What Is a Graduated Income Tax?
Fundamentally, a graduated income tax is structured based on a household’s ability to pay. Under a graduated income tax structure, households with similar incomes pay a similar share of their income in taxes. Households with low to moderate incomes pay a smaller share of their income in taxes than their high-income counterparts.
Governments utilize tax brackets to define a tax rate for each dollar of income—the first $100,000 of income is taxed at a lower rate than the next $100,000, for example. Below, Table 1a illustrates a simple graduated income tax structure with three tax brackets. Table 1b demonstrates that households with similar incomes are taxed at a similar rate, while households with more income are taxed at a higher rate.
A Tax Based on Ability to Pay
Michigan is one of nine states with a flat income tax—every working person in Michigan pays 4.25% of their income in taxes, regardless of their economic circumstances. When coupled with other state and local taxes, such as Michigan’s 6% sales tax, Michigan families with relatively less income pay a greater share of their total household income in taxes.
An income tax based on a household’s ability to pay would reduce the structural barriers facing working families who are striving to achieve economic security and prosperity. These households spend a greater share of their income to purchase necessities such as housing, food, utilities and transportation. A reduction in taxes for these households would free up money to purchase the goods and services that they need in order to achieve economic security.
A Smart Way to Raise Revenue
Adopting a graduated income tax would provide more state revenue to invest in programs like early childhood education, job training, public safety and other vital services. Increased revenues would be coupled with a reduction in taxes for millions of Michiganders. Furthermore, since households would have more money in their pockets, they would spend more in their local economies, thus boosting local businesses and fostering entrepreneurship throughout the state; households with relatively less income tend to spend a larger share of their income on goods and services in the local economy.
A graduated income tax would bring in more revenue to Michigan, which would help fund state services at a critical time in our state’s history. In 1978, Michigan voters approved the Headlee Amendment, which limited the amount of taxes that Michigan could collect to 9.49% of total personal income in the state. The Great Recession, combined with frequent and significant business tax cuts, caused Michigan to fall significantly below this limit. In the 2019 budget year beginning October 1, 2018, Michigan’s tax collections were $10.4 billion below the constitutional limit set by the Headlee Amendment. The multitude of tax cuts enacted over the past decade have put a strain on Michigan’s budgeting process, where lawmakers have been forced to reduce the funding for essential state programs.
Lawmakers should heed this message and stop supporting continued tax cuts that constrain our budget. It is clear that Michiganders are ready for a tax system that gives relief to those with low and moderate incomes and asks millionaires and the ultra-wealthy to pay their fair share.
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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.
