The Mackinac Center Appeals Ruling on Income Tax Cut

The Mackinac Center has appealed a Michigan Court of Claims decision that threatens last year’s historic adjustment to the personal income tax rate. We asked the Michigan Supreme Court to hear our case and bypass the Court of Appeals. The Supreme Court declined to do that, but it did order the Court of Appeals to hear the case on an expedited basis.

The Court of Claims ruled on Dec. 21 that Michigan’s 2023 income tax cut was only valid for one year. The 5% tax rate cut was created by a 2015 law, and the core issue of this case is whether the reduction is permanent.

Relying on an opinion by Attorney General Dana Nessel, the Department of Treasury concluded that this cut should be evaluated every year, not treated as permanent. The Mackinac Center, which brought the case on behalf of lawmakers, business groups, and individual taxpayers, argued that the plain language of the law indicates this cut was intended to continue unless superseded by another statute. Unfortunately, the Court of Claims disagreed.

The court reasoned that some of the plaintiffs lacked standing to bring the suit and further concluded that individual taxpayers had not yet been harmed by the Treasury Department’s interpretation. But the court didn’t stop there. Instead, it addressed the merits of the Mackinac Center’s arguments, and its conclusions were similar to those advanced in the attorney general’s initial opinion.

The impact of this decision is both significant and immediate. Starting Jan. 1, many taxpayers find themselves taxed at a higher rate. The Legislature, meanwhile, will base its spending on those higher taxes, possibly leading to as much as $714 million in taxpayer funds being spent improperly each year.

The Mackinac Center is not giving up on defending the permanent tax cut. The Michigan Court of Appeals will decide our case by March 11. Any appeal to that decision would be due to the Michigan Supreme Court by the end of March. We are optimistic that, once another court hears our appeal, our interpretation of the law will prevail.