House fiscal analyst outlines how October 2025 tax package reshapes Michigan road funding

William Hamilton, fiscal clerk for the House Fiscal Agency, told the appropriations subcommittee on state and local transportation that the October 2025 seven‑bill package enacted by the Michigan Legislature creates a separate Neighborhood Road Fund while also changing revenue flows into the existing Michigan Transportation Fund (MTF).

Hamilton said the package increases the state motor fuel tax by 20¢ plus a 1.4% inflation adjustment, making the motor fuel tax 52.4¢ per gallon effective Jan. 1, 2026. He said that change would generate roughly $1.073 billion in additional motor fuel tax revenue on a 12‑month basis but that only a partial amount will be recognized in the 2026 fiscal year because collections will lag the effective date.

"The motor fuel tax is now 52.4¢ per gallon," Hamilton said, noting that the law’s effective date and collection timing mean only eight of 12 months are credited in FY2026. He also said the package immediately eliminates a $600 million individual income tax credit that previously flowed to the MTF, producing a smaller net near‑term MTF gain. On a 12‑month basis Hamilton estimated the net change to MTF revenue at about $350.5 million, with roughly $715 million recognized in FY2026 because of the partial‑year timing.

Hamilton described the…