LANSING – The Michigan House narrowly approved bills Thursday to remove the sales tax from gasoline over six years, a move that would deny schools and local governments hundreds of millions of dollars they otherwise would receive, and switch to a percentage-based wholesale tax on gasoline that tops off at 13.5 percent to raise money for roads.

In a move to combat the sharp criticism from Democrats and schools, majority House Republicans adopted an amendment saying that during that six-year transition period, if the appropriations in the K-12 School Aid budget or if funds distributed to municipalities through revenue sharing decrease to an amount less than the previous year, then the sales tax would go back to 6 percent.

Passage of the bill, with only Republicans in support and searing Democratic opposition, gives House Speaker Jase Bolger (R-Marshall), who proposed the idea, a little more room to negotiate with the Senate and Governor Rick Snyder, who supports the bipartisan Senate-passed plan to gradually raise the new percentage-based gasoline tax to 15.5 percent and leave the sales tax on gasoline untouched.

Both proposals would raise about $1 billion toward the state’s deteriorating roads. But the House plan seeks to serve as a revenue-neutral change that would mean all taxes at the pump go toward roads. Bolger has said forecasted growth in sales tax revenues would mean enough money to prevent cuts to schools and local governments, something critics have called pie-in-the-sky.

At the end of a nearly nine-hour session, HB 4539 , which would remove the sales tax from gasoline, was discharged from the House Transportation and Infrastructure Committee, was changed, and passed on a 56-53 vote, the minimum for passage. Three Republicans – Rep. Bob Genetski II of Saugatuck, Rep. Dave Pagel of Berrien Springs and Rep. Paul Muxlow of Brown City – joined all 50 Democrats in opposition. Rep. John Olumba (I-Detroit) was absent.

The substitute version of HB 4539 repeals the sales tax on gasoline over six years. Beginning in January 2016, the sales tax on gasoline would be 5 percent. In 2017, it would decrease to 4 percent; in 2018, it would decrease to 3 percent; in 2019, it would decrease to 2 percent; and in 2020, it would decrease to 1 percent; before disappearing all together in 2021.

The bill instituting the percentage-based wholesale tax, HB 5477 , passed 58-51. Muxlow and Pagel again voted no, but Genetski switched to a yes vote and Olumba walked into session during the vote and supported it. Rep. Bill LaVoy (D-Monroe) was absent.

The bill was amended from the Senate version and over the same six years as the sales tax elimination, it increases the gasoline tax from 7.5 percent, which is revenue neutral, to 13.5 percent. The Senate set the eventual tax at 15.5 percent, phased in over four years.

Democrats sharply criticized the proposal. Rep. Doug Geiss of Taylor said the bill was discharged after sitting in committee for more than a year and was quickly subbed out so the content was not clear.

Rep. Brandon Dillon of Grand Rapids said the bill is a “political joke” by Republicans trying to not raise taxes for roads, when he said new revenue is needed.

“If you believe in this bill, then you believe in faith-based economics. … To say that this bill is an accounting gimmick insults accounting gimmicks,” he said. “This bill should have been referred to the Committee on Hocus Pocus rather than discharged to the floor and dignified with a vote. This bill insults the people who have worked hard to find a real solution to the real problem of fixing our infrastructure in Michigan.”

During the debate, multiple House Democrats spoke against the bill, but no Republicans spoke in support.

Rep. Marilyn Lane (D-Fraser), who is the minority vice chair of the Transportation and Infrastructure Committee and has worked with Republicans during this term on road funding, opposed the plan.

“All those who worked together and bipartisan all of a sudden get the ‘it’s my way or the highway’ plan,” she said.

Ari Adler, spokesperson for House Speaker Jase Bolger (R-Marshall), said there were no discussions with Senate leadership on the proposal, so it is unclear how it might be altered in the other chamber.

Prior to the vote, Senate Majority Leader Randy Richardville (R-Monroe) said clearly negotiations would be needed.

“I don’t know what they need to get something done out of that,” he said. “I don’t know who is asking for what right now. It’s a moving target, it seems. Whatever it is, it’s going to be significantly different than what we did, and I think we’re going to merge some ideas and we’ll probably end up in a room trying to agree on something. There will probably be a lot of give and take, but I think it’s going to be the right package and provide the right funding when we’re all done.”

Rep. Lisa Posthumus Lyons (R-Alto), who voted yes on both bills, said she looks forward to seeing what the Senate does. She said the passage of the bills is just another step in the process.

Lyons added she thought the 15.5 percent tax under the Senate bill was too high for middle class and lower-income residents in the state.

“People deserve to know that when they pay taxes at the gas pump, that that money is going to fix our roads and bridges,” she said. “And this plan assures that, while protecting education and local governments from funding cuts.”

House Minority Leader Tim Greimel (D-Auburn Hills) said the provisions in the bill for the six-year transition period will simply keep local government and education budgets stagnant.

“House Republicans are just wrong to think that having flat funding for schools over the coming years is the right approach,” he said. “School funding should at least keep up with inflation. And the supposed protection put in the bill does nothing to ensure that happens. It’s going to result in hundreds of millions of dollars being cut from schools.”

Senate Minority Leader Gretchen Whitmer (D-East Lansing) also blasted the proposal in a statement.

“This stunt by the House Republicans to claim we can solve our road funding problem by stealing money from schools and local communities shows a complete lack of leadership on an issue that needs to get resolved,” she said. “They themselves acknowledge in this bill that the economics don’t add up and inserted a trigger to repeal the entire act when that becomes painfully obvious to our budget, a move that would create even more uncertainty for the Department of Transportation and road builders than already exists now.”

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