Michigan voters to consider a statewide sales tax increase

by Skip Oliva February 12, 2015

Michigan sales tax increase

Michigan sales tax increase

Michigan voters will head to the polls on May 5 to approve (or reject) a proposed 1% increase in the statewide sales tax. Last December, Michigan Gov. Rick Snyder and the state’s legislature agreed to the referendum as part of a package to fund transportation and educational programs. If approved, Michigan would have a statewide sales tax of 7%, which would tie it with several states for second-highest in the country.

1% Michigan sales tax hike proposed

Michigan Gov. Rick Snyder and the state’s legislature have proposed a 1% statewide sales tax increase as part of a package to fund transportation and educational programs.

The referendum is necessary because the sales tax is written into the Michigan Constitution. Voters must approve any constitutional amendments proposed by the legislature. Michigan’s 1963 Constitution originally set the sales tax at 4%. In 1994, an amendment imposed an additional 2% tax, with the proceeds directed to the state’s public schools. The Constitution also exempts prescription drugs and groceries from the sales tax. If the referendum passes, sales of gasoline and diesel fuel will also be exempt from sales tax (although other gas taxes would increase).

A report commissioned by the Michigan legislature estimated raising the sales tax from 6% to 7% will generate about $1.6 billion in additional annual revenues. Most of this new revenue will go to roads and mass transit. Michigan schools are expected to receive an additional $300 million.

Who will win the campaign?

The referendum has sparked a spirited campaign among both supporters and opponents. A group called Protect MI Taxpayers emerged last December to rally opponents under the slogan “Stop Government Pickpocketing!” Since then, at least three other opposition groups have formed, according to the Detroit News, including Citizens Against Middle Class Tax Increases, the Coalition Against Higher Taxes and Special Interest Deals, and Concerned Taxpayers of Michigan.

On the flip side, a group called Safe Roads Yes is leading supporters of the referendum, officially known as Proposal 1. Established groups backing Proposal 1 include the Small Business Association of Michigan and the Michigan Infrastructure & Transportation Association, the trade association that represents the state’s road construction companies.

Political analysts estimate the total cost of the referendum campaign may exceed $15 million. EPIC-MRA, a Michigan-based polling firm, conducted a survey of 600 Michigan voters in late January on Proposal 1. In response to a question offering basic details of the sales tax increase, a slim plurality—46% to 41%—said they would vote for Proposal 1. However, when the pollsters provided more detailed information about Proposal 1, the “No” vote overtook the “Yes” side by a margin of 47% to 38%. EPIC-MRA noted its survey had a 4% margin of error. (It is unclear how much information voters will officially receive, as the Michigan Bureau of Elections has yet to approve final ballot language for Proposal 1.)

Ultimately, the success or failure of the referendum depends on who gets more of their supporters to the polls on May 5. Only 43% of Michigan voters turned out for last November’s statewide elections. And besides Proposal 1, the May 5 election only features contests for city and local offices, which are typically low-turnout affairs.

S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog Bonham’s Cases.

Skip Oliva
Skip Oliva

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