LANSING, Mich. (Michigan News Source) – Michigan lawmakers recently gave the state’s gas tax a makeover, assuring drivers it’ll all “even out” in the end.
Translation: sometimes you’ll pay more, sometimes less – but don’t gripe, because it’s “for the roads.”
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The overhaul, a package of four bills approved by both chambers and signed by Democratic Governor Gretchen Whitmer on October 7, revamps how gas and diesel are taxed, with the goal of funneling every cent directly into road repairs.
With the current system, in addition to the wholesale (base) price of gas and the retail markup, Michiganders are shelling out the following in taxes when they go to the pump:
- 31¢ per gallon – state motor fuel tax
- 18.4¢ per gallon – federal fuel tax
- 6% state sales tax – calculated based on the wholesale (base) price, plus both of the per-gallon taxes mentioned above
The gas taxes fund roads and public transit, while sales tax revenue is spread across multiple areas – including schools, local governments, and environmental regulation programs. But now, under the new system, all Michigan taxes paid when drivers are fueling up will go into the transportation fund.
The new formula.
Starting January 1, 2026 (Happy New Year!), Michigan drivers will see a new formula for how gas taxes are calculated. On that date, the state’s 6% sales tax on fuel will be replaced with a 20-cent-per-gallon increase in the fuel tax – a swap that takes full effect as the new year begins:
- 51¢ per gallon – state motor fuel tax
- 18.4¢ per gallon – federal fuel tax
Revenue neutral? It depends.
In a nutshell, Michiganders will pay less in gas taxes than the previous system when gas prices are higher and more than the previous system when gas prices are lower. That’s because the old system was based on a percentage sales tax, not a flat amount per gallon. Lawmakers insist, though, that the new setup is “revenue neutral.”
State Rep. Tom Kunse (R-Clare) told MLive he’s confident the change will be revenue neutral or better, adding, “It’s been 12 years of trying to get all taxes paid at the pump to go to roads,” he said. “I think this is a win. We got the funding, now we still need to make sure we spend it as fiscally responsible as possible.”
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So, will your gas bill really change? Probably not by much. But when it comes to something Americans see the price of several times a day, even small changes get noticed.
In the end, whether the plan really stays “revenue neutral” will hinge on fuel prices and how the state handles the new system. Lawmakers say it’s all about getting more money to finally fix Michigan’s roads – a pledge drivers have heard more times than they’ve hit a pothole.
