Oppose
Tax Climate

Impose a Graduated Income Tax in Michigan

Staff Contact

Dan Papineau

Director of Tax Policy & Regulatory Affairs

(517) 371-7669 | dpapineau@michamber.com

Summary of Bill & What It Means to You

SJR C (Irwin):  This joint resolution would eliminate Michigan’s longstanding, fair, flat income tax and replace it with one with a graduated one.  A flat rate income tax is when with one tax rate applying to all incomes.  A graduated income tax rate, also called a progressive tax, is a tax structure that levies increasingly higher tax rates on higher-earning individuals or businesses. Essentially, under this kind of system: the more you make, the more you pay.

Chamber Position

OPPOSE:   A graduated income tax does nothing more than redistribute wealth and punish individuals and job providers for being successful.  It also sends a message to motivated entrepreneurs to find somewhere other than Michigan to start a business, grow, and prosper.  Nothing incentivizes disinvestment and relocation outside of our great state more than taxing hard work and success.

.7% of Michigan taxpayers pay $1 billion in income tax every year while 35% of taxpayers actually get back $245 million just for submitting their income tax forms.  Michigan already ranks high when it comes to income taxes paid per capita AND income taxes paid as a percentage of income.  Why would we want to make the system more imbalanced and worse?

While the detrimental consequences a graduated income tax would have on individuals is apparent, another part of the graduated income tax proposal, as it stands, which is not as obvious but needs to be considered, is its potential to allow for a graduated corporate income tax as well.  After years of unfair and complicated business tax policy in the State, Michigan finally adopted a flat 6% corporate income tax.  36 states have flat corporate income taxes or no corporate taxes at all and at a rate of 6% Michigan is fair and still competitive.

Tax and spend proponents of a graduated income tax are shortsighted and irresponsible.  The Michigan Chamber believes in fiscally prudent tax policy that fosters growth, rewards success, and incentivizes hard work.

Bill Sponsors

This bill is a Job Killer

State Senator Jeff Irwin, District 18

State Senator Jeremy Moss, District 11

State Senator Stephanie Chang, District 1

Related Issues

Support
Partnership Audit Reform

SB 248  will allow for a streamlined, predictable method for reporting changes in federal tax liability to state tax authorities where one does not currently exist.  This promotes tax compliance and efficiency.

The legislation is a part of a national effort to codify the Multistate Tax Commission’s (MTC) model statute (Model Uniform Statute and Regulation for Reporting Adjustments to Federal Taxable Income and Federal Partnership Audit Adjustments) in response to the federal centralized partnership audit regime enacted by Congress in 2015.

Support
Promote More Favorable Treatment of Interest Expense Deductibility

SB 195: This legislation is in reaction to the Michigan Department of Treasury notice that limits a taxpayer’s ability to fully take advantage of the Internal Revenue Codes (IRC) section on interest expense deductibility.  To allow taxpayers to take full advantage of this federal tax provision for state purposes, the Michigan Chamber is looking to codify a more favorable interpretation of the law.

Support
Allowing for Immediate Expensing of Capital Expenditures

HB 4324:  This legislation would allow a business making a capital investment to expense the purchase in the year of acquisition.  By expensing 100% of an asset in one-year, taxable income will be reduced more favorably as opposed to having to expense the asset over a number of years.  The legislation also reduced compliance burdens for taxpayers because it aligns Michigan with federal depreciation methodologies.

Oppose
Eliminating the Student Assessments Two Years in a Row

HB 4310 and HB 4311:  This legislation would eliminate the requirement that k-12 students take the annual assessment designed to gauge how well students are mastering state standards.

Support
Eliminating the Tax on Personal Protection Equipment

HB 4224 and HB 4225:  This legislation exempts from sales and use tax the sale of personal protective equipment (PPE) and supplies to a person engaged in a business enterprise that has implemented a COVID-19 safety protocol plan.  The exemptions would be retroactive and apply beginning March 10, 2020, through December 31, 2021.

Support
Small Business Tax Cut

HB 4288: This legislation is expected to save businesses organized as s-corporations, partnerships, limited partnerships, limited liability partnerships and limited liability companies almost $200 million in taxes per year.

Business types listed above, commonly referred to as “passthrough” businesses, will be able to fully deduct their state and local taxes (SALT) from their federal income under changes made in HB 4288 thereby, significantly reducing their federal tax liability.  Because the legislation shifts the tax away from an individual and to the business entity, taxpayers can get out from underneath the federal $10,000 cap on SALT deductions.

Oppose
Impose a Graduated Income Tax in Michigan

SJR C (Irwin):  This joint resolution would eliminate Michigan’s longstanding, fair, flat income tax and replace it with one with a graduated one.  A flat rate income tax is when with one tax rate applying to all incomes.  A graduated income tax rate, also called a progressive tax, is a tax structure that levies increasingly higher tax rates on higher-earning individuals or businesses. Essentially, under this kind of system: the more you make, the more you pay.

Oppose
Violate Michigan’s Constitutional Restrictions on Local Taxes Funding School Operations

SB 20 (Zorn):  The legislation would expand the allowable use of “Sinking Funds” to be used for the purchase of school busses.  Sinking Funds are a special pots of resources a school district can request from taxpayers to use for very limited, capital improvements to real property.  Sinking funds are funded by local property tax millages.