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December 1, 1995

The Earmarking of State Taxes in Michigan

Council Comments #1038, December 1995

First in a series of occasional papers on issues raised by Proposal A of 1994.

In Brief

  • Nearly every tax imposed in Michigan since the early 1960s has had a portion of the resulting revenues dedicated to one or more specific functions.
  • Proposal A of March 1994 increased the proportion of earmarked revenues from about 34 percent of total state tax revenues in 1993 to about 57 percent in 1995. Constitutional earmarking increased from 27 percent to about 35 percent and statutory earmarking rose from seven percent to about 22 percent of total state tax revenues.
  • Michigan ranks high nationally in the percentage of state tax revenues dedicated to specific functions. While the results of Proposal A are likely to reduce the number of states that earmark more than Michigan, the final effect remains uncertain.
  • Not since the adoption of the current Michigan Constitution has more than 55 percent of state tax revenues been removed from the budgetary process. This will make it more difficult to reallocate funding priorities, should that become necessary, and take decision-making responsibilities out of the hands of those elected to make such decisions.

The Earmarking of State Taxes in Michigan

Council Comments #1038, December 1995

First in a series of occasional papers on issues raised by Proposal A of 1994.

In Brief

  • Nearly every tax imposed in Michigan since the early 1960s has had a portion of the resulting revenues dedicated to one or more specific functions.
  • Proposal A of March 1994 increased the proportion of earmarked revenues from about 34 percent of total state tax revenues in 1993 to about 57 percent in 1995. Constitutional earmarking increased from 27 percent to about 35 percent and statutory earmarking rose from seven percent to about 22 percent of total state tax revenues.
  • Michigan ranks high nationally in the percentage of state tax revenues dedicated to specific functions. While the results of Proposal A are likely to reduce the number of states that earmark more than Michigan, the final effect remains uncertain.
  • Not since the adoption of the current Michigan Constitution has more than 55 percent of state tax revenues been removed from the budgetary process. This will make it more difficult to reallocate funding priorities, should that become necessary, and take decision-making responsibilities out of the hands of those elected to make such decisions.

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