Cut the Budget, Raise Taxes or Wait

The forgotten option of the Michigan road funding debate

In attempting to find more resources for road repairs, lawmakers seem to have painted themselves into a corner. They want a lot of money and they want it now, but they can’t raise taxes or cut the budget. A number of proposals have been made to increase taxes, and we’ve promoted some ways to save money. But lawmakers can also wait.

Economic growth has meant that taxpayers are already sending more money to Lansing. Michigan’s budget increased by $8.7 billion since 2010, a 15% increase above inflation. Some of that has come from economic growth, but the state government has also changed its tax policies over the period. It decreased business taxes, eliminated a number of tax credits and deductions, cancelled income tax cuts, increased fuel and vehicle registration taxes and made other changes. And after all that, revenue is up.

It is also expected to increase even more. State revenue forecasters estimate at least another $1.5 billion for the state over the next three years. Growth is not guaranteed, but Michigan’s budget has steadily increased in the economic recovery.

The transportation budget increased from $2.0 billion to $3.6 billion since 2010, with only $500 million of the increase coming from tax hikes. Lawmakers have also marked some revenue to go the transportation budget in the future, and that would increase state spending up to $4.0 billion. Current levels on roads are also the highest in history, even without the earmark.

To put it another way, the governor’s proposed tax increase, which takes place over two years, is the equivalent of 2.6 years of prioritizing road funding at current trends.

Lawmakers are already increasing the importance of roads in the budget. The budgets passed by the House and the Senate for the upcoming fiscal year increase road funding without increasing taxes. Funding for schools would go up as well. The House budget increases transportation spending by $372 million. The primary source for these gains comes from growth, though the House budget also has some cuts to corporate handouts, which I appreciate. The governor, in contrast, wants to increase taxes by $1.3 billion in order to spend $800 million more on roads.

Lawmakers can spend more on roads without raising taxes. They already have.

If roads are a priority, then there ought to be something in the budget that is less of a priority. Otherwise calls for more money for roads are just an excuse to raise taxes. But lawmakers can also wait and make roads a priority for future revenue growth. Growth is already responsible for the bulk of the gains in road funding, and there is more to come in the future.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.