A look at Michigan road funding plan

Energy Associated Press

A look at a $1.6 billion road and school funding deal brokered by Gov. Rick Snyder and legislative leaders. The fate of the tax hike will rest entirely with voters if approved by lawmakers on Thursday:

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BALLOT

In May, voters would be asked to increase the state's 6 percent sales and uses tax to 7 percent and eliminate the sales tax on motor fuel, generating a net $588 million — mainly for $300 million for schools (the equivalent of $200 per pupil) and nearly $100 million for local governments. The plan also would bar the Legislature from spending School Aid Fund revenue on public universities, an issue for Democrats who feel the fund mainly dedicated for K-12 schools has been "raided" in recent years. The revenue could be spent on community colleges, however. Republicans especially wanted to ensure all taxes at the pump go to transportation, which is not the case now.

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LEGISLATION

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Legislators will vote Thursday on a number of bills that would only go into effect if the ballot measure is approved.

— In October 2015, Michigan's flat 19-cents-a-gallon gasoline tax and 15-cents-per-gallon diesel tax would be converted so they are based on wholesale prices and significantly rise, with floors and ceilings in place so taxes could not fluctuate significantly with changing fuel prices. Of the $1.3 billion collected, $1.2 billion would go to roads and bridges at state and local levels and about $100 million to public transit. Tax rates were still being tweaked Thursday afternoon, but the 19-cent gas tax likely would more than double but be offset by the removal of the sales tax on gas, at least initially.

— In the first two years, a combined $1.2 billion of the fuel tax revenue would go to partially pay off long-term debt from past road construction bonds. It is partly a way to phase in spending increases as opposed to immediately infusing all of into the system.

— In the 2016 tax year, low-wage earners would see more generous tax breaks. As part of a 2011 tax overhaul, Snyder and Republican legislators reduced the earned income tax credit from 20 percent of the federal earned income tax credit to 6 percent. It would go back to 20 percent under a Democratic-backed bill, a $260 million loss in revenue. Advocates say low-income families on average would get $300 more in their pockets.

— There would be changes to vehicle registration fees next year that would bring in an additional $95 million per year from regular cars and heavy semi-trucks. License plate taxes, which are based on a percentage of a vehicle manufacturer's suggested retail price at the time it is first titled, would be frozen in May. They currently drop by 10 percent each year for the first three annual plate renewals and then stay level. Drivers' fees would not go up but they would not go down, either. Separately, the heaviest freight trucks could pay $1,000 more annually in fees.

— Road warranties and competitive bidding rules for road work would be revised.

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SEPARATE

Lawmakers also will vote on bills that would force retailers such as Amazon.com to collect the sales tax on Internet purchases, which supporters say would level the playing field for brick-and-mortar stores. Retailers with Michigan stores must collect the sales tax when selling items online. But Internet-only stores like eBay do not have to assess it unless they have a physical presence in the state. Shoppers are supposed to voluntarily pay a 6 percent "use" tax for their online purchases when they file Michigan tax returns. But few do. The measure could bring in about $50 million a year and is not directly tied to the ballot proposal's fortunes.