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In Michigan, Republican governor finds a tax he can live with

By David Eggert

Associated Press

Published: Wednesday, March 20 2013 10:59 p.m. MDT

In this Feb. 23, 2013 photo, a motorist prepares to pump gasoline in Detroit. A coalition of business interests calls for higher taxes to fix Michigan's bad roads, as Gov. Rick Snyder's road funding plan gets little traction in the Legislature. Snyder has proposed an increase in the gasoline tax and higher vehicle registration fees to pay for $1.2 billion per year in road maintenance and repairs over the next decade. (AP Photo/Carlos Osorio)

Associated Press

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LANSING, Mich. — Michigan's venture capitalist-turned-governor, Rick Snyder, needed just five months in office to slash his state's business taxes. Elected on the downside of the recession, he was among a crop of new Republican leaders eager to show they could boost their states' ailing economies with lower taxes.

But two years later, confronting one of the automobile-addicted state's most visible problems — crumbling roads — Snyder has roiled conservatives by calling for a major tax increase.

He has proposed boosting the gasoline tax from 19 cents to 33 cents a gallon and hiking car license plate fees by 60 percent, firmly grabbing what many politicians consider a third rail for consumers — gasoline prices.

"This is common sense," he declared during his budget proposal, adding, "we need to make this investment."

Although a break from the GOP's anti-tax ideology, Snyder's move shows a dicey willingness among some Republican officials to begin raising more revenue. They are a distinct minority in the more than two dozen states the party dominates. But those treading this path are governors facing difficulty delivering basic services, especially roads, with budgets that are strained and must be balanced.

They insist there are actually some taxes that government should rely on more — and that even Republicans can embrace.

In Virginia, GOP Gov. Bob McDonnell recently won approval for overhauling his state's highway maintenance system by raising diesel and retail sales taxes and creating a mechanism for a potential future gasoline tax hike. Pennsylvania Republican Gov. Tom Corbett has called for increasing a wholesale gasoline tax, with most or all of the increase passed to drivers.

Conservative economists disdain higher tax rates for siphoning off money they say would be available for economic activity. But gasoline taxes, some Republican officials say, are a lesser evil because the money traditionally doesn't wind up in general spending, but rather in building infrastructure, which helps boost economic development.

They also like the simple idea behind it. "It's a user fee," Snyder said. "If you use the roads more, you should pay more. If you use the roads less, you should pay less."

People in states with a higher gasoline tax can actually come out ahead financially, said Patrick Anderson, a Michigan economist and limited-government proponent. "If the money builds infrastructure they use to earn money, you can end up in a better place," he said.

But the proposal has stirred turmoil among the state's Republicans, especially those expecting a more traditional cut-other-spending approach for funding core needs.

Snyder has the backing of the business lobby, which complains that key trade routes to Canada, such as Interstates 94 and 69, are a patchwork of potholes and cracks.

"We understand the difference between investing in an asset that has value and adds value to economic activity as opposed to general spending," said Rich Studley, president of the Michigan Chamber of Commerce.

Road investments have felt the effect of motorists driving less and using more fuel-efficient cars, which cut into fuel tax revenues. The state's main transportation fund is at its lowest level in 30 years when adjusted for inflation.

Snyder wants $1.2 billion in new revenue — nearly one-third over current spending — for upgrading the most commercially important corridors. The system needs a permanent fix — one that doesn't involve taking from other programs, he says.

But many in Michigan's GOP-controlled Legislature flatly reject a tax hike.

"No way," said Sen. Jack Brandenburg, a Republican from Harrison Township north of Detroit. Those who want more road money can "not go to the people for it."

The hike in the gasoline tax and vehicle fees would cost families an average of $120 more a year per vehicle.

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