Whitmer's $3B plan to fix Michigan roads calls for more corporate, marijuana taxes

• Michigan Gov. Gretchen Whitmer unveils $3B plan to fix roads
• Proposal calls for higher corporate and marijuana taxes, though details are unclear
• Whitmer also wants to put all taxes paid at pump towards roads

LANSING — Gov. Gretchen Whitmer is calling for new taxes on corporations and marijuana as part of what she's calling a $3 billion plan to fix Michigan roads. 

The plan will “make sure that corporations pay their fair share to do business in Michigan” and raise $1.7 billion a year from them “without putting the costs on the backs of everyday Michiganders,” her office said in an announcement.

The plan did not specify how or if Whitmer wants to raise the state’s 6% corporate income tax. Her office expects that to be a point of negotiation with the Michigan Legislature, including new Republican leadership in the House. 

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It’s the latest infrastructure plan from Whitmer, who won office in 2018 on a pledge to “fix the damn roads.” 

Her 2019 proposal to raise fuel taxes by 45 cents per gallon was not taken up in the Legislature. The next year, Whitmer went it alone with a $3.5 billion bonding plan for upkeep and reconstruction of some of Michigan’s busiest roadways, but the state will spend decades paying off the debt and the money is drying up. 

In announcing her new plan, Whitmer’s office said the new business tax plan is aimed at “big tech industries” such as Amazon because “these corporations haul heavy weights using semi-trucks that deteriorate roads and bridges faster than commuter vehicles.” 

Michigan allows some of the highest truck weight limits in the nation, which some groups have pointed to as a source of road deterioration, but there’s been little interest from policymakers in revising the limits since Whitmer floated a lower limit in 2019.

Whitmer will also propose levying an additional 32% wholesale tax on marijuana products to match those applied to tobacco products like cigarettes. Her office’s budget recommendation last week also called for expanding that tax to nicotine products that don’t contain tobacco, like vapes and pouches, which have avoided taxation for years.

Michigan currently has a 10% excise tax on recreational marijuana — a portion of which goes to the roads. That's lower than some states like Washington (37% excise tax), Montana (20%) and California (15%) but similar to regional neighbors like Ohio and Minnesota, both of which also have a 10% excise tax.

The governor also wants to devote another $1.2 billion for roads by ensuring all money paid at the pump goes toward road fixes. That's not currently the case in Michigan, which is among a handful of states that also applies its 6% sales tax to fuel purchases, which generated about $967 million in 2023.

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Whitmer is proposing to remove the sales tax on fuel and replace it with a flat tax “based on the historical average” of what the 6% sales tax has generated, said spokesperson Bobby Leddy.

Policy makers for years have debated how to redirect or eliminate the sales tax on fuel without reducing revenue for schools and local governments that are funded through the sales tax. 

It's not immediately clear how Whitmer plans to address that potential shortfall, but her office said her plan would hold "the School Aid Fund" harmless. 

More for local roads

While Whitmer’s earlier bonding program did not help fund local road repairs, her office said the new plan will include $1 billion a year in funding for local roads, which are maintained by different governments than state and county highways.

Whitmer's office says she is also proposing "fiscally responsible" cuts to other portions of the budget, freeing up another $500 million for roads, but did not specify what those cuts would entail.

Crain’s Detroit Business reported this week that the governor intended to propose an increase in the corporate income tax, but the governor’s office indicated the priority is ensuring a majority of funds raised comes from the business community and is not set on a specific approach.

The corporate income tax is a relatively small source of funds, bringing in about $1.6 billion a year for a budget that has topped $80 billion in recent years. By contrast, Michigan’s 6% sales tax brings in about $10.6 billion.

As an indication of just how much is on the table, Whitmer is also floating the possibility of a broad tax on the “spam or pop-up ads” Michiganders encounter online, Leddy said

State House Republicans last year proposed a road funding plan that would redirect funding currently allocated to schools and a signature economic development incentive program toward road repairs without raising taxes. 

House Speaker Matt Hall, R-Richland Township, said last week he would be open to raising the corporate income tax as part of a larger deal restructuring economic incentives. 

“When it comes to roads, what I support is the plan I put forward, which is dedicating (corporate income tax) to roads. And you see how we can do that without raising taxes,” he said. 

If the governor or business groups want to maintain economic incentives, “maybe we pay for it out of higher corporate income taxes,” Hall said. 

Mixed reaction in Lansing

Some conservatives were quick to criticize Whitmer’s proposal as released Monday, however. 

Senate Minority Leader Aric Nesbitt, a Republican from Porter Township running for governor, blasted the proposal and argued Whitmer “has no real plan.”

“She wants to reach deeper into the coffers of Michigan businesses and impose unspecified fees and taxes that will surely trickle back down to consumers,” he said in a statement.

Business Leaders For Michigan, which represents the state’s largest companies, “appreciates” the various proposals from Whitmer and lawmakers, President and CEO Jeff Donofrio said in a statement. But “raising the state’s corporate income tax would further strain businesses—especially small ones—increase costs for consumers and have a chilling effect on Michigan’s ability to attract new jobs and investment,” he said. 

Whitmer’s proposal also calls for $250 million a year dedicated to public transit projects. That was cheered by the Michigan Public Transit Association, whose Executive Director John Dulmes noted many bus systems across the state face funding shortfalls amid declining state support.

The Michigan Infrastructure & Transportation Association, which represents road builders, welcomed Whitmer’s proposal and called on state leaders to pass a compromise plan.