"The right to criticize government is also an obligation to know what you are talking about."

-Lent Upson, first director of Citizens Research Council

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April 10, 2025

The looming expiration the Tax Cuts and Jobs Act (TCJA, 2017) has reignited the debate about the federal personal income tax exemption for municipal bonds. Federal policymakers are seeking ways to ‘pay for,’ or extend, the terms of several of the tax cuts enacted in the TCJA by eliminating certain tax provisions in addition to enacting federal spending reductions.

The tax exemption for municipal bonds has been crucial in securing cost-effective financing for essential facilities and services throughout the United States. This includes funding for state and local governments, K-12 schools, colleges and universities, roads and airports, hospitals, water and sewer utilities, housing, and more. The exemption plays a vital role in financing infrastructure in both rural and urban communities.

Repealing of the exemption will increase the costs to construct or purchase the public infrastructure and capital. If enacted, costs will rise at a time when Michigan communities need greater investment and more asset management of public facilities. Higher capital costs could result in increased taxes for local taxpayers.

IN A NUTSHELL

 -- Bonds issued by state and local governments are federally tax-exempt, allowing state and local governments to issue debt at lower interest rates.

 -- The U.S. Congress is considering including interest earned on municipal bonds in federal taxable income for investors in state and local government bonds. This change will increase the interest rates state and local governments would have to pay for their bonds, and increase costs for their taxpayers.

 -- Changing the federal tax treatment of municipal bonds would bring uncertainty and disruption to the bond markets, delaying planning, budgeting, and much needed investment in Michigan’s public infrastructure.

Catch Up On More Recent Papers:

• A Data-Driven Assessment of Michigan's Road Program
• Michigan May Want to Reconsider Requiring Foreign-Trained Doctors to Repeat Residency Training
• Medicaid Eligibility Rule Changes Will Create "At-Risk" Funding Cliff for Schools Next Year
• Michigan Needs a State-Level, Expert Commission to Reform its Local Government Funding Model
• Policymakers at All Levels Can Work Toward Better Indoor Air Quality

In a statewide webinar held Wednesday, Research Council infrastructure analyst Eric Paul Dennis presented findings from his recent report, A Data-Driven Assessment of Michigan’s Road Program. His presentation highlighted the following points:

• Michigan ranks 30th among all 50 states in road funding and 40th in road system conditions.
• Michigan’s road program performance declined between 2004 and 2024.
• Policy discussions should include an evaluation of options to improve Michigan’s road performance. At the top of that list: repealing and replacing Public Act 51 of 1951, Michigan’s main road funding law.

Editorial: More money for roads can’t solve the problem alone, Crain’s Business (April 4)

New report shows current road funding laws in Michigan are outdated and ineffective, WDET (April 3)

New report: Michigan’s roads rank 40th in US; experts say:scrap road-funding formula and start over, Vic McCarty Show WTCM (March 31)

Research group advises new road funding model for Michigan, WSJM (March 29)

New formula for improving Michigan roads, WPHM 1380 (March 28)

Report: Michigan is trailing other states on road upkeep and needs new funding method, Lansing City Pulse (March 26)

Report: Michigan is trailing other states on road upkeep and needs new funding method, Michigan Advance (March 26)

New study calls for overhaul of Michigan’s road funding and allocation legislation, WKAR Public Radio (March 26)
Report ranks Michigan 30th in road funding and 40th in road conditions, ABC12 (March 26)

New Report Says Road Funding Needs Overhaul, WJR Detroit (March 26)

Eric Lupher talks with Chris Renwick about road report (begins 1 hr, 15 min), WJR Detroit (March 26)

Assessing Michigan’s Roads, WJR Detroit (March 26)

New Citizens Research Council Report Argues for Reform of Michigan’s Road Funding Program as Part of Increased Investment, Michigan Business Network (March 26)

Eric Paul Dennis - The WILS Morning Wake-Up, WILS 1320 (March 26)

New analysis recommends changes to Michigan’s road funding formula, WSJM - Moody on the Market (March 25)

CRC: Legislature Should Scrap, Replace Act 51 Road Funding Law, Gongwer (March 25)

As Michigan’s road costs rise, experts say current funding method ‘isn’t working’, Bridge Michigan (March 25)

Michigan’s roads ranked 40th in U.S. in new report, MLive.com (March 25)

Replace Michigan's 'obsolete' road funding rules to avoid 'more of the same,' group says, Detroit News (March 25)

Report: Reform of Michigan’s Road Funding Program Needed as Part of Increased Investment, DBusiness (March 25)

Michigan should rip up road-funding formula, start with blank slate, report says, Crain’s Business (March 25)

Since 1916, Citizens Research Council has been relied upon to provide trusted, unbiased, public policy analyses to ensure better decision making. Michigan policy leaders, on both sides of the aisle, take notice.

But a think tank cannot run on fumes alone!  It costs money to undertake this high-quality work.

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Together, we will continue to provide sound research analyses for all of Michigan.

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Detroit News politics editor and columnist Chad Livengood guest hosted the Research Council's #FactsMatter Podcast with the Research Council’s infrastructure analyst Eric Paul Dennis, PE, to discuss the Council’s recently released paper, "Data-Driven Assessment of Michigan’s Road Program," which makes the case that Michigan legislators should overhaul the way the state divvies up money for road improvements.

The report was released and podcast recorded as state lawmakers are currently seeking billions of dollars in additional infrastructure funding.

Dennis makes the case that overall funding levels are just one factor affecting road quality—smarter spending and systemic reforms are just as critical as additional revenue to maintain and improve infrastructure conditions statewide.

Find all #FactsMatter podcasts on SoundCloud, Apple, Spotify, Amazon or wherever you get your podcasts.

Other Recent Podcasts:

• Michigan has an underperforming road system. State lawmakers need to address it.
• If lawmakers are serious about reforming budget earmarks, they should put it in law.
• Gov. Whitmer's new budget plan: funding bumps for students, new sin taxes and more.

(See above for the week's coverage of the 2025 Michigan Road Program Report)

Port Austin Zoning Ordinance Debate Deepens With Village Response Letter, Newsbreak (March 28)

Even after bankruptcy, Detroit is in debt, CapCon (March 27)

Detroit mayoral hopefuls embrace tax breaks for revival despite some objection, Detroit News (March 26)

Port Austin Michigan Zoning Crackdown Sparks Public Outcry Over Tent, Camper Ban, Newsbreak (March 26)

Michigan districts brace for cuts, as number of needy students falls, Bridge Michigan (March 20)

Tax relief, road projects competing for dollars in Lansing, Detroit News (March 12)

Michigan road funding efforts have stalled before. Can new plans break the traffic jam?, Detroit Free Press (March 12)

Madhu Anderson, above, senior research associate for local affairs, and Research Council President Eric Lupher presented before policy leaders at the Michigan Farm Bureau. Anderson provided an overview of Michigan property taxes, and the unanticipated interactions between the state's property tax limitations. Lupher discussed the potential of a Michigan Constitutional Convention ("Con-Con"), which will be a question on the ballot in November 2026. He also discussed what is required to get a citizen-backed initiative on the ballot, as well as how Michigan's laws compare to other states.

Eric Lupher, below left, also presented this week before the Michigan Association of Counties on the Constitutional Convention ("Con-Con") process, which will be a question on the ballot in November 2026.