Around the state, a drum is constantly beating for tax cuts. We hear that tax cuts will make Michigan more competitive, that we will entice people to live here and businesses to move here. However, the idea that Michigan is a high tax state simply is not true.
A recent memorandum by the Citizens Research Council shows that Michigan’s tax incidence, or the general amount taxpayers pay, for 2013 is not really that high. The report used Census data and compared states in terms of tax revenue as a percent of personal income and tax revenue per capita. Using both of these methodologies, in terms of overall tax collections, Michigan ranked below the national average and at the bottom of all Great Lakes states. In fact, in terms of overall tax collections, Michigan’s per capita collection of $3,750 is 18% below the U.S. average, and where Michigan’s tax collections grew by $537 in three decades, the U.S. average grew by $1,715 in the same time period.
Many have pointed to Michigan’s “lost decade” of recession as a reason why the state is not feeling the recovery, but not all of the revenue impacts can be blamed on diminished personal income and the burst of the housing bubble. Tax policy changes have compounded the effects of the state and national economy. Following Michigan’s switch from the Michigan Business Tax to the Corporate Income Tax, effective January 1, 2012, the state became a bottom ten state in corporate tax revenues, joining, according to the CRC, “states that tend not to host the same types of industry for which Michigan has typically competed.”
Worse yet, there are more tax policy changes coming including changes made that will ultimately repeal the Personal Property Tax, increase taxes on motor fuels and reduce and potentially eliminate the income tax, and impose sales tax on online sales. At a time in which Michigan is dealing with crisis after crisis, Michigan can least afford reductions in revenue.
We need to quit spreading the myth that taxes are too high. And if low taxes mean less in services, more crumbling roads and low-performing schools, count me out. Taxes help pay for important services, such as police and fire, state parks, libraries, high-quality schools, roads and bridges, and so much more, which help make states more vibrant and help entice businesses and people to relocate. Michigan’s taxes are not too high, and if we want to help save our state and our communities’ struggles, we need to look at ways to bring in more revenue, not less.
— Rachel Richards