge of allies are doing their damnedest to slide by us roughly six weeks from now.
And you’d think that at least one of the organizations or individuals lined up to oppose the Michigan Sales Tax Increase for Transportation Amendment would have already snagged media buys for at least one well-produced television commercial. I’ll freely admit that I don’t spend much time in front of the boob tube these days, but I can’t seem to get through even one prime-time television show (regardless of channel) without seeing at least one Pro-1 30-second spot. The reason that bugs me (both the pro-1 ad campaign and the absence of an anti-1 ad campaign) has less to do with polling, and more to do with my understanding of voter behavior.
Michigan Triples Down On The Most Abused Federal Program
The U.S. Government Accountability Office released its FY 2014 estimates of improper payments made by the Federal Government in testimony before the U.S. Senate’s Committee on Homeland Security and Government Affairs on Monday. The Improper Payments Information Act of 2002 and the Improper Payments Elimination and Recovery Act of 2010 require Federal Executive Branch agencies to estimate the levels of improper payments in all Federal programs. The GAO assembles this data and reports the levels of improper payments, along with recommendations to minimize such improper payments.
At the Federal level, all improper payments amounted to about $ 125 billion dollars in FY 2014. Even by casual Federal accounting standards this is breathtaking. Three cents of every Federal Government dollar spent. Going through the GAO’s estimates by program, the Earned Income Tax Credit is at the top of the list by percentage of improper payments: 27.2 % of all EITC payments are improper. The GAO estimated FY 2014 improper EITC payments by the Federal Government alone amounted to $ 17.7 billion dollars. Other Federal programs burned more dollars, but none had the percentage rate of improper payments that the EITC has. Not even close.
The most obscure element of the tax increase package which Michigan voters will be asked to approve on May 5th is Senate Bill 847 of 2014. This bill is a $ 260 million annual increase in the State of Michigan’s version of the EITC. The EITC will increase from its current 6 %, to 20 %, of the Federal EITC credit allowed under Section 32 of the Internal Revenue Code. Currently, the Michigan EITC pays out about $ 80 million from the Michigan Treasury every year at the 6 % rate.
The Michigan Office of the Auditor General released its overdue performance audit of MDoT’s Bridge Inspection Program Friday afternoon, just in time to miss last week’s news cycle. Weekend news reports focused on bridge inspection frequency, but there is a more fundamental question which should be answered first: Are the MDoT bridge records which were audited complete and correct? Even remotely so?
The Federal Highway Administration collects bridge data from the State DoT’s and other sources to create and maintain the National Bridge Inventory. It is supposed to list all American bridges which have roads running across them or below them, along with ownership, identifiers, and condition data. Condition data is given as a number from 0 (failed) through 9 (good beyond current standards). These numbers then get converted into the descriptors you read in the press, such as ‘structurally deficient’, poor, good, etc.
The MOAG performance audit is replete with statistics derived from MDoT’s bridge inventory database which show – no surprise – that some of Michigan’s bridges are in poor shape. You can see MOAG’s statistics as of April 30th, 2014 in the audit or go to a searchable database of individual bridge data across the entire country, as of 2012, brought to us by Alexander Svirsky of MassRoads.com.
A first pass at the MOAG bridge inspection audit involved looking at the worst condition category of bridges, those rated 0 or 1 for failed or imminent failure. Going through the Wayne County owned bridge summary on Page 51 of the new MOAG audit, I was heartened to see that Wayne County has no condition category 0 or 1 bridges. But there are at least two zero condition category major bridges in Wayne County across the Rouge River, so let’s say I am experiencing a little cognitive dissonance just now.
You are about to be buried in pseudostatistics and factoids purporting to demonstrate just how bad Michigan roads are. We have already demonstrated that the TRIP vehicle maintenance factoids fabricated by a devious road contractors’ business league are a complete fraud.
Now State of Michigan government entities are unleashing a wave of propaganda intended to drive your vote on Proposal 2015-01. Two State of Michigan government entities have prepared campaign flyers on behalf of Proposal 15-1 using Michigander’s tax dollars: MDoT and the Transportation Asset Research Council (TAMC).
Both MDoT and TAMC have spent years preparing slick pamphlets decrying the sad condition of Michigan’s roads, citing PAvement Surface Evaluation and Rating (PASER) data collected by TAMC with MDoT and local road agency help. These pamphlets claim that 30 – 40 % of Michigan roads are in poor condition. But are they really?
Reflex Conditioning Drives Uncontrolled Government Spending
The brilliant, Nobel Prize winning physiologist Ivan Petrovitch Pavlov demonstrated that you could condition a dog to salivate by sounding a metronome. All he had to do was sound the metronome when putting out food for his dogs. It did not take long for his dogs to associate the sound of the metronome with food. Then he no longer even had to put food out to get the dogs to salivate; he only had to sound the metronome.
Today, inferior rank politicians have been conditioned to salivate when a financial grant is offered by superior rank politicians. The only problem with these grants of largess is that they always come with caveats, and usually require matching funds. These restrictions are a deliberate – and successful – effort to frustrate all efforts to manage government expenditures.