A mileage tax for Michigan motorists? Lawmakers want $5M for pilot program

• Budget plans set for votes in Michigan Legislature include $5 million for a ‘road usage charge’ pilot program
• Push for road funding alternatives comes amid projections gas taxes revenue will to decline because of electric, hybrid cars
• Privacy concerns about placing GPS trackers in vehicles persist

With Michigan roads projected to continue crumbling, Michigan lawmakers are renewing debate over alternative funding models. 

Democrats in the state House and Senate last week added $5 million to proposed budget bills for a pilot program to assess replacing traditional fuel taxes with a mileage-based road usage fee.

Money for the pilot would come from the state general fund under $6.8 billion transportation budget bills expected to see floor votes as early as Wednesday. 

“We have to find an equitable source of revenue, a user fee for vehicles traveling on our roads, regardless of what source the energy is,” said Lance Binoniemi of the Michigan Infrastructure and Transportation Association. “We do believe this is the future.”

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Under the Senate proposal, the state would create a 19-member technical advisory committee that would help design a pilot program for the Michigan Department of Transportation to implement by June 2025. 

Among other things, the committee would be charged with assessing the "ease and cost" of recording mileage and collecting taxes under the pilot program, which Michigan drivers could choose to join. 

Budget negotiations are ongoing, meaning a lot could change before Democratic majorities in the state House and Senate negotiate a final spending plan with Gov. Gretchen Whitmer. 

But Rep. Ranjeev Puri, a Canton Democrat and chair of the House Appropriations Transportation Subcommittee, said exploring alternative road funding options is a priority. 

He said state officials have been eyeing the possibility of going after federal grant money for a road use charge program, but noted lawmakers want to leave open the option of a state-level pilot project in the event of lengthy federal delays or restrictions. 

“The baseline question we are asking ourselves right now is, what is the quickest way to be able to do a pilot in Michigan,” Puri said.

“I think it's a little too early to design the program and have specifics, but…we would look at the variety of different ways that states around the country have been doing it and just figure out what works best for the state.”

The concept 

One of the largest sources of funding for Michigan road repairs is a 27.2 cents-per-gallon tax on gasoline and diesel fuel drivers pay at the pump. The state has the seventh-highest per-gallon tax in the country, in part because Michigan also charges motorists a 6% sales tax, which is not used to fund roads. 

Baruch Feigenbaum, senior managing director of transportation policy for the Reason Foundation, recently told lawmakers the fuel tax is akin to “a rockstar on his farewell tour” as increased fuel efficiency and alternatives like hybrids and electric vehicles mean less revenue coming back to the state. 

To address the discrepancy, other states like Oregon and Utah have implemented mileage-based user fee opt-in programs that charge motorists depending on how much they use the roads.

Michigan officials have signaled interest in previous budget cycles, last year authorizing MDOT to conduct a survey to determine drivers’ willingness to accept a road usage charge. 

If the state moves forward with a formal pilot program, Puri said it would be a voluntary option for drivers: “No one would be forced to do this.”

The Senate proposal also makes clear the pilot program would be voluntary, with participants paying a mileage-based fee but getting a refund for any fuel taxes or registration fees they pay.

The push for a mileage-based tax system is complicated by privacy concerns about placing GPS data collection devices in residents’ vehicles. Critics argue road funding alternatives shouldn’t come at the expense of individual rights. 

“Simply put: there’s no way to implement a miles traveled tax on Michigan drivers without a significant growth of government intrusion into our privacy,” Zach Rudat, Advocacy Director of the Michigan Freedom Fund, said of the legislative proposal, instead calling for lawmakers to eliminate the sales tax on fuel and replace it with an equivalent fuel tax hike. 

States that have started pilot programs have typically offered drivers the option of sharing GPS data with either the government or third-party vendors. But to address privacy concerns, they’ve also provided non-GPS options, including odometer image capture systems that allow users to upload cellphone pictures in a manner akin to a mobile check deposit. 

Some proponents have also suggested use of transponders similar to the EZ Pass toll system to track miles traveled on busy highways. 

The Michigan pilot proposed by the Senate would also require at least one mileage reporting option that "does not rely on vehicle location data" and would direct the state to collect "a minimal amount of personal information" for each participant. 

MDOT would lead the pilot for one year and report findings to the Legislature by the end of 2026, including cost, privacy issues, data collection technology, feasibility and participant acceptance. 

Puri, the House lawmaker, said he’s also concerned about driver privacy, noting that the idea is to “design this in a way that’s very secure and holds data with the utmost importance.”

Beyond privacy concerns, policymakers should assess costs and benefits before proceeding with a road usage charge pilot program, according to the nonpartisan Citizens Research Council found in a 2023 report. 

Voluntary programs in three other states — Oregon, Utah and Virginia — so far appear to be revenue negative, according to the report, meaning they have actually generated less revenue than if the programs did not exist. 

The stakes in Michigan 

Michigan’s roads and bridges are deteriorating faster than agencies can repair them, experts say, and the problem is expected to compound over time without significant new investments. 

An analysis of 2023 road conditions released last week by the Michigan Transportation Asset Management Council showed the overall condition of federal aid-eligible paved roads declined a net 5% since 2022 and will continue to deteriorate. 

Analysts predicted that the number of those roads in good condition will drop from the current 26% to 20% by 2035, and that roads in poor condition will increase from 33% to 52% over that time frame. 

Finding a long-term solution to pay for road and bridge repairs could be a crucial part of attracting and retaining Michigan residents as officials work to reverse stagnant population trends, according to a panel Whitmer convened last year to study the state’s sluggish population growth. 

The bipartisan Growing Michigan Together Council in December urged policymakers to consider vehicle miles traveled fees, tolling and “better utilization of public-private partnerships.” 

“Ensuring businesses and residents feel confident investing in a future in our state requires safe roads, accessible transit, and water systems that deliver clean water and flood protection,” the council said in its recommendation report. 

Whitmer, who has abandoned her failed effort to hike fuel taxes, has personally signaled a willingness to explore other road funding ideas. 

“Traditional ways of funding our infrastructure don't make sense" given the auto industry's shift towards electric vehicles, she said at the start of her second term. 

Other options

Short of a politically unpopular fuel tax hike, like the 45-cent proposal Whitmer pushed for in 2019, Michigan officials are considering a potpourri of options that might help address road funding gaps. 

In addition to exploring road usage charges, lawmakers in recent months took testimony from authors of a toll road proposal projecting Michigan could generate up to $1 billion a year by setting up tolling on heavily-traveled highways. 

Michigan currently has tolls in place in certain tunnels and bridges, but not on any roads. The study, ordered by lawmakers in 2020, determined 14 of Michigan’s 31 highways could theoretically support tolling, including large portions of Interstates 75, 94 and 96.

Any tolling program would take years to get off the ground in Michigan and require policymakers to clear several logistical hurdles. The study proposed beginning with parts of I-94 and then continuing over five years on all or parts of I-69, I-75, I-196, I-275, I-696, and M-14.

Tolling remains a controversial prospect among drivers, particularly in the trucking industry, who would likely be subject to higher costs per mile due to the heavier weights they carry on the roads.  

A 2023 study by the Michigan Infrastructure and Transportation Association explored other potential ways make up the funding gap, including:

• Raising the gas tax by 39 cents per gallon to 74 cents per gallon
• Increasing the sales tax by 2 percent to 3 percent to fix roads, which would require a constitutional amendment 
• Implementing a tax of 3 cents to 5 cents per mile for every vehicle mile traveled

State gas taxes and registration fees increased slightly under a road funding plan signed in 2015 by then-Gov. Rick Snyder. A 2019 bonding program initiated by Whitmer raised $3.5 billion for highways but did not address local roads. 

Other efforts to raise more substantial amounts in the last decade haven’t been politically popular: A 2015 ballot initiative to raise new revenue for roads was walloped at the ballot box, and lawmakers rejected Whitmer’s 2019 proposal to hike fuel taxes without ever taking a vote. 

“Every time we've seen a road funding increase...it wasn't on time, and it was never enough,” said Binoniemi, of the Michigan Infrastructure and Transportation Association. “It will not get any better until we invest more money.”