Michigan gas tax will follow the price at the pump

Calling her state’s roads “the pits,” Gov. Jennifer Granholm announced a plan to use a proportional rate that would raise when the price of gasoline goes up.

“What we want to do is take the tax that is right now a flat tax and transform it into a percentage tax,” she said at a press conference.

The current charge is 19 cents per gallon, but Granholm said the problem is there is no long-term funding source that will ensure smooth roads. Gas-tax revenues have been on the decline for six years in the state of Michigan. The new tax will be “revenue neutral,” meaning it would not increase right away. The money, however, will not be collected at the pump. Instead, it will be paid by gasoline wholesalers, who will then pass the fee on to consumers.

A report released in November 2008 showed a crumbling future for Michigan’s roads. The study said that the state must double road repair spending to about $3 billion a year or face a continuing deterioration of its road system. Michigan will receive $1.8 billion in stimulus money this year, but after that the financial picture gets fuzzy.