Watch: Bill aims to send more auto taxes to transportation fund

Podcast host Greg Bishop explains that House Bill 6079 would apply to sales taxes collected on motor vehicles, vehicle parts and accessories.

In committee testimony, Morgan explained that many consumers assume taxes paid on transportation-related purchases already support transportation infrastructure, but that's not actually the case.

“Under the current system, the vast majority of sales tax collected on many auto parts, fluids and accessories is redirected to the general fund to support unrelated budget items,” Morgan said. “Only about 7% of those dollars ultimately make their way to the Comprehensive Transportation Fund to support transportation services.”

This is because, decades ago when the tax was first implemented, consumers typically purchased vehicle parts from dealerships or dedicated auto parts stores. Today though, many buy the same products from big-box retailers, warehouse clubs or online sellers.

“When a family buys a set of tires at Costco or replaces windshield wipers at a Meijer, they're still making transportation-related purchases,” Morgan said. “Yet, the sales tax generated from those purchases often does not flow to transportation the same way.”

According to a Michigan House Fiscal Agency analysis cited on the podcast, the legislation would classify purchases based on the product being sold rather than the type of business selling it.

The analysis estimates the bill’s changes would increase the Comprehensive Transportation Fund’s revenue by about $225 million annually beginning in fiscal year 2028. The state’s general fund revenue would see an equivalent reduction.

Morgan explained the proposal would not increase taxes.

“This bill does not raise taxes by a single cent,” he said. “Taxpayers are already paying these taxes. It's just how we categorize them now.”

The Comprehensive Transportation Fund supports public transit, rail services and other transportation programs. Morgan said the additional state funding could help reduce pressure on local governments that increasingly rely on property tax millages to fund transit operations.

“My hope would be that you would see less demand on the local property tax base to fund transportation because the state would be doing more of our part to support those services throughout Michigan,” he said.

The bill is currently waiting to be considered by the Committee on Transportation and Infrastructure. It has received some bipartisan support from Republicans.

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