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Michigan’s Personal Income Tax May Automatically Rollback in 2023

Advocacy News – April 13, 2021

Back in 2015 business leaders, including the Michigan Chamber’s President and CEO, Rich Studley, gathered to witness then-Governor Rick Snyder sign into law a $1.2 billion road funding plan. While the Michigan Chamber acknowledged at the time the proposal was not a full and complete fix for our deteriorating infrastructure, it was a good start and, most importantly, was a plan that could actually get enacted.

The bulk of the proposal consisted of $600 million in new revenue and $600 million in redirecting existing revenue towards our transportation infrastructure.

A little known and seemingly forgotten provision in the 2015 law, was a trigger that would reduce the income tax if year-over-year tax revenues to the State’s General Fund increased by more than 1.425 times the rate of inflation. Due to timing and the recovery from the COVID-19 pandemic, revenue is expected to exceed the limit in FY 2021-22, thus triggering rate reductions beginning January 1, 2023.

Under current economic forecasts, the mandated rate reductions are expected to lower FY 2022-23 General Fund revenue by $193.0 million (partial fiscal year) and $439.0 million in FY 2023-24. The current 4.25% income tax rate would drop roughly to 4.15%.

The question becomes, should policymakers delay the trigger, eliminate it altogether, alter it, or simply let it take effect?

The Michigan Chamber is looking for your input on what should be done with the income tax trigger. While the state budget has gone up significantly over time and state government spending is at an all-time high, many argue more revenue is needed for infrastructure, workforce training, affordable daycare, etc…

If you have thoughts on this matter or would like to discuss it further, please contact Dan Papineau at dpapineau@michamber.com

Advocacy News – April 13, 2021

Back in 2015 business leaders, including the Michigan Chamber’s President and CEO, Rich Studley, gathered to witness then-Governor Rick Snyder sign into law a $1.2 billion road funding plan. While the Michigan Chamber acknowledged at the time the proposal was not a full and complete fix for our deteriorating infrastructure, it was a good start and, most importantly, was a plan that could actually get enacted.

The bulk of the proposal consisted of $600 million in new revenue and $600 million in redirecting existing revenue towards our transportation infrastructure.

A little known and seemingly forgotten provision in the 2015 law, was a trigger that would reduce the income tax if year-over-year tax revenues to the State’s General Fund increased by more than 1.425 times the rate of inflation. Due to timing and the recovery from the COVID-19 pandemic, revenue is expected to exceed the limit in FY 2021-22, thus triggering rate reductions beginning January 1, 2023.

Under current economic forecasts, the mandated rate reductions are expected to lower FY 2022-23 General Fund revenue by $193.0 million (partial fiscal year) and $439.0 million in FY 2023-24. The current 4.25% income tax rate would drop roughly to 4.15%.

The question becomes, should policymakers delay the trigger, eliminate it altogether, alter it, or simply let it take effect?

The Michigan Chamber is looking for your input on what should be done with the income tax trigger. While the state budget has gone up significantly over time and state government spending is at an all-time high, many argue more revenue is needed for infrastructure, workforce training, affordable daycare, etc…

If you have thoughts on this matter or would like to discuss it further, please contact Dan Papineau at dpapineau@michamber.com