In Blog: Factually Speaking

Michigan seems to have caught a case of the “Kansas.” I woke up last week to reports that Michigan is considering eliminating, or at least cutting, its income tax. Let me be clear: this type of Kansas-style tax cut is not a cure for Michigan’s economic ails, and instead will only bring pain to the state. Cutting Michigan’s income tax will not create jobs and will not grow our economy. It will, however, give a big tax break to Michigan’s top earners, while hurting our schools, roads, parks and other services that are so important to our economy and quality of life.

While Michigan’s economy has been recovering from the decade-long recession that hit Michigan harder than any other state in the nation, it hasn’t fully rebounded. However, drastically cutting or eliminating taxes, as Kansas did, is not the way to improve our economic outlook. In fact, in the years following Kansas’ tax cut, the state had little to no job growth, failed to grow economically and entered into a perpetual budget crisis, leaving the state unable to pay its basic bills. Michigan does not want to follow this same prescription.

Cutting Michigan’s income taxes will starve the state budget and harm Michigan residents.

  • Income taxes make up about one-third of total state revenue.
  • Income taxes provide over one-fifth of state funds for schools.
  • About $7 out of every $10 of our state General Fund is from income taxes.
  • A 0.1 percentage point reduction (from 4.25% to 4.15%) in the state income tax would cut state revenues by between $230 million to $250 million.
  • Eliminating the income tax would pull over $9 billion out of our state budget.

Eliminating the income tax would mean that Michigan couldn’t pay for even the most basic public services Michigan residents rely on, like clean air and water, drivable roads, public safety and good schools. Based on current projections, eliminating the income tax would leave the state without enough to pay for even one of the state’s most vital departments, Health and Human Services, which provides care for children in foster care, assistance to families who have fallen on hard times and mental health care to those who can’t afford it. We are still reeling from the Flint water crisis. Due to years of underfunding our transportation network, our needs are growing (and our roads will not be fully fixed by our recent transportation plan). And statewide, schools are still struggling to provide a high-quality education for our children.

Finally, to make things worse, this will primarily help those that least need it. Instead of asking wealthy, powerful interests to carry their share of the load, it will provide the biggest benefit to these people while providing little to no tax benefit to hard-working people who make more modest incomes. So at the same time that we are draining our resources to provide for good schools, colleges, and investments in our roads and communities—the things that are really important for economic growth and security—we are creating a tax system that favors the wealthy even more than it already does.

Lawmakers should take a hint from one of a doctor’s guiding principles: first, do no harm. Michigan needs to protect what we already have: a state income tax that allows us to invest in good roads, high-quality schools, and strong communities. Otherwise, Michigan’s budget and economy will suffer through death by a thousand cuts.

— Rachel Richards

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