The Mackinac Center for Public Policy is calling on Michigan lawmakers to reduce the income tax rate, citing an increase in tax collections and the budget.
In an August 19 blog post, the nonprofit research and educational institution acknowledged that the state economy has not fully recovered from revenue losses caused by the COVID-19 pandemic but said there has been enough growth to allow for reducing the income tax rate — which is a flat 4.25 percent — to 3.9 percent. That would "allow people to keep more of their money and leave lawmakers with plenty left over for the state budget to grow faster than inflation,” the blog post said, noting that the rapid growth of the state budget throughout the pandemic should facilitate the reduction of taxes.
“People in Michigan have had it tough since March 2020. State lawmakers can afford to lighten the tax burden they put on them if they want. They’ve got the money,” the policy group's post said. “Between the growth in state revenue, excess fund balances and what has already been budgeted, there might be $6 billion in state funds at lawmakers’ disposal for the upcoming fiscal year, even without counting extra federal stimulus spending."
The blog post also noted that the income tax rate would already have been reduced to 3.9 percent "had lawmakers not cancelled a scheduled rate reduction in 2011."
Legislation (H.B. 4631 and H.B. 4632) signed into law in 2011 by then-Gov. Rick Snyder canceled a rate reduction schedule that would have reduced the rate to 3.9 percent by 2015. Under the bills, the rate was frozen at 4.25 percent starting January 1, 2013.
H.B. 4631 and H.B. 4632 also repealed the Michigan business tax and imposed a 6 percent corporate income tax, the cost of which was partially offset by preventing the individual income tax rate from lowering to 3.9 percent.
Legislation to restore the reduction schedule was proposed in 2015 (H.B. 4849) and in 2017 (H.B. 4001), but the bills were unsuccessful.
In 2018 gubernatorial candidate Bill Schuette (R) called for reducing the tax to 3.9 percent as part of his campaign to unseat Gov. Gretchen Whitmer (D).