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Michigan’s Court of Appeals issued an opinion on March 8 concluding that the 2023 income tax cut was only valid for one year. The Mackinac Center appealed this decision to the Michigan Supreme Court on March 25.
The core issue of this case is whether the 5% tax cut that applied in 2023 should be made permanent. That cut was passed by the Legislature in 2015, with lawmakers clearly intending that it be applied permanently when certain triggering events occur. Unfortunately, the Department of Treasury, acting on the advice of Attorney General Dana Nessel, concluded that this cut could only apply on a year-by-year basis.
The Court of Appeals rejected the Court of Claims’ earlier conclusion that the plaintiffs in the case lacked standing as well as the lower court’s conclusion that their claims had been brought prematurely. But the court agreed that the stronger interpretation of the income tax statute required an annual income tax cut based on a fixed 4.25% rate. As a result, the income tax will only be cut in those years when an extraordinary revenue event occurs.
While the Mackinac Center is appealing this decision, some damage has already been done. Since the first of the year, taxpayers have been paying a higher tax rate than they should. The state will collect $714 million more in taxpayer dollars. At the same time, the Legislature is preparing a state budget that incorporates these improper taxes.
The Mackinac Center will continue to fight for the proper interpretation of Michigan’s income tax statute, and we hope that the Supreme Court will agree with our interpretation. If it does, Michigan’s taxpayers will enjoy some much-needed tax relief in difficult economic times.
