According to reports, our Michigan income tax rate is going down, but then it’s going back up.
The 2023 rate dipped slightly because state revenues increased enough to trigger a cut for taxpayers.
Republican lawmakers passed legislation offering that tax relief, and they went to court hoping to keep the cut in place. But a new court ruling has put that in jeopardy.
The judge’s lengthy decision filled 30 pages, but it said the Republican legislature in 2015 wrote a vague law not clarifying whether those kinds of tax cuts were supposed to become permanent.
That’s not what the Republicans who brought the case say they intended for the tax rates to ratchet down permanently if the income went up—for now, though, based on the decision, that will not happen.
The then-Republican legislature looked to reduce the state income tax as long as there was money to pay for it.
So, in the 2022 tax year, you paid 4.25%. In 2023, you will pay a tiny bit less at 4.05%. But that’s a big tax refund: three-quarters of a billion dollars goes back into Michigan taxpayer’s pockets.
Republican legislators and businesses went to judge Elizabeth Gleicher, asking her to keep the 2023 rate of 4.05% in 2024. The state, led by Attorney General Dana Nessel, believes the tax cut should only be temporary and wants it to revert back to 4.25%.
In her ruling, Gleicher said the situation was temporary.
“Logically, it would make little sense to provide a permanent tax cut based on economic circumstances that exist in one calendar year,” said Gleicher.
The Mackinac Policy Center says logically, that’s precisely what the legislature approved.
The Mackinac Center’s senior legal analyst, Patrick Wright, is planning an immediate appeal.
“It’s a temporary speed bump,” said Wright. “I don’t think that the logic of the case that the judge applied was all that strong. And so I think we’ll be able to argue around it pretty easily.”
He said the Republican legislature wanted Michigan’s five million taxpayers to get an income tax cut whenever possible.
“Michigan survived until 1967 without one,” Wright said. “There are nine states currently that don’t have an income tax.”
So the next step is to the appeals court and, more than likely, the Michigan Supreme Court.
It should be sometime next year before we know where the final Michigan 2024 income tax rate settles.