Committee hears testimony on bill to send auto-related sales tax to Michigan's Comprehensive Transportation Fund

LANSING

Lawmakers on the committee heard testimony on House Bill 6079, a proposal to direct sales tax revenues from auto-related purchases into Michigan's Comprehensive Transportation Fund (CTF) rather than leaving most of those collections in the general fund.

Sponsor Representative Bryan Morgan said the bill would not raise taxes but would change where existing sales tax on auto parts and accessories is routed. "When taxpayers pay taxes in transportation-related purposes, they expect those dollars to support transportation," Morgan told the committee, arguing current law directs much of the revenue away from transportation and that only a small share currently reaches the CTF.

Deb Prato, CEO of The Rapid (Grand Rapids'area public transportation), testified the proposal would modernize an almost-century-old sales-tax framework to reflect how people shop today and to stabilize funding for local bus operating (LBO) programs. Prato noted a recent $100 million infusion into LBO moved the reimbursement rate only slightly (from about 29.19% to 29.42%), and said greater, dedicated CTF revenue would allow agencies to increase frequency and expand service: "Funding equals frequency. Frequency equals convenience. Convenience equals ridership."

Members and witnesses discussed several concrete fiscal and implementation details. A committee fiscal estimate referenced during discussion suggested redirecting auto-related sales tax could increase transportation-dedicated receipts by roughly $220 million; members also noted a separate roads package last year produced a net $61.2 million increase in CTF-related funding. Representative Morgan and witnesses emphasized the bill was drafted to avoid taking money from the School Aid Fund.

Committee members pressed witnesses on administration and compliance. Representatives asked whether big-box and online retailers already tag items by SKU and whether Treasury would need to create new reporting systems. Witnesses said most retailers already use SKU-level systems that can categorize items as "auto-related," and that Treasury would oversee reclassification and redistribution; they acknowledged Treasury had not yet provided implementation cost estimates and said they would work with Treasury to minimize burdens on small merchants and rural businesses.

Members also raised distribution and equity questions: how additional CTF revenue would be allocated among urban and rural operators, what portion would reach local bus operating, and what guardrails or reporting requirements could ensure the money results in measurable service improvements. Witnesses described existing mechanics: local bus operating funds are allocated by MDOT via reimbursement rates under Act 51 (which has a statutory reimbursement ceiling cited in testimony), and rural agencies can receive higher percentage assistance in recognition of higher per-trip costs.

Rural transit leaders backed the bill. Heidi Wenzel, director of transportation for the city of Ionia and past president of the Michigan Public Transit Association (testifying by Zoom), described a microtransit pilot that expanded countywide and reported rapid ridership gains. She said many rural riders are "necessity riders" who need reliable access to health care, work and groceries and urged lawmakers to invest sustainably in transit.

Several members asked for explicit reporting and accountability language so redirected funds could be tracked geographically and by service improvements; Representative Morgan said appropriation decisions and any reporting requirements would be set by the Legislature and that he was open to reporting language.

No vote on HB 6079 was taken at the hearing. The committee concluded the testimony and adjourned after reading additional pro cards and excusing absent members.