When adjusted for inflation, this is a 16.4 percent increase. From 2009 to the pre-pandemic budget in 2019, state revenue increased $9.1 billion. While the state’s tax system has made improvements, it’s spending continues to grow each year. The Tax Foundation warns that “immediate elimination of the tax could wreak havoc on local government budgets.” These taxes penalize businesses with larger inventories, such as retailers and manufacturers. One weakness in the Michigan’s tax code is its partial taxation of business inventory. The Tax Foundation notes that, unlike taxes on intangible property, real property taxes are generally more transparent and actually work to benefit those who are required to pay the taxes. From 2018 to 2020, Michigan held the 36th spot. Michigan’s property tax codes do not seem to have become more competitive in recent years. Using the property tax component of their tax index, with 1 being the best property tax codes and 50 being the worst, the Tax Foundation ranked Michigan 35th overall. Property taxes are another point of interest in the index calculation. Taken together, the Tax Foundation ranked Michigan’s overall sales tax component as the 10th best out of the 50 states. At 41.98 cents per gallon, Michigan’s gas tax is the 9th highest in the nation. ![]() Michigan’s gasoline tax holds a small role in the overall sales tax ranking, but it’s still a noteworthy mention. So, when comparing states’ combined state tax rates and average local tax rates, Michigan has the 13th lowest sales tax rate. However, Michigan is one of only 13 states that do not impose local sales taxes. This makes it the 17th highest in the nation. In Michigan, the state sales tax has been six percent since 1994. Overall state and local sales taxes matter as well. With this filter applied, Michigan ranks as the 8th lowest out of the 41 states with income taxes. Many other states’ progressive tax systems have a higher maximum statutory rate, but Michigan’s proportional tax even holds its ground when compared to the maximum statutory rates for incomes under $50,000 a year. Out of the eight states with a proportional tax, Michigan has the third lowest marginal rate. Nine states have no income tax, and of the 41 who have one, only eight have a flat income tax. One factor that has changed, is Michigan’s personal exemption which increased from $4,750 to $4,900 in 2020 as was planned by a 2018 law. It was 3.9% for decades before rising to 4.35% in 2006 and dropping a bit in 2012 where it has stayed put. The Great Lakes State has a 4.25% flat tax on income. They break down the percent Michigan citizens pay across all major areas.įor individual income taxes, the Tax Foundation ranks Michigan as the 12th best in the United States. The Tax Foundation’s studies provide plenty of other interesting data about the mitten’s tax system. So, Michigan’s unemployment insurance debt tax may have been the anchor dragging down the overall score for many years. The Tax Foundation moved Michigan’s UI tax rank from 49th to 17th after the solvency tax was removed. ![]() ![]() After almost ten years, Michigan finished repaying the loans and eliminated obligation assessment on businesses’ tax rates. In 2011, Michigan owed 3.1 billion dollars in outstanding unemployment insurance loans to the U.S. Whether the sudden climb in ranking is a result of Michigan’s own improvement or the shortcomings of other states isn’t entirely clear. ![]() For the 2021 Business Tax Climate Index, Michigan is ranked 14th in the nation. The rankings are generated through the compilation of the states’ many taxation components including income, property, and other individual and corporate taxes.įrom 2014 to 2020, Michigan steadily declined in the ranking, moving from 11th to 17th on the list, largely because of improvements of the tax systems in other states. The Tax Foundation’s State Business Tax Climate Index is a comprehensive and source that examines and compares how well each state’s tax system is structured. So how much do Michigan citizens pay in taxes and how does that rank across the United States? And how high those taxes are matters to people as well. They say nothing is certain except death and taxes.
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