The Fix for Michigan

You don't want to hear it, and please don't tune out, but the fix is $4 per gallon gas. The State of Michigan is currently in a budget crisis. Expenses are up and revenues are declining with no sign of improvement in sight. Our legislators are looking for things to cut, but cuts hurt, we have record unemployment, tremendous need for state services and a crumbling infrastructure. What Michigan needs is a bold thinking, not just more belt tightening leading us to a state of emaciation.

How about Michigan leading the nation once again, not with the motor age, but with an age of environmental action? Our governor intends to lead Michigan to prosperity with green tech jobs. But let's do more and lead by example, being proactive about reducing fuel consumption, green house gas emissions, and changing the types of cars the nation drives. Should our automotive designers and engineers hear about the new automotive landscape happening in California and Europe, or live it here in Michigan? Nothing changed the automotive purchasing habits and transportation modes of U.S. consumers more than $4 gasoline.

Michigan citizens buy about 4.6 billions gallons of gasoline a year (numbers from FY2006-07). We currently have a $0.19 state excise tax and a 6% sales tax on gas, generating around $1.5 billion in revenue a year. If the current excise tax was adjusted to $2 , making gasoline over $4 per gallon, we'd generate $9 billion. Yes, demand for gas would drop immediately, but not proportionately. To relieve the burden of this increase tax on gasoline, the state could drop the 6% sales tax on goods. Michigan earned $6.5 billion in revenue from sales tax in FY2006-07, so the drastic increase in gas tax would more than make up for the sales tax loss. Depending on how the tax rate is manipulated and the amount of tax relief given to those with low incomes, the gas tax could easily generate an additional $1 billion. Of course this excise tax rate would need to be adjusted as crude oil prices shift and as demand decreases over time, but the guiding principle is to eliminate the thirst for cheap gas.

Michigan being a peninsula-state makes the gas tax workable. Except on our southern borders, we would not lose gasoline sales to neighboring states. But even in these southern regions, we would gain shoppers coming to Michigan for our tax free goods. Michigan would also avert the problem of losing in-state sales to internet shoppers looking to avoid state sales tax. Dropping the sales tax would be great for Michigan business owners and consumers.

The higher gas prices would also immediately stimulate our auto industry as Michiganders would seek to purchase more fuel efficient vehicles. Being in the heart of an environmentally progressive state would also boost the credibility of our manufacturers nationwide and worldwide.

We need to give up our fix for cheap gas, and get down to the business of fixing Michigan.