LANSING, MI – With the average cost of gasoline in Michigan above $4.50 per gallon heading into Memorial Day weekend, the state Senate voted to temporarily nix taxes to reduce the price by about 50 cents and help summer travelers.
Senators on Thursday, May 26, advanced a package of bills that would remove Michigan’s 27-cent-per-gallon fuel tax from June 15 through Sept. 15, as well as suspend the state’s 6% general sales tax on gasoline purchases.
“This three-month tax holiday,” state Sen. Roger Victory, R-Hudsonville, said, “would provide over $8 billion in relief to virtually everyone in Michigan, including families and workers trying to make ends meet, businesses facing higher transportation costs, farmers growing the food that we need to feed our families, and tourists and vacationing families.”
With gas and sales taxes suspended, prices should drop “about 50 cents per gallon,” said state Sen. Tom Barrett, R-Charlotte. At current prices, a gallon of regular gasoline, he said, should fall to around $4, and a gallon of diesel – currently averaging $5.25 in Michigan according to AAA – will fall well under $5.
The exact discount, though, will depend on the price of gasoline. AAA pegs Michigan’s average price for a regular gallon at $4.56 on Thursday. Taking off the 27-cent gas tax and then the sales tax ($4.29 x 0.06), current savings would be just under 53 cents per gallon.
At $6 per gallon, as JPMorgan Chase analysts forecast could be the U.S. average by August, the savings in Michigan under the state Senate proposal would be just over 61 cents per gallon.
“Still very, very high (prices), and still things we need to work on,” Barrett said, “but things that can actually provide meaningful relief for the residents of our state.”
The bills were quickly discharged from committee Thursday morning and fast-tracked to a full chamber vote in the afternoon. The Republican-led bills passed with bipartisan support, and they now go to the House, which has GOP control like the Senate.
The Senate Fiscal Agency notes these bills would cost the state between $763 million and $804 million in revenue, but Republican senators argued Michigan can take that hit, noting the state is projected to see an extra $5 billion over the next two years.
Related: Michigan projects $3B budget surplus for 2022 as economy, work force continues to grow
“As a state, we can responsibly afford to cover our expenses using the surplus,” Victory said, “while helping Michiganders who are suffering under the increased cost of living.”
The three bills that repeal the gas and sales taxes – Senate Bills 972, 973 and 974 – were approved nearly unanimously by the Senate, as the only “no” vote was state Sen. Jeff Irwin, D-Ann Arbor. SB 1029, which would give local governments $300 million to compensate for lost revenue, passed 30-7.
Irwin argued the tax relief will be “unevenly felt,” saying it will only directly help people who drive, especially people who get low gas mileage.
“The estimates are that if you had someone who was driving a Ford F-150, driving 10,000 miles a year, they’d save maybe 10 bucks a month,” Irwin said. He argued Gov. Gretchen Whitmer’s plan to give $500 rebates to working families would distribute relief more fairly.
Irwin also argued that companies will just be able to raise prices after the tax cut and “pocket the difference.” SB 1029, however, notes, “A person other than an end user shall not enrich themself” from the cut and “shall pass the reduction on to the end user.”
In April, Whitmer vetoed similar legislation to pause the gas and sales taxes, but her office is “encouraged by today’s action in the Senate,” press secretary Bobby Leddy told MLive.
“We will monitor this legislation as it advances,” Leddy said. “The governor looks forward to working with the legislature on a broader bipartisan agreement that puts Michigan first by cutting taxes and providing real relief right now for our seniors and working families.”
Gas prices also tend to increase as the weather warms because companies switch to a more expensive blend and demand rises with summer travelers. AAA projects 1 million Michiganders will travel more than 50 miles over the upcoming Memorial Day weekend, considered the unofficial start of summer.
Other factors blamed for the nationwide gas price hike include low domestic oil refinery supply, inflation, and fewer oil exports from Russia after its invasion of Ukraine.
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