Offsets to Increased Transportation Taxes

Before discussing specific transportation reforms and tax increases, we must consider how the increased tax burden for transportation can be paid for. Offsets can come from cost savings and from reductions in spending in other parts of state government. One place to start looking for cost saving opportunities is on a list of proposed spending reforms proposed by the Mackinac Center. The Center has a list of proposals that could save the state $1.8 billion per year, ranging from privatization of prisons, to Medicaid reform, to competitive bidding for K12 health care insurance.[119] While many of the spending reforms would require major changes in the way the state operates, and most would not be possible with a “business as usual” mentality, implementing just one-third of them would offset all of the state tax increases that are being proposed to cover investments in the transportation system.

One especially interesting opportunity for spending offsets relates to Michigan’s 21st Century Jobs Fund – a $2 billion dollar, 10-year program to provide grants to business startups and jobs related to nonprofit organizations.[120] Press releases on the Fund suggest that $800 million is for “competitive technologies in targeted sectors of the economy.” The Fund is largely financed through use of the state’s tobacco settlement money. Is this money better spent trying to pick private sector “winners and losers” along with funding of state non-profit organizations, or would it be better spent on transportation infrastructure expansion projects that could help establish a better climate for private sector investment. Elimination of this program could result in a spending offset of at least $50 million per year in proposed new transportation investment.