Lower Michigan’s Tax Rate
Is it time to lower Michigan’s personal income tax?
You might remember that the Michigan Legislature and former Michigan Governor Jennifer Granholm raised our personal income tax in 2007. Democrat Gov. Granholm signed the biggest tax increase in Michigan history. The personal income tax raised to 4.35 percent (from 3.95 percent).
Now, Mackinac Center for Public Policy believes it is time to revisit that decision.
Why do they think so? (Because the tax revenues have grown and the budget is now balanced.)
Did you know that Michigan collected less taxes the year after imposing an 11.5 percent tax hike? Prior to that increase, the personal income tax brought in $6.4 billion to Michigan. By the 2010 fiscal year, it had decreased to $5.5 billion.
How does an increase in the tax rate decrease tax revenues? (Because of economic activity decreasing.)
Michigan’s economy has now rebounded and they believe Lansing can afford to let us keep more of our income. In 2013, the state collected $8.3 billion in individual income taxes and is projected to bring in $8.5 billion during the current fiscal year.
Now, let us think about this, Michigan survived on $5.5 billion from our personal income tax rate of 3.95 percent just four years ago — that is $3 billion less than we currently bring in. They believe that reducing the individual income tax rate to 3.75 percent is justified.
Based on an incremental revenue impact sheet from the state's Senate Fiscal Agency, a 3.75 percent rate would bring in roughly $1.1 billion less than what it currently brings in — meaning the state would still bring in $7.4 billion in personal income tax.
If we make this change, it would make Michigan more competitive with its neighboring states. Our income tax rate advantage over Ohio and Wisconsin would increase and Michigan would improve against Indiana and Illinois.
Also, it would allow us as citizens to have more money in our pockets and decide where we want to spend our money — not the state legislature.
What do you think?
Call me today on the Live with Renk show, Monday through Friday 9 a.m. to noon, to let me know your thoughts at 269-441-9595.