And while the increase in the diesel excise tax from 15 cents per gallon to 26.3 cents per gallon – gas rose from 19 cents per gallon to 26.3 cents per gallon – seems like a serious jump, the tax had been the same since 1997. Other state taxes take diesel to 40.71 cents per gallon and gas to 38.88 cents per gallon.
“We were supportive of it because it funds highways,” said Walt Heinritzi, executive director of the Michigan Trucking Association. “It is a big increase, but we were really lagging. It was just catch-up time.”
Of course, the tax hike, which Gov. Rick Snyder signed into law on Nov. 10, 2015, didn’t go into effect for nearly 14 months. Beginning in 2022, the excise taxes will rise annually by 5% or the consumer price index, whichever is less.
“We were at the point where we having a difficult time coming up with revenue to get our full federal matching funds,” Heinritzi said. “This was in the works for well over a year before the actual passage of the legislation. And it was delayed going into effect until 2017 because 2016 was an election year in the House.”
The fuel tax hikes passed the House 55-52 but barely got through the Senate by a 20-18 vote.
“This will lead to safer and better roads in our state and do it in a fiscally responsible way,” Snyder said at a news conference after the bill passed along with related legislation that added $600 million in general fund revenues along with $200 million from higher vehicle registration fees.
Evan Stouten, President of Modular Transportation in Grand Rapids, wished that the tax increase was actually larger as long as it meant no change in the registration fees which went up $332 for an 80,000-pound truck.
“I’m 100% for Michigan increasing the taxes,” said Stouten, who has 80-some trucks in his Michigan operation, most of them flatbeds. “It needed to happen. We have to spend money on the roads and bridges to keep them in good shape, let alone the improvements they want to make. But I would rather that they did it 100% on fuel, not on the license plates, because fuel is a little bit easier to pass on to your customers.”
Stouten, who expects the diesel tax hike to cost his company $53,000 a year, with the fee increases accounting for another $13,000.
“Because we knew this was coming and for other operational reasons, we stared hard at how we could get our [driver] turnover down and we did that,” Stouten told Transport Topics. “We’re having a good year [so the extra $66,000 in costs] is manageable. No one going’s to lose his or her job because of that. But we’re in a soft market. Rates are being pushed down and they’re probably not going to up before the summer. You talk to your customers about it and the best ones give you some help and the others say they’ll help you when they can.”