THE STAKES ARE HIGH FOR MICHIGAN
The OBBBA makes the individual income tax cuts of the Tax Cuts and Jobs Act (TCJA) of 2017 permanent, including expanding many of the costly deductions of the TCJA such as the standard deduction, the alternative minimum tax, as well as huge deductions for certain business activity. The cap for deducting state and local taxes has been raised from $10,000 to $40,000, another tax deduction largely favoring high-income earners in high-income states.
However, the bill goes far beyond simply expanding the TCJA temporary tax provisions.
National Impact
According to the Institute on Taxation and Economic Policy (ITEP), 72% of the tax savings from the OBBBA goes to the top 20% of households, with less than 1% going to the bottom fifth of households. The average tax cut for the top 1% is $66,000 per year while the bottom 20% will see an average tax cut of $20. ITEP further estimates that should the trade war continue, the tariffs will more than offset the reduction of taxes for the bottom 40% of tax earners.
This means that combined with the tariffs, the bottom 40% will actually end up paying more. The OBBB not only heavily favors high earners, but earners in states with no income tax will see, on average, a larger increase in after-tax savings. Furthermore, the tax benefits for pass-through businesses will continue, which will disproportionately favor the 1%.
- OBBBA also restores expensive business deductions, such as deducting the full cost of equipment, deducting the cost of research and experimental projects, restoring interest deduction (making it less costly for businesses to issue debt instead of equity), and allowing businesses to deduct 100% of nonresidential property used for business purposes.
- One of the more expensive provisions of the OBBBA is permanently extending the changes made to the alternative minimum tax (AMT) in the TCJA. The AMT was created to prevent high-earning taxpayers from avoiding too much tax liability. According to the Congressional Budget Office, if the TCJA provisions for the AMT expired, the AMT would have yielded $83 billion in 2026 and reach $112 billion in 2034. Right now, only 200,000 individuals pay the AMT, when over 5 million individuals before TCJA paid the AMT.
- The OBBBA also capped deductions for tips and overtime pay but only before 2029 and only pertaining to qualified tips and qualified overtime, respectively. Additionally, only those with social security numbers are allowed to deduct qualified tips and overtime.
- The OBBBA introduces so-called “Trump Accounts” which are essentially IRAs (not Roth IRAs since the contributions are not tax-exempt), with the only differences being: (1) that the U.S. Treasury makes a one-time $1,000 contribution to “qualifying” accounts; (2) local governments can also make contributions to these IRAs.
- The OBBBA increases the maximum Child Tax Credit by $200. However, it also excludes up to 3 million children because the credit is only available to children who have at least one parent/guardian who has a Social Security number.
- The OBBBA also undercuts public schools by providing tax credits to organizations that make donations to private schools (including religious institutions) who provide vouchers. The provisions will cost $5 billion per year. The OBBBA makes these credits especially generous relative to other “charitable” donations. Not only does this take money away from other charities (like food and health) but, as ITEP points out, acts as a tax shelter for wealthy individuals. The federal government is essentially subsidizing private school tuition.
- Read more about this in the education section of this analysis.
- The OBBBA also ends clean energy tax credits set out by the Inflation Reduction Act (IRA) of 2022. According to Climate Power, Michigan is home to the most alternative energy projects launched in the wake of the IRA, resulting in over $27 billion of investments and the creation of 26,352 jobs.
- Similarly, electric vehicles have been buoyed by tax credits, but the OBBBA will end EV tax credits starting September 30, 2025. Since the auto industry is such a huge part of the Michigan economy, it will spell uncertainty for the industry and perhaps discourage investments into alternative energy.
- The OBBBA permanently extends exemptions of the estate tax outlined in the TCJA. The estate tax does not apply for single filers with estates less than $15 million and joint filers with estates less than $30 million. Higher-income earners are disproportionately impacted by the estate tax. Extending these provisions contributes to wealth inequality.
- Finally, OBBBA adds over $3 trillion to the nation’s debt from 2025-2034 and $12 trillion in the next 20 years. While there will be a short-term boost to GDP, the mid-to-long-term economic effects of OBBBA are actually negative compared to the baseline estimate, according to the Yale Budget Lab. Put simply, the bill is worse for long-term economic growth than if Congress had let the provisions of the TCJA expire. This is mostly due to higher interest rates, as a result of increased deficits and the ballooning federal debt stock.
Repercussions for Michigan
- 69% of the tax savings would flow to the top 20% of households (making more than $133,800 per year), with less than 1% going to the bottom fifth.
- On average, Michiganders will get a tax cut of $2,660, but this is heavily skewed to the top 20%. The top 1% in Michigan is projected to save on average $49,220 thanks to the OBBBA. In fact, as a percentage of their income, the top 5% of Michigan households will save 3.1%, compared to 0.2% for the bottom 20%. This is not to mention the impact the spending cuts and tariffs will have on the bottom 40% of Michigan households.
- For the bottom 20% of households, the extra $20 can help pay for a full tank of gasoline, while the tax cut given to the top 1% of households of $49,220 can buy a brand new car.
- Relative to just extending the temporary TCJA tax provisions, the bottom 20% of Michiganders will see an annual average tax increase of $60, the middle 20%, an average tax cut of $420, and the top 1% with an average tax cut of $24,850. Relative to just extending existing policy, 75% of the tax cuts would flow to the top 20% of Michigan taxpayers, while the bottom 20% would be the only group seeing a tax increase.
- The aforementioned business tax breaks will impact Michigan’s revenue stream, particularly the ability for businesses to expense domestic research and experimental costs as well as qualified properties used along the production process. Since Michigan is “coupled” with these federal tax changes, these business tax exemptions will reduce the tax base.
- Additionally, these numbers do not factor in the recent Consensus Revenue Estimating Conference (CREC) changes, thus Michigan will be able to utilize less money than previously forecasted.
Analysis provided by
Nicholas Hess, Tax Policy Analyst
Rachel Richards, Fiscal Policy and Government Relations Director
Jay Cutler joined the League in March 2026 as the Kids Count Senior Data Analyst, where he collects, analyzes, and prepares data for Kids Count in Michigan.
Danielle Taylor-Basemore joined the League as the Development Data and Stewardship Coordinator in June 2025. She brings with her five years of nonprofit experience with a special focus on community engagement, data visualization and strategic programming. Prior to joining the League, Danielle served as the Business District, Safety, and Digital Manager at Jefferson East, Inc.
Scott Preston is a Senior Policy Analyst with the Michigan League for Public Policy, where he leads the organization’s immigration and criminal justice reform portfolios. In the three years prior to joining the League, Scott facilitated the Southeast Michigan Refugee Collaborative and managed a small business economic development program at Global Detroit. His work included launching Michigan’s first Refugee Film Festival and building on a trusted connector model that linked marginalized communities with crucial resources. Scott’s work at the League is informed by his background in journalism and research. He spent four years covering the Syrian refugee crisis in the Middle East for publications such as The Economist, and later worked with unaccompanied refugee minors through Samaritas. Scott holds a master’s degree in international migration and public policy from the London School of Economics and Political Science.
Kate Powers joined the League as the Chief Development Officer in February 2025. Prior to joining the League, Kate held leadership positions at many Michigan nonprofit organizations, most recently serving as the COO and Chief Development Officer of Ele’s Place. Kate has spent the bulk of her career in fundraising, with a short stint in the state Legislature as a legislative aide to members in both chambers. Kate is a graduate of Michigan State University’s James Madison College with a Bachelor of Arts in Social Relations and has a certificate in fundraising management from the Lilly Family School of Philanthropy at Indiana University. Additionally, Kate served on the East Lansing Public Schools Board of Education and is a past President of the Junior League of Lansing. In her free time, she enjoys traveling with her husband and her son and saving outfit of the day and home decor ideas on Pinterest. 
Nicholas Hess joined the League as the Fiscal Policy Analyst in September of 2024. In this role, Nicholas focuses on tax policy, government revenue, and their impact on working families and racial equity, including the effects of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). Nicholas values the role that judicious fiscal policy can play in the improvement of people’s lives and the economy, alleviating inequities along the way.
Audrey Matusz joined the League as the Visual Communications Specialist in September 2024. She supports the team with implementing social media strategies and brainstorming creative ways to talk about public policy. She brings with her nearly a decade of experience in producing digital products for evidence-based social justice initiatives. 
Jacob Kaplan 
Donald Stuckey 
Alexandra Stamm 
Amari Fuller
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. 
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.
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.
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.
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.
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.
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.
