MIDLAND, Mich. — The Mackinac Center for Public Policy asked the Michigan Supreme Court to hear its challenge to the Michigan Department of Treasury’s decision to raise the personal income tax rate this year. The Center filed the bypass motion and a brief appealing the Court of Claims' Dec. 21, 2023 decision today.The Center is representing Associated Builders and Contractors of Michigan, National Federation of Independent Business, Sen. Ed McBroom, Rep. Dale Zorn and six individual taxpayers from across the state.

At the start of 2024, Michigan’s 4.9 million taxpayers saw their income tax rate increase back up to 4.25% after it was brought down to 4.05% last year. The tax cut occurred because of a 2015 law that lowers taxes when state revenue outpaces inflation by a set amount.

While the law (and those who voted for it) clearly intended the reduction to be permanent, Attorney General Nessel disagreed. In a March 2023 opinion to the state treasurer, the attorney general argued that the phrase “current rate” in the law meant that the income tax would return to 4.25% after one year, rather than remain the lowered rate. The treasurer followed this opinion and made the tax cut temporary.

The Court of Claims’ decision agreed with the state’s argument that the tax rate cut had to be temporary or else the rate might one day go down to zero. But as the Mackinac Center’s brief points out, by only comparing the one-year-only tax cut to having no income tax at all, the court fails to consider the Legislature’s role in the process. If a few years into a lower tax rate lawmakers felt that there was not enough revenue, they could vote at any time to raise the rate, as they've done before. The treasurer ignores the separation of powers by diminishing the Legislature’s ability to make those decisions.

The Mackinac Center’s brief also looked at the spending during the 2023-24 fiscal year and found that the amount spent on special tax favors and earmarks was enough to support four additional years of the tax cut.

“At a time when families and small business owners are already grappling with higher costs, this wrongful tax hike is costing taxpayers a staggering $714 million a year,” said Patrick J. Wright, vice president for legal affairs at the Mackinac Center. “We hope the Michigan Supreme Court will recognize the clear intent of the Legislature and give Michiganders back the tax relief they deserve.”

Read the brief here.

Read the motion here.

Learn more about the case here.