Susan J. Demas: Business leaders should call GOP’s bluff on Whitmer’s gas tax

March 15, 2019 12:47 pm

Late winter road work in Meridian Township | Susan J. Demas

It’s almost springtime in Michigan, which means that it’s time for another glorious season of pothole roulette.

Nobody really denies that our roads are in shambles, as most Michiganders have lost a tire (or several) or coughed up hundreds of dollars for far more serious car repairs. And the $2.5 billion annual cost to really fix infrastructure is considered a conservative estimate.

But GOP leaders who control the Legislature have already called Gov. Gretchen Whitmer’s gas tax increase a “non-starter” — while naturally offering up no solution of their own. There’s a danger in this obstructionism, however, as business leaders are generally not on the same page.

In Michigan, we’ve become accustomed to politicians ignoring problems for years — and then settling for half-measures and calling it good.

So Whitmer’s call for bold action is jarring.

Gov. Gretchen Whitmer at the Fiscal Year 2020 budget presentation | Casey Hull

It’s time to admit that former Gov. Rick Snyder’s brilliant branding campaign of Michigan as “The Comeback State” was largely a myth.

Lowering business taxes — his signature accomplishment — came at a hefty cost, especially after a decade-long recession cannibalized spending on basic needs.

Snyder slashed funding for K-12 schools, community colleges and universities in his first year in office. Then he threw a few more bucks at them in his subsequent budgets and basically wanted a medal for it.

Meanwhile, our education system, which was once a national model, is flagging. Our childhood literacy rates are plummeting. No state in the country has invested less in schools in the last 25 years.

It’s the same story for Michigan’s roads, which are the worst in the country. Snyder, to his credit, recognized there was a huge problem. But his 2015 solution raising $2 billion annually by hiking the sales tax, gas tax and vehicle registration fees was a convoluted mess.

That died 80 to 20 percent at the hands of voters — a staggering failure. (Fun fact: Some of the political consultants screaming the loudest about Whitmer’s plan worked on this turkey).

Snyder and Republicans gave up on really solving the problem. They passed a scaled-back measure later than year that didn’t even raise the full $1.2 billion promised until 2021. And gas taxes and vehicle registration taxes went up long before anyone saw asphalt being poured.

Susan J. Demas

Honestly, that’s the worst of both worlds for politicians — being asked to take a hard vote on something voters can see doesn’t really help them.

And it’s even worse for taxpayers. No wonder some aren’t thrilled about Whitmer’s solution of a 45-cent gas tax increase.

The Advance wrote about why your roads haven’t been fixed after the ‘15 tax hikes in our in-depth breakdown of road funding. And other publications, like Crain’s and the Detroit Free Press, have tackled this vexing issue, too.

But the TV-ready story is warning about a Democrat raising your taxes, replete with ominous graphics. That kind of sensationalism, by the way, was absent when the last GOP governor raised taxes on individuals by more than $1 billion a year to pay for his business tax cut.

And President Trump’s 2017 giveaway to the rich was portrayed as a tax cut for everyone — although now roughly two-thirds of Americans are paying more than they thought this year.

Now I’ve never been a huge fan of raising the gas tax because it’s regressive (and I didn’t just Google that term, unlike the crop of new self-appointed budget experts on social media). But I was heartened that Whitmer tried to address that by eliminating the pension tax and hiking the Earned Income Tax Credit (EITC).

Back in 2011, Snyder slashed the EITC to pay for his more than $2 billion business tax cut. That was the most nonsensical tax policy move I’ve ever covered (yes, it was far worse than taxing baby shoe bronzing, for those around during the ‘07 shutdown).

The EITC is, hands down, one of the best ways to help working families. And it has the stamp of approval from the Michigan League for Public Policy, an anti-poverty nonprofit which is always on the side of the angels.

So anyone who tells you that raising the EITC is a bad idea generally has no idea what they’re talking about.

Late winter potholes in Lansing | Susan J. Demas

It’s also true that we already pay a hidden tax for roads. The gas tax hike will cost the average motorist $276 a year — which is less than half the $646 we pay every year in repairs and other expenses, per a study released this week.

But despite pushback on the gas tax, Whitmer is criss-crossing the state to drum up support for her plan. She’s made it clear she’s not going to go small on roads like gutless Republicans did in 2015.

And the business community could be Whitmer’s ace in the hole. They’ve long favored the gas tax to fund road improvements — which, no doubt, was a big reason why she went with that option.

During Snyder’s tenure, there was rarely any daylight between Republican politicians and business leaders. But on Thursday, Detroit Regional Chamber of Commerce President and CEO Sandy Baruah was candid about a “growing split” between the two groups on infrastructure.

Business leaders have certainly enjoyed their tax breaks, but they’re feeling the heat from the budget tradeoffs that made them possible. It’s hard to convince investors and talent to come to Michigan when our roads and schools are literally crumbling before our very eyes.

Gov. Gretchen Whitmer speaking with CEO Sandy Baruah at the Detroit Chamber of Commerce, March 14, 2019 | Ken Coleman

If there’s no movement from the GOP-led Legislature, Baruah, in particular, has a powerful platform in May: the Mackinac Policy Conference. Expect that to be three nonstop days of haranguing the captive lawmaker audience to do the right thing.

Of course, business leaders could always appease Republicans and sit on their hands. But in that case, there are other ways to raise the $2.5 billion for roads.

Now I’m not saying that jacking up the corporate income tax to 20 percent or instituting a graduated income tax to soak the rich would pass at the ballot box.

But I’m also fairly certain that corporate titans don’t really want to take that risk.

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Susan J. Demas

Susan J. Demas is a 23-year journalism veteran and one of the state’s foremost experts on Michigan politics, appearing on C-SPAN, MSNBC, CNN, NPR and WKAR-TV’s “Off the Record.” In addition to serving as Editor-in-Chief, she is the Advance’s chief columnist, writing on women, LGBTQ people, the state budget, the economy and more. For almost five years, Susan was the Editor and Publisher of Inside Michigan Politics, the most-cited political newsletter in the state. Susan’s award-winning political analysis has run in more than 100 national, international and regional media outlets, including the Guardian U.K., NBC News, the New York Times, the Detroit News and MLive.