Advocacy News – Sept. 26, 2025
What’s new: On Thursday night, leaders in the House and Senate, along with the Governor, announced they had reached a tentative deal to finalize the 2025–26 state budget ahead of the Oct. 1 deadline. The agreement includes nearly $2 billion in additional annual funding for roads. The announcement came after the Michigan House passed several pieces of legislation tied to the negotiated budget — including a series of tax increases aimed at businesses.
Why it matters: A key challenge in the budget negotiations has been balancing competing priorities: identifying billions in additional funding for road projects across the state (a top priority for the Governor), reducing waste and increasing government efficiency (a focus of the House), and protecting key programs such as Medicaid (a priority for the Senate). It now appears that the House, Senate and Governor may have reached a deal, with some of the key revenue components up for a vote Thursday night. While the full details of the budget — including any potential cuts — remain largely unknown (and may still need to be hashed out), the key revenue elements of the agreement include:
- “Decoupling” Michigan’s tax law from federal tax changes in the One Big Beautiful Bill Act (OBBBA). Currently, Michigan businesses file state taxes based on their federal adjusted taxable income. HB 4961 eliminates the benefits of the federal tax cuts for Michigan businesses, including small businesses, on their state level tax returns. Estimated revenue impact: $677 million.
- Insurance Provider Assessment (IPA). HB 4968 makes changes to Michigan’s (current) insurance provider assessment structure. Michigan uses a provider tax on certain healthcare entities to draw additional federal Medicaid funding, contingent on a waiver from the Centers for Medicare and Medicaid Services (CMS). Under the new One Big Beautiful Bill Act, states continuing this practice without a waiver face steep federal penalties. To comply, Michigan must either secure a waiver or redesign its tax structure to meet the new federal standards. The Michigan Department of Health and Human Services is now tasked with developing a compliant alternative and will have the power to set the rate themselves to achieve the necessary funding. The concern is that this tax change will increase costs for insurers, which will be passed through to health insurance purchasers, the bulk of which are Michigan employers. Estimated revenue impact: Allows the state to continue to collect approximately $650.0 million annually.
- Wholesale tax on marijuana. HB 4951 would levy and impose (in addition to all other taxes) an excise tax at the rate of 24% on the wholesale price of marijuana sold or otherwise transferred. Estimated revenue impact: $420 million.
What we’re saying: While we are encouraged a government shutdown maybe be avoided, the lack of transparency around key elements of the state budget — including the final topline number — makes it difficult to conduct a true cost-benefit analysis. However, we remain concerned that the revenue pieces — especially the “decoupling” changes — will negatively impact businesses. Specifically, decoupling from federal tax cuts will result in tax increases for Michigan businesses, including small businesses and employers, and substantially increase the administrative burden on Michal businesses of all sizes. Michigan must remain competitive with other states, especially because the federal tax policy changes were established to make companies in all states more competitive with foreign competitors.
Go deeper: Read the full memo outlining our opposition to decoupling or contact Randy Gross with questions.