While no news is often regarded as good news, in this case, it’s not. Michigan’s tax structure is still highly regressive, and taxes Michiganders with low incomes at a higher rate than Michigan’s wealthiest residents, according to a report by the Institute on Taxation and Economic Policy.
The report models state and local taxes, including sales and excise taxes, property taxes, and income taxes, in all states and Washington, D.C. and determines how they impact taxpayers in different income groups. The report finds that tax systems in most states are inequitable and upside-down; tax structures actually make income inequality worse in 45 states—including Michigan; and states that are often commended as “low tax” often end up being high tax for families with low and middle incomes.
In Michigan, the report found that taxpayers in the bottom 20%—those having less than $17,600 in annual income—pay an effective state and local tax rate of 10.4% while the top 1%—those making more than $422,100 a year—pay only 6.2% of their income in state and local taxes. The middle 20% of Michigan’s taxpayers—literally the middle class—pay 9.2% of their income in state and local taxes. What’s more, taxpayers in the top 1% and the next 4% (combined top 5%) pay lower effective rates (6.2% and 7.5% respectively) than the effective rate for all Michigan taxpayers (8.4%).
Additionally, Michigan has the 22nd most unfair state and local tax system in the country, and incomes in Michigan are more unequal after state and local taxes are collected than before. The story is much the same with regard to our immediate neighbors. Illinois, Ohio, Indiana and Wisconsin all have highly regressive tax systems, with Illinois being among the worst 10 states in terms of tax inequality. Minnesota is the one exception; Minnesota is among the best 10 jurisdictions, including one of six jurisdictions where state and local tax systems do not worsen income inequality.
Unfortunately, the tax changes most often discussed in Michigan by the Legislature and candidates will not help our upside-down tax system; they will make it worse. State income tax rate cuts or—worse—elimination of the Michigan income tax only provide steep tax cuts to the most wealthy Michigan taxpayers while providing little benefit to the rest of us. Michigan’s income tax is the only slightly progressive tax system, and this is only due to a refundable state Earned Income Tax Credit (EITC), albeit a comparatively low one, and a refundable property tax credit. Also, of the “terrible ten” states, seven of them do not have a broad-based personal income tax, including Texas and Florida, which are often cited as examples as to why we should eliminate our income tax, and ultimately have to rely heavily on regressive sales and excise taxes. Lawmakers and candidates also fail to acknowledge that Michigan has an income tax rate reduction on the books that has yet to be triggered that should be repealed before it takes effect.
Cutting income taxes like this will only put Michigan in a situation where the wealthier get wealthier, the rest of us get little, and the state is left without adequate revenues to fund the things we all rely on—education, transportation, and clean air and water.
Instead, Michigan needs to look at ways to adequately and fairly raise revenue, such as a graduated income tax, while providing targeted tax relief to those who need it and will use it to boost our economy, like a restoration of or modernization of our state EITC. Only then will we be able to move our state in the right direction.
Emily Jorgensen joined the Michigan League for Public Policy in July 2019. She deeply cares about the well-being of individuals and families and has a great love for Michigan. She is grateful that her position at the League enables her to combine these passions and work to help promote policies that will lead to better opportunities and security for all Michiganders.
Jacob Kaplan 
Mikell Frey is a communications professional with a passion for using the art of storytelling to positively impact lives. She strongly believes that positive social change can be inspired by the sharing of data-driven information coupled with the unique perspectives of people from all walks of life across Michigan, especially those who have faced extraordinary barriers. 
Rachel Richards rejoined the League in December 2020 as the Fiscal Policy Director working on state budget and tax policies. Prior to returning to the League, she served as the Director of Legislative Affairs for the Michigan Department of Treasury, the tax policy analyst and Legislative Director for the Michigan League for Public Policy, and a policy analyst and the Appropriations Coordinator for the Democratic Caucus of the Michigan House of Representatives. She brings with her over a decade of experience in policies focused on economic opportunity, including workforce issues, tax, and state budget.
Donald Stuckey 
Patrick Schaefer
Alexandra Stamm 
Amari Fuller
Renell Weathers, Michigan League for Public Policy (MLPP) Community Engagement Consultant. As community engagement consultant, Renell works with organizations throughout the state in connecting the impact of budget and tax policies to their communities. She is motivated by the belief that all children and adults deserve the opportunity to achieve their dreams regardless of race, ethnicity, religion or economic class.
Megan Farnsworth joined the League’s staff in December 2022 as Executive Assistant. Megan is driven by work that is personally fulfilling, and feels honored to help support the work of an organization that pushes for more robust programming and opportunities for the residents of our state. She’s excited and motivated to gain overarching knowledge of the policies and agendas that the League supports.
Yona Isaacs (she/hers) is an Early Childhood Data Analyst for the Kids Count project. After earning her Bachelor of Science in Biopsychology, Cognition, and Neuroscience at the University of Michigan, she began her career as a research coordinator in pediatric psychiatry using data to understand the impacts of brain activity and genetics on children’s behavior and mental health symptoms. This work prompted an interest in exploring social determinants of health and the role of policy in promoting equitable opportunities for all children, families, and communities. She returned to the University of Michigan to complete her Masters in Social Work focused on Social Policy and Evaluation, during which she interned with the ACLU of Michigan’s policy and legislative team and assisted local nonprofit organizations in creating data and evaluation metrics. She currently serves as a coordinator for the Michigan Center for Youth Justice on a project aiming to increase placement options and enhance cultural competency within the juvenile justice system for LGBTQIA+ youth. Yona is eager to put her data skills to work at the League in support of data-driven policies that advocate for equitable access to healthcare, education, economic security, and opportunity for 0-5 year old children. In her free time, she enjoys tackling DIY house projects and trying new outdoor activities with her dog.
Amber Bellazaire joined the Michigan League for Public Policy as a policy analyst in June of 2019. Her work primarily focuses on state policy and budgets affecting Michigan’s Medicaid programs. Previously, Amber worked at the National Conference of State Legislatures tracking legislation and research related to injury and violence prevention, adolescent health, and maternal and child health. She also brings with her two years of Americorps service. As a full time volunteer, Amber had the opportunity to tutor high school students in Chelsea, Massachusetts and address issues of healthcare access and food insecurity through in-person outreach in Seattle, Washington.
Simon Marshall-Shah joined the Michigan League for Public Policy as a State Policy Fellow in August 2019. His work focuses on state policy as it relates to the budget, immigration, health care and other League policy priorities. Before joining the League, he worked in Washington, D.C. at the Association for Community Affiliated Plans (ACAP), providing federal policy and advocacy support to nonprofit, Medicaid health plans (Safety Net Health Plans) related to the ACA Marketplaces as well as Quality & Operations.
I would encourage you to send this data to the media. It needs to be part of the public discussion.
what is a property tax “circuit breaker”?
Hi, Cheryl! Here’s some info from ITEP (The Institute on Taxation and Economic Policy):
The basic idea behind the “circuit breaker” approach to reducing property taxes is quite simple: taxpayers earning below a certain income level should be given some amount of property tax relief when their property taxes exceed a certain percentage of their income. But states that have implemented this basic idea have made a range of choices about who should receive the credit and how the credit should be calculated.
In 2018, 18 states and DC offered property tax circuit breaker programs. These circuit breakers provide a sophisticated formula to target reductions for those most in need, low-income families who owe significant property taxes relative to their incomes.
Another thirteen states provide property tax credits to some low-income families based on their income. With eligibility established based solely on income, these credits do not include a provision requiring property taxes to exceed a set percentage of income to qualify for the credit. As a result, those most in need may not be fully protected from a property tax “overload.”
How do I know if I’m qualified and where do I sign up for this