Local-Option Motor Vehicle Registration Taxes

The Governor has suggested the authorization of local-option motor vehicle registration taxes for Michigan counties. This would not be the first time such taxes were authorized.

Public Act 237 of 1987, the Local Road Improvement and Operations Revenue Act, granted counties authority to impose local registration fees up to $25, upon approval of a majority of the electors voting on the issue. Before the law was repealed by sunset in 1992, six counties – Alpena, Eaton, Monroe, Montcalm, Oakland, and Tuscola – put the question to the voters for their approval. Voters in all six counties defeated proposals to impose annual $25 registration fees. No county requested voter authority to impose a local registration fee of less than $25 per year.

CRC looked at the issues surrounding the ballot question specific to Oakland County in 1988 (See Oakland County Vehicle Registration Fee Ballot Issue, Council Comments No. 975, www.crcmich.org/PUBLICAT/1980s/1988/cc0975.pdf). That CRC paper raised the issue of uncoordinated care of the roads as a prospect. Between then and now, federal laws have strengthened the metropolitan planning organizations’ roles in coordinating road care.

Michigan has a long history of funding transportation needs through taxes that resemble user fees, most notably the motor fuel taxes. Local registration taxes, especially when they are levied at a flat rate for all types of vehicles, do not reflect highway use, the damage done to the road surface, or the fact that highway users from throughout the state travel on that community’s roads. They do tax the vehicles that use the roads so revenue generation would be greater in densely populated counties with more vehicles (and presumably more vehicle activity).

Some of the feedback from the efforts in the 1980s was that life and business patterns take people into multiple counties on a regular basis.  Counties are one way to define regions, but defining the tax areas as multiple county regions might better establish a registration tax that benefits the multiple roads traveled on a regular basis.

A number of Michigan’s counties benefit from second homes and tourism. Non-residents that spend as much as half of the year in these communities, or a steady stream of visitors in these communities, use the roads the same as full-time residents. Because these visitors are not residents of these communities, they would not be subject to these taxes and would not directly help with funding care of the roads.

Finally, local governments might consider whether funds received through a county registration tax could replace property taxes levied for road care by many cities, villages, and townships. At a time when local governments are struggling with so many financial issues, moving road funding away from the property tax could allow that millage to be levied for public safety, general operations, or other needs.

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