Over spring break, my son needed to use books by a specific author for homework. Not having any of these books, my family jumped in the car, drove on our newly-paved street, passed the local fire department and stopped at the public library to see if any of these books were available. Without even thinking, we used or saw services provided by our taxes in the less than 10 minute drive.
I think about all of the amazing services taxes provide us. They provide us good public schools, vibrant communities, safe and drivable streets, public safety, parks, libraries, a trained workforce and so much more.
However, there are lawmakers who are trying to cut or eliminate our state income tax. And while paying less in taxes sounds like a good idea, what any income tax cut does is provide a big break to Michigan’s wealthiest taxpayers while providing little to our residents who need it most. Additionally, an income tax cut won’t change what residents do with their money, as the impact would be felt in small amounts throughout the year as workers receive their paychecks instead of in lump-sum payments. A $260 payment is more noticeable than $10 more in each of your paychecks.
While most Michigan taxpayers would not see a significant impact on their pocketbook, even a small cut will significantly impact our ability to provide the things that Michigan residents rely on and need. Eliminating the state income tax without a replacement could cost the state nearly $10 billion, and even a small 0.1 percentage point reduction (from 4.25% to 4.15%) could cost the state more than $250 million on a full-year basis. And the income tax helps fund our schools, our colleges and universities, clean water, roads, and all of the good things that the government provides.
It’s been said that Michigan needs a game-changer. Cutting taxes won’t do this. We know this because we’ve done it before.
- In the 2011 tax shift, Michigan cut business taxes by about $1.6 billion, and now net business taxes only provide about 2% of our total state-sourced revenues.
- The state has started phasing out personal property taxes, which were paid by businesses to local governments, schools and libraries, and required the state to reimburse them for their lost revenues.
- The state is also implementing a sales tax exemption for the value of a trade-in when buying a vehicle.
And many bills are introduced and enacted that cut or eliminate taxes on specific items or for specific entities, so much so that our state and local tax revenue as a percent of personal income has dropped 12% between 2004 (10.48%) and 2014 (9.22%).
So instead of more tax cuts, Michigan should look at investing in the things that Michigan residents, communities and businesses rely on. Perhaps this will truly change the game.
So as we mark Tax Day today, don’t despair! Remember that paying taxes is what helps make Michigan great. (And if you haven’t yet done your taxes and need help, you might qualify for some free tax help. Go to http://michiganfreetaxhelp.org/ to find out.)
— Rachel Richards