Treasurer: Michigan Income Tax to Drop for One Year

by Scott McClallen

 

Michiganders should see $50 of savings after the state income tax decreases to 4.05% for one year.

“Michigan’s strong economic position has led to a reduction in the state income tax from 4.25% to 4.05% for 2023,” Treasurer Rachael Eubanks said in a statement. “When Michiganders file their 2023 state income taxes in 2024, they will see the rate adjustment in the form of less tax owed or a larger refund.”

In 2015, Michigan Republicans enacted a law requiring a reduction of the state income tax if the general fund grew faster than the rate of inflation in any year starting in 2023.

Michigan Democrats tried to avoid this trigger through House Bill 4001, which aimed to spend $800 million to cut Michigan tax filers $180 checks. However, Republicans refused to give the plan immediate effect, which killed the checks. Instead, Republicans said the 2015 law would permanently drop the income tax rate to 4.05%.

“As a result of our growing economy and strong fiscal management, Michigan’s state income tax will decrease to its lowest in 15 years,” Gov. Gretchen Whitmer said in a statement. “Our state is headed in the right direction, bolstered by low unemployment, projects bringing jobs and supply chains home, and fiscally responsible, bipartisan leadership that took us from a projected $3.5 billion deficit in 2020 to a $9.2 billion surplus this year, paid down $14 billion in debt, and brought the rainy-day fund to an all-time high.”

Attorney General Dana Nessel issued a legal opinion previously this week in which she stated the tax reduction will apply only to the tax year 2023. It requires consensus by an annual reevaluation by the Treasurer, Senate Fiscal Agency, and House Fiscal Agency. It is anticipated the formal step of adopting a consensus with updated revenue estimates will occur as a procedural matter at the May Consensus Revenue Estimating Conference.

The tax change will be effective Jan. 1, 2023 for tax year 2023.

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Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on Forbes.com and FEE.org. Previously, he worked as a financial analyst at Pepsi.

 

 

 

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