MIDLAND, Mich. — A ruling today from the Michigan Court of Appeals held that the 2023 income tax reduction is not permanent. This will cost Michigan’s five million taxpayers around $714 million in 2024. The court unanimously concluded that the statute was unambiguous and designed only to give temporary tax relief.

The Mackinac Center sued the Department of Treasury on behalf of Associated Builders and Contractors of Michigan, National Federation of Independent Business, Inc., Senator Ed McBroom, Representative Dale Zorn and six individual taxpayers from across the state.

Michigan taxpayers in 2023 saw an income tax reduction from 4.25% to 4.05%, thanks to a 2015 statute that implemented a tax cut trigger. That trigger lowers the personal income tax rate when the state’s revenue outpaces inflation by a set amount. The rate reduction was intended to be permanent, but after seeking an opinion from Attorney General Dana Nessel, State Treasurer Rachael A. Eubanks announced that the rate would go back up to 4.25% in 2024.

When the law was passed, there was a clear consensus from politicians on both sides of the aisle that the rate reduction would be permanent. The House Fiscal Agency’s 2015 analysis of the bill stated that the reductions would “continue indefinitely on an annual basis.”

“The question in this case has always been what is the clearest reading of the statute,” said Patrick Wright, vice president for legal affairs at the Mackinac Center. “We remain convinced that the best reading of the law requires a permanent tax cut.”

An appeal to the Michigan Supreme Court is likely. The Mackinac Center and its clients are reviewing their legal options.

View the decision here.