MIDLAND, Mich. — Michiganders lost a permanent tax cut today when the Michigan Supreme Court dismissed the Mackinac Center for Public Policy’s lawsuit that would have saved taxpayers $700 million per year.

The Mackinac Center sued the Michigan Department of Treasury in August 2023 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.

The case centered around a 2015 law that created a tax cut trigger that lowers the income tax rate when the state’s revenue outpaces inflation by a set amount. Excess revenue sources in 2022 triggered the cut, lowering the rate from 4.25% to 4.05% in 2023. Although lawmakers intended the rate reduction to be permanent, the state treasurer announced the cut would be temporary.

“As a member of the Legislature in 2015, there is no doubt the Legislature passed this bill with a trigger knowing it was a permanent income tax reduction that would lessen the tax burden on every Michigan taxpayer,” said Rep. Dale Zorn, R-Onsted. “I am disappointed that the Court does not recognize this important part of the legislation.”

This decision also hurts the nearly 60% of small businesses in the state that pay taxes through the personal income tax. “This disappointing ruling is just yet another burden added on to contractors who are already facing high costs, excessive government regulation and soaring inflation," said Shane Hernandez, president of ABC Michigan.

“Small businesses across the state are feeling the crushing weight of higher costs,” said Amanda Fisher, Michigan State Director for the National Federation of Independent Business, Inc. “These same businesses have now been stripped of tax relief. In 2015, the Legislature drafted this legislation with the clear intent that tax revenue should not be allowed to increase year over year without returning it to the taxpayer. It is unfortunate that the Court has decided to override the what was and is clearly the purview of the Legislature.”

Former Gov. Rick Snyder, who signed the law in 2015, made it clear that the tax cut was meant to be permanent. In an April 2024 op-ed in The Detroit News, Gov. Snyder called the trigger a “guarantee of fiscal responsibility” and “a win for everyone who calls Michigan home.” The House Fiscal Agency’s 2015 analysis of the bill stated that the reductions would “continue indefinitely on an annual basis.” Even legislative opposition at the time discussed the permanent nature of the tax cut in each chamber hours before the final vote.

“It is deeply disappointing that the Michigan Supreme Court refused to even hear the case,” said Sen. Ed McBroom, R-Vulcan. “Gov. Whitmer and others in the Legislature at the time knew exactly what it said when they railed against voting on it. Michigan residents are now reaping the price of unsustainable spending on other programs and poor investments across the state.”

The current Legislature could prioritize an income tax cut by amending the law. Since the dispute over the tax cut trigger began in March 2023, it has passed two budgets that spent a combined $2.8 billion on select district projects.

“Taxpayers just lost $700 million a year without a single vote in the Legislature,” said Patrick J. Wright, vice president for legal affairs at the Mackinac Center. “This case is a reminder that the Legislature must be extremely precise in order to avoid a misguided interpretation of the law by a future administration opposed to its original goals.”

Learn more about the case here.