The Mackinac Center for Public Policy says the time has come to get rid of the income tax increase from 2007. | stock photo
The Mackinac Center for Public Policy says the time has come to get rid of the income tax increase from 2007. | stock photo
It’s time for the Michigan Legislature to lower the state’s income taxes, James Hohman wrote in a blog for the Mackinac Center for Public Policy.
“Michigan lawmakers passed a temporary income tax hike in 2007 that’s still with us,” Hohman said, according to the Mackinac Center. “Despite the COVID-19 pandemic and the governor’s insistence on raising taxes, Michigan’s finances are looking good. Lawmakers can afford to lower the income tax if it is important to them.”
Cutting income back to the pre-2007 level would reduce state revenue by about $870 million, according to Hohman, but it would make the state more competitive for business and encourage growth.
“Even if lawmakers made a substantial reduction to the income tax rate, state revenue would still increase due to overall growth,” Hohman told the Mackinac Center. “In other words, the state could lower the income tax rate and still have more to spend next year than they did this year.”
When Michigan legislators raised the income tax in 2007, the hike was supposed to be temporary.
“Lawmakers were dealing with projected overspending and found that raising taxes was going to be easier than cutting the budget,” he said, according to the Mackinac Center's blog. “The tax hike was going to boost revenue by $700 million for the year, and the rate increase would phase out annually afterward.”
It's worth noting that during her time in the Michigan Legislature, Gov. Gretchen Whitmer voted for the tax increase. But Michigan’s fiscal problems were just beginning as the nation entered the Great Recession.
“State revenue fell by over $3 billion — 11% — from fiscal year 2007-08 to 2010-11, though federal bailouts pushed state spending to new highs and extra federal money lingered well into the state recovery,” Hohman told the Mackinac Center.
The “temporary” income tax increase became permanent, even after the economy recovered. However, Michigan’s economy and revenue from the 2007 tax increase have grown over the years. In 2011, Michigan brought in $25.2 billion and is budgeting $35.4 billion for the current fiscal year, a 17% increase when adjusted for inflation.
“The growth of the state budget means that the temporary problems from 2007 are long gone and the state can afford to lower taxes,” Hohman wrote, according to the Mackinac Center.
Alerts Sign-up