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May 2, 2017

Report – Perspectives on Michigan’s State Personal Income Tax


Report 396, May 2017
State policymakers have long harbored a peculiar love-hate relationship with the personal income tax. Part of that relationship is based on economics. It is the largest source of state tax revenue. Besides the property tax, it is the only tax widely available to Michigan cities. The personal income tax has been relied upon to generate new revenues during lean economic periods and it is the tax state policymakers most often turn to as a way to offer tax relief.
The question of whether to levy a tax on personal income is as much about political ideology as it is about economics. People will differ on the value they place on the size of government, and reducing or eliminating a major source of revenue for the state may result in reductions in the size of government. People will differ on the value they place on taxes on income relative to consumption taxes, sin taxes, or property taxes.
Perspectives on Michigan Income Tax Rates
As with any policy issue, understanding the past can be instrumental to determining a course for the future. On the matter of income taxation, it is equally useful to consider both the state government’s history in levying this tax and the history of the local-option city income tax in Michigan.
State Income Tax Rate Changes In Michigan’s 50 year history with the income tax, the tax rate has rarely remained at the same rate for more than a few years. The tax has been levied at a rate greater than four percent for most of the last 35 years.
State policymakers have mounted repeated efforts to reduce the tax rate to 3.9 percent. An effort initiated in 1999 reduced the tax rate by 0.1 percentage point over five years. This period overlapped with the onset of Michigan’s single state recession. In the face of cyclical economic tides that were resulting in tax revenue reductions, the statutory tax rate reductions helped to create the state’s structural budget deficit and worsened Michigan’s single state recession.
Eventually, difficult economic conditions led to statutory changes that increased the tax rate from 3.9 percent to 4.35 percent in 2007. The statutory changes that triggered that increase also called for future tax rate reductions to occur automatically. Beginning in 2011, and each year thereafter, the tax rate was to reduce by 0.1 percentage point until the rate reached 3.9 percent in 2015.
However, in the face of continued economic struggles, the Income Tax Act was amended before those automatic rate reductions could begin and the rate was set at its current 4.25 percent.
Future Changes The state personal income tax rate stands to be reduced in the future because of a provision that was adopted as part of the road funding package enacted at the end of 2015. Beginning in tax year 2023, the personal income tax rate would be reduced in any fiscal year for which cumulative general fund/general purpose (GF/GP) revenue growth exceed 1.425 times the cumulative rate of inflation over the same period. The revenue effects from the rate reduction are specifically targeted to affect the GF/GP budget. The provisions do not return the tax rate to previously authorized levels if revenues in future years fall below the calculated amount tied to inflation.
Adequacy of Tax Revenues
It can be asked whether state tax revenues in general or revenues specifically from the state personal income tax are “adequate”. Adequate may connote different things to different people. Thus, this analysis uses three methods of evaluating adequacy from different perspectives:
1. Current revenues measured against historic tax revenues.
2. Current revenues measured against the constitutional tax limitation created by the Headlee Amendment.
3. Michigan tax revenues compared to other states.
Measuring against Previous Year Tax Revenues Fiscal Year (FY)2016 nominal tax revenues of $27.3 billion were slightly more than the previous high point of $26.6 billion in FY2008. When total tax revenues are adjusted for inflation to take into account the change in price of government services over time, it becomes evident that FY2015 revenues were 13.2 percent less than the FY2000 peak of $31.6 billion. When adjusting for inflation, FY2015 tax revenues were at levels last seen in FY1995 (except on the way down in FY2009).
Michigan personal income tax revenues were on a fairly constant growth path from the time of their adoption until the start of Michigan’s single state recession in 2001. After experiencing some fairly large swings in the decade that followed, Michigan income tax revenues have been on a growth path in the past five years. FY2016 income tax revenue of $9.2 billion were higher than the FY2008 peak of $7.3 billion or the FY2000 peak of $7.2 billion (See Chart A). However, the $9.2 billion collected in FY2016 is still 10 percent less than the inflation-adjusted FY2001 peak of $10.0 billion. When adjusting for inflation, FY2015 income tax revenues were at levels last seen in FY1997 (except on the way down in FY2001).
Measuring against the Constitutional Revenue Limit The Headlee Amendment added Section 26 to Article IX to create a state revenue limit as a ratio of state revenue collected to personal income measured in that fiscal year. The Headlee revenue limit is fixed at 9.49 percent for each year.
The advent of Michigan’s single state recession beginning in 2001 caused the state to fall far below its revenue limit. Current total tax revenues flowing into the general fund/general purpose budget of $8.5 billion are less than half of the revenues the state is permitted under the revenue limit.
Measuring Michigan against Other States In 2013, Michigan total state and local government tax revenue ranked 35th highest in the U.S. at $3,750 in per capita. Michigan was 34th highest in the nation with $96 of total tax revenues per $1,000 of personal income. Michigan’s ranking against other states decreased by 21 places, mirroring the national shift toward lower taxation in the past two decades.
Michigan’s personal income tax revenue burden ranked 34th in the nation on both a per capita basis and as a percentage of personal income. Collections for 2013 equaled $866 per capita, 81 percent of the national average, and $22 per $1,000 of personal income, 92 percent of the national average.
Personal income taxes are levied in 43 states. Of these, 41 tax wage and salary income, while two states – New Hampshire and Tennessee – only tax dividend and investment income. The other seven states levy no income tax at all. Michigan is one of eight states that levy a flat rate tax on individuals.
When using the tax rates applied to the highest income brackets as a basis for ranking states, Michigan’s 4.25 percent tax rate is relatively low. Only five states – North Dakota, Pennsylvania, Indiana, Illinois, and Wisconsin – levy lower tax rates on individuals in the highest income brackets.
Reliance on Personal Income Tax Revenues in Other States
State and local government tax systems are often measured against an ideal in which three tax components – property, sales, and income taxes – contribute roughly equally to the total. Economists argue that this “three-legged stool” model of taxation provides the optimal state tax system, minimizing deadweight loss from inefficient taxation and reducing distortionary effects on the economy. In 2013, Michigan collected 95 percent of its tax revenues from the three major tax components outlined above in one form or another.
Seven states – Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming – do not levy a personal income tax at all and two states – New Hampshire and Tennessee – only tax dividend and investment income. On the other hand, five states – Alaska, Delaware, New Hampshire, Montana, and Oregon – do not levy a state sales tax.
The ability of states to stray from the norm rests on the economic drivers of their states and the tax policy priorities each state has in place. Florida and Nevada benefit heavily from the tourism industries that drive their state economies and each receives more than half of the state tax revenues from sales tax revenues. South Dakota, Texas, and Washington benefit less from tourism, but each receive more than half of their state tax revenues from the sales tax. Alaska, Texas, and Wyoming benefit greatly from the oil and mineral extraction that are significant parts of their state economies. The Alaska Permanent Fund pays people to live in Alaska, rather than taxing them based on their economic activity.
Role of Michigan’s Personal Income Tax
If the personal income tax goes away:
1. Can revenues from existing taxes grow at sufficient rates to make up for the loss?
2. Where will replacement revenue come from?
3. What will be the state budget reductions to ensure budget balance?
The personal income tax and the sales and use taxes are the primary sources of tax revenues for the state government. These three taxes contribute nearly 75 percent of the state’s tax revenues. Other tax revenues flow from sin taxes, such as tobacco and liquor, business taxes, such as the Corporate Income Tax and the insurance company tax, and the State Education Tax.
The GF/GP budget funds all functions and services for which there are no dedicated sources. It receives more than 72 percent of the revenue from the personal income tax. Other revenues are derived from the undedicated portion of the sales, use, and tobacco taxes and from business taxes.
Options if the Income Tax is Reduced or Eliminated
The prospects for reducing or eliminating the state personal income tax must be considered in light of the Michigan Constitution’s mandate for a balanced budget. If the state personal income tax rate is reduced or the tax is eliminated, policymakers can consider several options to address the revenue decline from this source:
1. They can rely on existing tax sources to grow at sufficient rates to make up for revenues lost from the income tax,
2. They can adjust the tax rates levied on other taxes to generate revenues that would replace lost income tax revenues, or
3. They can cut spending as revenues decline to keep spending in line with available resources.
Each option includes complications. Provisions in the Michigan Constitution or state law affect the use of tax revenues and tax rates that may be applied. Appropriations reductions in some areas will result in more than a dollar-for-dollar decline in spending because of federal matching requirements that may not be matched. And because of the nature of how state tax dollars are used, reductions in state resources will stand to affect school districts, community colleges and universities, local governments, hospitals and other health providers, and many other public and private entities that receive state funding to carry out public purposes.
None of the taxes flowing into the GF/GP budget have been very robust since 1994. The individual income, sales, and use taxes experienced some growth in the late 1990s. That growth was washed away during the first decade of this century, more so for the personal income tax than for the sales and use taxes. Tobacco tax revenues experienced several peaks during the period in question driven by changes to the tax rates applied to tobacco products. Based on past experience, there is little prospect of revenue from existing taxes growing at sufficient rates to make up for lost income tax revenue.
The idea that the growth of existing tax revenues could be sufficient to make up for reduced income tax revenue is further complicated by Michigan’s heavy reliance on earmarking. Earmarking, or dedicating, refers to the practice of reserving revenues from specific sources for specific functions. Michigan is among a few states that rely heavily on the practice of earmarking state tax revenue to specific purposes. In FY2014, nearly 63 percent of the total was earmarked ($15.3 billion).
The personal income tax has proven to be a robust source of revenue for the state. Replacing revenues from that tax with new taxes or increases in tax rates on existing taxes would not be easy. Generally, sales and property taxes are the only other taxes capable of raising large sums of revenue (in the magnitude of the current state personal income tax).
Efforts to increase the sales tax rate are complicated by constitutional limitations on the tax rate and constitutional and statutory earmarking of the tax revenues. A reliance on the sales tax to fund a larger share of state spending is also hindered by the state’s failure to include many services in the sales tax base. Michigan’s major consumption taxes on the sale and use of tangible property and a limited number of services do not connect effectively with our ever-increasing service-oriented economy.
The property tax is the other tax capable of yielding sufficient revenues to make up for what would be lost with reduction or elimination of the personal income tax. But even with a statewide tax base of $327.4 trillion, it would require a tax rate of nearly 30 mills to generate the revenue produced by the 4.25 percent tax rate on personal income.
Like the sales tax, the property tax is less attractive as a potential source of replacement revenue because of constitutional provisions. Specifically, the taxable value system of valuing property for purposes of taxation combined with a long stretch of relatively low inflation has resulted in a very low rate of growth in the statewide taxable value and therefore, slow growth in the property tax revenues.
State spending differs from that of other governmental units (e.g. school districts, municipal governments) in that less than 20 percent of annual expenditures finance programs that the state directly operates itself and only approximately 11 percent of the total budget each year supports the compensation of state employees (this is a much lower percentage than in any other governmental sector in Michigan). The rest of the state budget (about 80 percent) supports programs operated by non-state government organizations. Given these realities of the state budget, substantial cuts to state spending effectively means reducing the budgets of other organizations.
The GF/GP budget funds community health and Medicaid services, corrections, community colleges and universities, human services, state police, and such governmental functions as the governor’s office, the legislature, the attorney general’s office, treasury, management and budget, and other parts of the administration of state government.
Some of the state resource committed to the GF/GP budget are used to draw down funding from federal programs. These programs require the state and/or local governments to contribute to the funding of the program. As a result, a reduction in resources committed to the GF/GP budget can have the effect of reducing spending by a greater amount.
When considering a reduction in resources committed to the GF/GP budget, it is necessary to recognize the existing commitment of state resources that either earmark available resources to specific spending programs or have the effect of reducing the amount of available resources. These include the future redemption of business tax credits that will diminish tax revenues, the commitment of GF/GP resources for highway funding, tax credits for low and moderate income households that will diminish tax revenues, personal property tax reimbursement to local governments that commits resources away from the GF/GP budget, changes in funding obligations for the Healthy Michigan plan that will draw upon GF/GP resources, changes to the use tax related to taxation of the Medicaid managed care organization that will diminish GF/GP resources, changes to the sales tax related to the sale of automobiles and watercraft, other sales tax changes that will diminish state resources, and the pending cost of funding indigent defense in criminal cases.
Conclusion
Michigan’s love-hate relationship with the personal income tax appears to be entering a new chapter. Legislative attention on the tax imagines ways to reduce the tax rate or eliminate the tax altogether. Such an exercise will not come easy and would have implications for the efficacy of government service: not just the state government but also counties, cities, villages, townships, school districts, community colleges, universities, and many public and private providers of government services that rely on state appropriations. Changes stand to affect the ability of those governments to provide public goods and services, thus affecting the quality of life for residents and businesses in Michigan.

May 2, 2017

Report – Perspectives on Michigan’s State Personal Income Tax


Report 396, May 2017
State policymakers have long harbored a peculiar love-hate relationship with the personal income tax. Part of that relationship is based on economics. It is the largest source of state tax revenue. Besides the property tax, it is the only tax widely available to Michigan cities. The personal income tax has been relied upon to generate new revenues during lean economic periods and it is the tax state policymakers most often turn to as a way to offer tax relief.
The question of whether to levy a tax on personal income is as much about political ideology as it is about economics. People will differ on the value they place on the size of government, and reducing or eliminating a major source of revenue for the state may result in reductions in the size of government. People will differ on the value they place on taxes on income relative to consumption taxes, sin taxes, or property taxes.
Perspectives on Michigan Income Tax Rates
As with any policy issue, understanding the past can be instrumental to determining a course for the future. On the matter of income taxation, it is equally useful to consider both the state government’s history in levying this tax and the history of the local-option city income tax in Michigan.
State Income Tax Rate Changes In Michigan’s 50 year history with the income tax, the tax rate has rarely remained at the same rate for more than a few years. The tax has been levied at a rate greater than four percent for most of the last 35 years.
State policymakers have mounted repeated efforts to reduce the tax rate to 3.9 percent. An effort initiated in 1999 reduced the tax rate by 0.1 percentage point over five years. This period overlapped with the onset of Michigan’s single state recession. In the face of cyclical economic tides that were resulting in tax revenue reductions, the statutory tax rate reductions helped to create the state’s structural budget deficit and worsened Michigan’s single state recession.
Eventually, difficult economic conditions led to statutory changes that increased the tax rate from 3.9 percent to 4.35 percent in 2007. The statutory changes that triggered that increase also called for future tax rate reductions to occur automatically. Beginning in 2011, and each year thereafter, the tax rate was to reduce by 0.1 percentage point until the rate reached 3.9 percent in 2015.
However, in the face of continued economic struggles, the Income Tax Act was amended before those automatic rate reductions could begin and the rate was set at its current 4.25 percent.
Future Changes The state personal income tax rate stands to be reduced in the future because of a provision that was adopted as part of the road funding package enacted at the end of 2015. Beginning in tax year 2023, the personal income tax rate would be reduced in any fiscal year for which cumulative general fund/general purpose (GF/GP) revenue growth exceed 1.425 times the cumulative rate of inflation over the same period. The revenue effects from the rate reduction are specifically targeted to affect the GF/GP budget. The provisions do not return the tax rate to previously authorized levels if revenues in future years fall below the calculated amount tied to inflation.
Adequacy of Tax Revenues
It can be asked whether state tax revenues in general or revenues specifically from the state personal income tax are “adequate”. Adequate may connote different things to different people. Thus, this analysis uses three methods of evaluating adequacy from different perspectives:
1. Current revenues measured against historic tax revenues.
2. Current revenues measured against the constitutional tax limitation created by the Headlee Amendment.
3. Michigan tax revenues compared to other states.
Measuring against Previous Year Tax Revenues Fiscal Year (FY)2016 nominal tax revenues of $27.3 billion were slightly more than the previous high point of $26.6 billion in FY2008. When total tax revenues are adjusted for inflation to take into account the change in price of government services over time, it becomes evident that FY2015 revenues were 13.2 percent less than the FY2000 peak of $31.6 billion. When adjusting for inflation, FY2015 tax revenues were at levels last seen in FY1995 (except on the way down in FY2009).
Michigan personal income tax revenues were on a fairly constant growth path from the time of their adoption until the start of Michigan’s single state recession in 2001. After experiencing some fairly large swings in the decade that followed, Michigan income tax revenues have been on a growth path in the past five years. FY2016 income tax revenue of $9.2 billion were higher than the FY2008 peak of $7.3 billion or the FY2000 peak of $7.2 billion (See Chart A). However, the $9.2 billion collected in FY2016 is still 10 percent less than the inflation-adjusted FY2001 peak of $10.0 billion. When adjusting for inflation, FY2015 income tax revenues were at levels last seen in FY1997 (except on the way down in FY2001).
Measuring against the Constitutional Revenue Limit The Headlee Amendment added Section 26 to Article IX to create a state revenue limit as a ratio of state revenue collected to personal income measured in that fiscal year. The Headlee revenue limit is fixed at 9.49 percent for each year.
The advent of Michigan’s single state recession beginning in 2001 caused the state to fall far below its revenue limit. Current total tax revenues flowing into the general fund/general purpose budget of $8.5 billion are less than half of the revenues the state is permitted under the revenue limit.
Measuring Michigan against Other States In 2013, Michigan total state and local government tax revenue ranked 35th highest in the U.S. at $3,750 in per capita. Michigan was 34th highest in the nation with $96 of total tax revenues per $1,000 of personal income. Michigan’s ranking against other states decreased by 21 places, mirroring the national shift toward lower taxation in the past two decades.
Michigan’s personal income tax revenue burden ranked 34th in the nation on both a per capita basis and as a percentage of personal income. Collections for 2013 equaled $866 per capita, 81 percent of the national average, and $22 per $1,000 of personal income, 92 percent of the national average.
Personal income taxes are levied in 43 states. Of these, 41 tax wage and salary income, while two states – New Hampshire and Tennessee – only tax dividend and investment income. The other seven states levy no income tax at all. Michigan is one of eight states that levy a flat rate tax on individuals.
When using the tax rates applied to the highest income brackets as a basis for ranking states, Michigan’s 4.25 percent tax rate is relatively low. Only five states – North Dakota, Pennsylvania, Indiana, Illinois, and Wisconsin – levy lower tax rates on individuals in the highest income brackets.
Reliance on Personal Income Tax Revenues in Other States
State and local government tax systems are often measured against an ideal in which three tax components – property, sales, and income taxes – contribute roughly equally to the total. Economists argue that this “three-legged stool” model of taxation provides the optimal state tax system, minimizing deadweight loss from inefficient taxation and reducing distortionary effects on the economy. In 2013, Michigan collected 95 percent of its tax revenues from the three major tax components outlined above in one form or another.
Seven states – Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming – do not levy a personal income tax at all and two states – New Hampshire and Tennessee – only tax dividend and investment income. On the other hand, five states – Alaska, Delaware, New Hampshire, Montana, and Oregon – do not levy a state sales tax.
The ability of states to stray from the norm rests on the economic drivers of their states and the tax policy priorities each state has in place. Florida and Nevada benefit heavily from the tourism industries that drive their state economies and each receives more than half of the state tax revenues from sales tax revenues. South Dakota, Texas, and Washington benefit less from tourism, but each receive more than half of their state tax revenues from the sales tax. Alaska, Texas, and Wyoming benefit greatly from the oil and mineral extraction that are significant parts of their state economies. The Alaska Permanent Fund pays people to live in Alaska, rather than taxing them based on their economic activity.
Role of Michigan’s Personal Income Tax
If the personal income tax goes away:
1. Can revenues from existing taxes grow at sufficient rates to make up for the loss?
2. Where will replacement revenue come from?
3. What will be the state budget reductions to ensure budget balance?
The personal income tax and the sales and use taxes are the primary sources of tax revenues for the state government. These three taxes contribute nearly 75 percent of the state’s tax revenues. Other tax revenues flow from sin taxes, such as tobacco and liquor, business taxes, such as the Corporate Income Tax and the insurance company tax, and the State Education Tax.
The GF/GP budget funds all functions and services for which there are no dedicated sources. It receives more than 72 percent of the revenue from the personal income tax. Other revenues are derived from the undedicated portion of the sales, use, and tobacco taxes and from business taxes.
Options if the Income Tax is Reduced or Eliminated
The prospects for reducing or eliminating the state personal income tax must be considered in light of the Michigan Constitution’s mandate for a balanced budget. If the state personal income tax rate is reduced or the tax is eliminated, policymakers can consider several options to address the revenue decline from this source:
1. They can rely on existing tax sources to grow at sufficient rates to make up for revenues lost from the income tax,
2. They can adjust the tax rates levied on other taxes to generate revenues that would replace lost income tax revenues, or
3. They can cut spending as revenues decline to keep spending in line with available resources.
Each option includes complications. Provisions in the Michigan Constitution or state law affect the use of tax revenues and tax rates that may be applied. Appropriations reductions in some areas will result in more than a dollar-for-dollar decline in spending because of federal matching requirements that may not be matched. And because of the nature of how state tax dollars are used, reductions in state resources will stand to affect school districts, community colleges and universities, local governments, hospitals and other health providers, and many other public and private entities that receive state funding to carry out public purposes.
None of the taxes flowing into the GF/GP budget have been very robust since 1994. The individual income, sales, and use taxes experienced some growth in the late 1990s. That growth was washed away during the first decade of this century, more so for the personal income tax than for the sales and use taxes. Tobacco tax revenues experienced several peaks during the period in question driven by changes to the tax rates applied to tobacco products. Based on past experience, there is little prospect of revenue from existing taxes growing at sufficient rates to make up for lost income tax revenue.
The idea that the growth of existing tax revenues could be sufficient to make up for reduced income tax revenue is further complicated by Michigan’s heavy reliance on earmarking. Earmarking, or dedicating, refers to the practice of reserving revenues from specific sources for specific functions. Michigan is among a few states that rely heavily on the practice of earmarking state tax revenue to specific purposes. In FY2014, nearly 63 percent of the total was earmarked ($15.3 billion).
The personal income tax has proven to be a robust source of revenue for the state. Replacing revenues from that tax with new taxes or increases in tax rates on existing taxes would not be easy. Generally, sales and property taxes are the only other taxes capable of raising large sums of revenue (in the magnitude of the current state personal income tax).
Efforts to increase the sales tax rate are complicated by constitutional limitations on the tax rate and constitutional and statutory earmarking of the tax revenues. A reliance on the sales tax to fund a larger share of state spending is also hindered by the state’s failure to include many services in the sales tax base. Michigan’s major consumption taxes on the sale and use of tangible property and a limited number of services do not connect effectively with our ever-increasing service-oriented economy.
The property tax is the other tax capable of yielding sufficient revenues to make up for what would be lost with reduction or elimination of the personal income tax. But even with a statewide tax base of $327.4 trillion, it would require a tax rate of nearly 30 mills to generate the revenue produced by the 4.25 percent tax rate on personal income.
Like the sales tax, the property tax is less attractive as a potential source of replacement revenue because of constitutional provisions. Specifically, the taxable value system of valuing property for purposes of taxation combined with a long stretch of relatively low inflation has resulted in a very low rate of growth in the statewide taxable value and therefore, slow growth in the property tax revenues.
State spending differs from that of other governmental units (e.g. school districts, municipal governments) in that less than 20 percent of annual expenditures finance programs that the state directly operates itself and only approximately 11 percent of the total budget each year supports the compensation of state employees (this is a much lower percentage than in any other governmental sector in Michigan). The rest of the state budget (about 80 percent) supports programs operated by non-state government organizations. Given these realities of the state budget, substantial cuts to state spending effectively means reducing the budgets of other organizations.
The GF/GP budget funds community health and Medicaid services, corrections, community colleges and universities, human services, state police, and such governmental functions as the governor’s office, the legislature, the attorney general’s office, treasury, management and budget, and other parts of the administration of state government.
Some of the state resource committed to the GF/GP budget are used to draw down funding from federal programs. These programs require the state and/or local governments to contribute to the funding of the program. As a result, a reduction in resources committed to the GF/GP budget can have the effect of reducing spending by a greater amount.
When considering a reduction in resources committed to the GF/GP budget, it is necessary to recognize the existing commitment of state resources that either earmark available resources to specific spending programs or have the effect of reducing the amount of available resources. These include the future redemption of business tax credits that will diminish tax revenues, the commitment of GF/GP resources for highway funding, tax credits for low and moderate income households that will diminish tax revenues, personal property tax reimbursement to local governments that commits resources away from the GF/GP budget, changes in funding obligations for the Healthy Michigan plan that will draw upon GF/GP resources, changes to the use tax related to taxation of the Medicaid managed care organization that will diminish GF/GP resources, changes to the sales tax related to the sale of automobiles and watercraft, other sales tax changes that will diminish state resources, and the pending cost of funding indigent defense in criminal cases.
Conclusion
Michigan’s love-hate relationship with the personal income tax appears to be entering a new chapter. Legislative attention on the tax imagines ways to reduce the tax rate or eliminate the tax altogether. Such an exercise will not come easy and would have implications for the efficacy of government service: not just the state government but also counties, cities, villages, townships, school districts, community colleges, universities, and many public and private providers of government services that rely on state appropriations. Changes stand to affect the ability of those governments to provide public goods and services, thus affecting the quality of life for residents and businesses in Michigan.


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