How Road Funding Works

Road construction in Michigan is primarily paid for with revenues from fuel taxes and vehicle registration fees. Since these taxes are paid by people driving vehicles on public roads, they function as a user fee.

Taxes motorists pay do not meet the strict definition of user fees, however. Vehicle registration taxes for passenger vehicles, for example, are based on their value rather than their estimated wear on the roads.[6] Further, hybrid and electric cars tend to be heavier and thus cause more wear on the roads, but owners of these vehicles buy less fuel and pay less in fuel taxes. People purchasing fuel for use in lawnmowers, snowmobiles or other recreational vehicles also pay for road maintenance.

Despite these divergences, the bulk of taxed fuel in Michigan is purchased for use by vehicles operating on government-funded roads.[*] But these taxes also can be appropriated for other purposes, which reduces their functioning as user fees. For instance, 10 percent of fuel taxes go to transit operations.[7]

[*] David Zin, Michigan Senate Fiscal Agency chief economist, email correspondence with James Hohman, Jan. 22, 2015. These taxes also can be diverted, breaking further from the user fee concept. For instance, 10 percent of fuel taxes go to fund public transit operations.