House Road Funding Package Puts Gas Tax Increases on Autopilot --- Tax on B5 Diesel for Heavy Trucks Cut 20%

Southfield, MI Gas Prices 12 June 2015

Michiganders woke up this morning to discover that regular unleaded gasoline prices are now $ 3 per gallon, a $ .25 increase, or more, from yesterday. Refinery problems, summer driving season, and SE MI’s special fuel blend are blamed in the press, but really this price shock is an intended consequence the Federal Reserve’s zero interest policy and their determination to boost stock prices. Oil derivatives are cheaper than dirt when there is no cost to money.

Wall Street wasn’t happy early this year when plunging oil prices drove down stock averages. So someone is furiously selling off Treasury paper and buying oil & gasoline futures contracts. Treasury interest rates have been rising in lockstep with oil & gas prices, on the same days, even the same hours. Officially, no one knows who is behind these trades, but the Federal Reserve is sitting on $ 4 trillion in Treasury paper and is fighting any effort to audit their holdings. A coincidence? Not likely.

Your government extracting more money from your wallet.

Southfield MI Gas Prices 12 June 2015

Wednesday the Michigan House of Representatives passed HB 4615, the gas tax provisions of Speaker Kevin Cotter’s road funding package, 58 for to 51 against. Press reports covering the House road funding package snidely denigrate it for not providing the ‘additional revenue’ needed – a code phrase for taxes. In fact the House road funding package does have one obvious tax increase called ‘diesel fuel tax parity’.

However there is an out for diesel consumers: diesel fuel blended with 5% biodiesel (B5) gets a seven cent tax break, bringing its tax rate down three cents below the current diesel fuel tax rate. E70 and higher ethanol in gasoline blends get the same preferential treatment. Only a small fraction of passenger cars can run on E70, but almost all diesels can burn B5.  You can bet that B5 labeling fraud will become the new normal.  So heavy trucks get a huge tax break from HB 4615 right from the outset, and heavy trucks do 99% of the road damage even when they smell like a french fryer. More money for the environmental wackos, too.

A less advertised – but far more significant – tax increase in HB 4615 is its ratchet raising gasoline and diesel fuel taxes every year. Slightly less obnoxious than Proposal 1’s tax ratchet because it is only determined by the Detroit Consumer Price Index, it is still a tax ratchet that goes only up, never down. Motor vehicle fuels are about 9 % of consumer price indices, so this ratchet captures 9 % of the ‘wholesale price’ ratchet of Proposal 1.

Is it good public policy to allow our legislators to put tax increases on autopilot? Don’t they circumvent legislative oversight? The fundamental law of government in our time is that agency budgets always expand, to consume all available revenues, regardless of need. Remember those idle passenger rail cars rotting in Owosso?

HB 4615 will turn Michiganders into tax fortune tellers. Every time you see gas prices jump overnight you will be able to predict the future, or at least the next rise in gas taxes on October 1st.  Your wages are probably not inflation adjusted, but the taxes you pay will be.

A small footnote here: Speaker Cotter, who voted for the HB 4615 tax ratchet, expelled Representative Cindy Gamrat from the House Republican Caucus. Representative Gamrat steadfastly voted against the HB 4615 tax ratchet. So who is the real Republican?

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