As gas prices continue to rise, the Senate Finance and Transportation and Infrastructure Committees held a joint hearing on motor fuel taxes in Michigan. The senators heard a presentation from the non-partisan Senate Fiscal Agency (SFA), covering a myriad of subtopics. While the legislature has been debating a gas tax holiday, and several governors have called for a holiday on the federal gas tax, a combination of state and federal taxes only account for 14.7% of the total cost of gasoline. The remaining drivers of the cost per gallon are 55.7% the price of crude oil, 15.8% is driven by distribution/marketing, and the remaining 13.8% is due to the cost of refining. Despite the 25.2% increase in price this year, Michigan consumption is up 13.6%.

Motor fuel tax revenue in Michigan is distributed a few ways. Gasoline and diesel fuel taxes are sent to the Michigan Transportation Fund, which is responsible for funding infrastructure repairs statewide. One of the reasons some legislative members have opposed suspending this tax is the reduction in funding road and bridge repairs, something that is sorely needed in Michigan. A majority of the sales tax on fuel sales is distributed to the School Aid Fund, which helps fund the state’s K-12 schools. The remaining portion is distributed to constitutional revenue sharing, the Comprehensive Transportation Fund, and the General Fund. The SFA has estimated the annual tax costs for an average Michigan driver is $151 in Michigan motor fuel tax and $125 in Michigan sales tax on purchased motor fuel.

For more information, please click here to view the PowerPoint presentation from the hearing.

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