Michigan road funding comes from four main sources: a state motor fuel tax of 52.4 cents per gallon, annual vehicle registration fees (with extra surcharges for electric vehicles), federal highway grants, and local property tax millages passed by individual communities. Those streams feed a Michigan Transportation Fund that collects roughly $3.9 billion a year, which is then split by a formula written in 1951 among the state highway system, 83 county road commissions, and more than 500 cities and villages. Even at that scale, about a third of Michigan’s roads still rate as poor.
What You Pay at the Pump
Every gallon of gasoline or diesel sold in Michigan carries a state fuel tax under the Motor Fuel Tax Act, Public Act 403 of 2000. As of January 1, 2026, that rate is 52.4 cents per gallon for both gasoline and diesel.1State of Michigan. Notice Concerning Inflation Adjusted Fuel Tax Rate That’s a sharp jump from the 31.0 cents drivers paid through 2025, the result of a statutory reset that raised the base to 51 cents before a 2.7 percent inflation adjustment was layered on top.
The inflation mechanism works year to year. Each January, the Michigan Department of Treasury multiplies the prior year’s rate by one plus the inflation rate, caps the increase at 5 percent, and rounds up to the nearest tenth of a cent. The statute pauses that annual escalator in certain years and then resumes it, which is why 2026 saw a large step rather than a gradual climb.2Michigan Legislature. Michigan Compiled Laws – Section 207.1008 – Motor Fuel Tax Act From 2027 onward, the same formula continues indefinitely unless the legislature steps in.
The tax is collected from wholesalers before fuel reaches the pump, so you pay it inside the posted price. On top of the state levy, the federal government adds its own excise: 18.4 cents per gallon on gasoline and 24.4 cents on diesel.3U.S. Energy Information Administration. How Much Tax Do We Pay on a Gallon of Gasoline and on a Gallon of Diesel Fuel Because heavier drivers burn more fuel, the tax works as a rough user fee. That logic weakens fast with fuel-efficient and electric vehicles, and the state is already trying to patch the gap.
Registration Fees and the EV Surcharge
The second major state stream comes from the Secretary of State. Under the Michigan Vehicle Code, Public Act 300 of 1949, every vehicle on public roads must be registered annually.4Michigan Legislature. Michigan Compiled Laws – Act 300 of 1949 – Michigan Vehicle Code For passenger vehicles, the fee is based on the manufacturer’s suggested retail price from the year the vehicle was built, then drops by a set percentage over each of the first few years of ownership before leveling off. Vehicles manufactured before 1984 use a weight-based schedule instead.5State of Michigan. License Plates and Tabs
Electric vehicles pay no fuel tax, so Michigan charges them an annual surcharge collected with the regular registration renewal:
- $267 for electric passenger vehicles
- $367 for electric trucks and buses
- $113 for plug-in hybrid passenger vehicles
- $183 for plug-in hybrid trucks and buses5State of Michigan. License Plates and Tabs
Commercial driver licenses and overweight hauling permits add smaller amounts. Heavy loads cause disproportionate wear, so operators responsible for that damage pay a premium.
Federal Highway Dollars
Federal fuel tax collections flow into the Highway Trust Fund, which sends money back to states through formula grants tied to road mileage, population, and similar factors. The Infrastructure Investment and Jobs Act, signed in 2021, pushed those numbers up. Michigan was projected to receive about $7.8 billion in formula highway and bridge funding over five years, roughly 30 percent more than the prior authorization.6U.S. Department of Transportation. The Bipartisan Infrastructure Law Will Deliver for Michigan State agencies and Michigan-based stakeholders have been awarded over $16 billion in combined federal infrastructure funding since 2022, with more awards expected through 2026.7Michigan.gov. Michigan Infrastructure Office
Matching Requirements
Federal highway aid comes with strings. For most non-Interstate projects, the standard split is 80 percent federal and 20 percent state or local; Interstate work gets a 90 percent federal share.8Office of the Law Revision Counsel. 23 USC 120 – Federal Share Payable Michigan has to put up its share to unlock the federal piece. No match, no money.9US Department of Transportation. Understanding Non-Federal Match Requirements
Competitive Grants
Beyond formula money, communities can chase competitive federal grants. The BUILD/RAISE program funds surface transportation projects with significant local or regional impact, especially multi-modal work that doesn’t fit other channels. The PROTECT Formula Program, with $1.52 billion in nationwide contract authority for fiscal year 2026, pays to harden roads and bridges against flooding and extreme weather.10Federal Highway Administration. PROTECT Formula Program
A Trust Fund in Trouble
The federal gas tax has not been raised since 1993, while construction costs and fuel efficiency have both climbed. The Highway Trust Fund is projected to become insolvent by 2028, at which point federal highway spending could face cuts approaching 46 percent. If Congress doesn’t act, Michigan would lose billions in expected aid, and every project that depends on a federal match would be in jeopardy.
How State Money Gets Divided
Public Act 51 of 1951 controls where every dollar of state-collected road revenue goes.11Michigan Legislature. Michigan Compiled Laws – Act 51 of 1951 – Michigan Transportation Fund Act Before the main distribution, the fund covers off-the-top deductions for administrative costs, the Comprehensive Transportation Fund (which supports public transit and rail), and other earmarked programs. The remaining balance then splits three ways:
- 39.1 percent to the State Trunkline Fund, which MDOT uses to maintain all state highways, U.S. routes, and Interstate corridors
- 39.1 percent to Michigan’s 83 county road commissions for county primary and local roads
- 21.8 percent to 531 incorporated cities and villages for their local street systems
Those percentages are fixed in statute and have held for decades.12House Fiscal Agency. Fiscal Brief – MTF Distribution Formula to Local Road Agencies Within the county and city shares, money is further divided among individual jurisdictions based on vehicle registrations and total road miles. In fiscal year 2024–25, total Michigan Transportation Fund revenue was estimated at roughly $3.93 billion.
When Local Governments Ask for More
State and federal allocations rarely cover the full cost of neighborhood streets, so local governments turn to voters. Property tax millages dedicated to roads are the most common tool, and they vary widely. Some communities levy a fraction of a mill; others go as high as 2.5 mills, usually for a fixed term that must be renewed at the ballot.
Municipalities also use special assessments, where property owners on a particular street pay a one-time charge for a full reconstruction of their frontage. City councils sometimes transfer general fund dollars to urgent road needs as well. These local tools exist because the Act 51 formula, stable as it is, was never designed to cover every residential side street to a high standard. Communities that want better roads than the formula alone delivers have to raise the money themselves.
Why Roads Are Still Bad
About 33 percent of Michigan roads rate as poor on the most recent statewide assessment. Harsh winters, heavy truck traffic, and decades of deferred maintenance have pushed a significant share of the system past that threshold. The 2026 fuel tax increase helps, but construction inflation in materials like asphalt and concrete tends to run ahead of general inflation, which eats gains quickly. A growing fleet of electric and highly fuel-efficient vehicles generates less fuel tax per mile driven, and while EV surcharges patch some of that, the gap keeps widening as electrification spreads.
What Might Replace the Fuel Tax
Michigan is studying a road usage charge, sometimes called a mileage-based user fee, that would charge drivers by miles traveled rather than gallons purchased. Public Act 22 of 2025 directs MDOT to develop a pilot program and establish a technical advisory committee.13State of Michigan. Road Usage Charges The idea: if the system is meant to charge for road use, measuring actual road use beats using fuel purchases as a proxy. A per-mile charge would apply equally to gasoline cars, hybrids, and EVs. Multiple states have already run pilots, and a 20-state Eastern Transportation Coalition pilot is testing the technology and public acceptance through mid-2026.14The Eastern Transportation Coalition. TETC MBUF Pilot
Privacy is the biggest hurdle. Any mileage-tracking system has to record how far you drive and, depending on the technology, potentially where. The advisory committee will have to work through data governance, enforcement, and whether drivers can choose among plug-in devices, telematics, or manual odometer reads. The pilot is still early, and no timeline exists for a full transition away from the fuel tax.