Tax Policy Emerges Modernized, Despite a Contentious Process and Late State Budget

Livonia, MI, Nov. 10, 2025 – Citizens Research Council of Michigan today released an update of its Outline of the Michigan Tax System, representing the 39th edition of this popular publication which serves as a ready reference point for policymakers, journalists, researchers, and citizens to Michigan’s often complicated tax structure.

Despite the delayed passage of the FY2026 Michigan budget, it achieved major milestones, most notably a long-awaited boost in road funding and key tax policy achievements that stabilize state revenues affected by federal law changes.

“The most dramatic changes to Michigan’s tax system occurred when the FY2026 budget passed, starting with the first permanent road funding increase since 2015,” said Eric Lupher, Citizens Research Council president. “When fully phased-in, the state will generate an additional $2 billion annually for road maintenance and repair from a 20-cent increase in the gasoline tax, a new 24 percent excise tax on wholesale marihuana sales and a new earmark from the   corporate income tax.”

State lawmakers acted to address the negative impacts on future Michigan tax revenue from the federal One Big Beautiful Bill Act (OBBBA), decoupling the state income tax from OBBBA and restructuring the Insurance Provider tax, safeguarding more than $1 billion in state funding while also allowing for targeted tax relief for tipped workers, overtime pay and Social Security recipients.

Other notable changes since our last update include:

• Public Act 103 of 2023: Establishes a new Solar Energy Facilities Tax
• Public Act 175 of 2023: Requires an annual deposit from use tax revenues into a Local Government Reimbursement Fund to reimburse local units for revenues lost due to the increase in the small business personal property tax exemption enacted in 2023.
• Public Act 156 of 2024: Establishes a one-time, non-refundable tax credit of up to $10,000 for live organ donation expenses that are not reimbursed by another party.

The 39^th edition of the Outline of the Michigan Tax System incorporates all these changes and many more.  The Tax Outline serves as an important ready reference for those interested in Michigan’s public finances. Summary descriptions outline the base, tax rate, and revenue disposition for major taxes assessed at both the state and local levels. These are supplemented by historical information on long-run revenue trends. For easy reference, archived versions of previous updates dating back to 1997 are available at https://crcmich.org/publications/outline-of-the-michigan-tax-system-archives.

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Founded in 1916, the Citizens Research Council of Michigan works to improve government in Michigan. The organization provides factual, unbiased, independent information concerning significant issues of state and local government organization, policy, and finance. By delivery of this information to policymakers and citizens, the Research Council aims to ensure sound and rational public policy formation in Michigan. For more information, visit www.crcmich.org.