This article originally appeared in The Detroit News October 1, 2024. 

Family budgets are stressed by inflation, high interest rates and price increases for food, gas, housing and transportation. Which is perhaps why 14 states cut income taxes in 2024. This is not only happening in Republican-controlled states. In Connecticut, where Democrats control the state House, Senate and governor’s office, policymakers cut income tax rates. Colorado, also controlled by Democrats, reduced income taxes, property taxes and the sales tax. The state's governor, Jared Polis, even called for lower taxes in his 2024 state of the state address.

“Taxes are simply too high,” he said.

Michigan taxpayers won’t enjoy the same relief. In fact, every Michigan taxpayer has a higher tax rate in 2024 thanks to a concerted effort by Gov. Gretchen Whitmer's administration. This hurts individual taxpayers and could hamper the governor’s desire for state population growth.

The story starts in 2015. The Michigan Legislature and then-Gov. Rick Snyder enacted a law that allowed for a future reduction of the personal income tax if certain conditions were met. The formula was simple: If a budget surplus exceeded inflation, that would trigger an income tax rate cut. Lawmakers decided to let Michigan families keep more of their own money if state revenue was up.

In January 2023, state fiscal agencies indicated that a large surplus from the previous year would likely trigger a tax cut, lowering the rate from 4.25% to 4.05%.

Whitmer and legislative leaders attempted to sidestep the tax cut. One strategy they explored was to move $800 million into the state’s corporate welfare fund and backdate the transaction. When that didn’t gain enough support, Whitmer proposed sending $180 “inflation relief” checks to tax filers. Both plans would have allowed an accounting gimmick to shift some allocations to the previous fiscal year, thereby avoiding the tax cut. Neither effort to sidestep the trigger worked.

Thus, Michigan taxpayers earned a tax cut in 2023 — $700 million in total.

The state, however, did not stop working to minimize the relief for Michigan taxpayers. The state Department of Treasury refused to update tax schedules to reflect the new tax rate, creating the potential for confusion when employers calculated how much to withhold from employees’ paychecks.

But no worries, right? Taxes went down, right? To quote ESPN College GameDay analyst Lee Corso, “Not so fast, my friend!”

This legal interpretation stunned the policymakers who enacted it. They had intended the cuts under the 2015 trigger to be permanent. Rick Snyder, who signed the legislation, published an opinion piece in the Detroit News with the emphatic statement that his goal had been to reduce the income tax rate gradually to under 4%. Brian Calley, who served as lieutenant governor at the time, pointed out that “no one” during the legislative debates suggested such tax cuts would be temporary.

The Mackinac Center Legal Foundation filed a lawsuit on behalf of several business groups and individual taxpayers seeking to preserve the $700 million tax cut beyond the 2023 tax year. Two lawmakers who voted for the 2015 legislation also joined the lawsuit.

Unfortunately, the Michigan Court of Appeals adopted Nessel’s reading of the law, agreeing the tax cut trigger law only provides temporary tax relief. The Michigan Supreme Court declined to take the case after the plaintiffs appealed.

If Michigan taxpayers are to earn ongoing tax relief it will require new action from the Legislature.

Other states are becoming more attractive to industry and investment. Michigan is becoming more expensive.

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.