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As discussed in a previous section, it is likely that Michigan’s fuel tax revenue will face downward pressure that will intensify with time. Average fuel efficiency is expected to continue to increase, driven by a combination of consumer demand and federal mandates on automakers. All else equal, increased fuel efficiency leads to less fuel tax revenue. More electric vehicle use will put additional downward pressure on this revenue, as owners of these vehicles pay nothing in fuel taxes. The higher registration fees the state charges for electric vehicles will not make a substantial difference to this future revenue decline.
As the projections generated for this report show, Michigan policymakers would need to hike the fuel tax rate substantially to maintain a sufficient and dedicated revenue stream that would enable the state to put roads back together faster than they fall apart. Recent history suggests that such tax hikes are likely to be unpopular with voters. Given these limitations of the current fuel tax, state policymakers should look to MBUFs to secure a long-lasting and stable source of road funding for the future.
