State treasurer: Michigan taxpayers will see income tax cut next year
LANSING, Mich. (CBS DETROIT) - The state treasurer says Michigan's income tax will decrease to 4.05% for one year, resulting in families expecting to pay lower taxes when they file for tax year 2023.
State officials say the income tax is dropping from 4.25%, which is the first time the state will see a decrease to its lowest since 2007.
The income tax rate reduction is expected to save taxpayers a total of $650 million next year and will equate to savings of approximately $50 for a Michigan taxpayer making about $40,000 annually, Michigan Treasurer Rachel Eubanks told The Associated Press.
"When Michiganders file their 2023 state income taxes in 2024, they will see the rate adjustment in the form of less tax owed or a larger refund," said Treasurer Rachel Eubanks in a statement.
A state law, enacted in 2015, requires a temporary reduction of the income tax if the general fund grew faster than the rate of inflation starting in 2023. On Tuesday, Attorney General Dana Nessel issued a legal opinion stating that the tax reduction will be temporary.
Nessel's opinion comes a few months after the state House Fiscal Agency predicted in January that Michigan's revenues have been running high enough to automatically trigger a drop in the income tax rate under the 2015 law.
"As a result of our growing economy and strong fiscal management, Michigan's state income tax will decrease to its lowest in 15 years," Whitmer said in a statement. "Our state is headed in the right direction, bolstered by low unemployment, projects bringing jobs and supply chains home, and fiscally responsible, bipartisan leadership that took us from a projected $3.5 billion deficit in 2020 to a $9.2 billion surplus this year, paid down $14 billion in debt, and brought the rainy-day fund to an all-time high."
Republicans who passed the law have argued that the rate reduction was meant to be permanent. In a joint statement with Senate Republican Leader Aric Nesbitt and other Republican leaders, former Gov. Rick Snyder, who led Michigan from 2011 to 2019, criticized the opinion as an "unreasonable overreach of what was agreed upon."
"The income tax trigger was intended to be a permanent reduction activated when state government had a large surplus," Snyder said.
Eubanks said her office is bound by Nessel's opinion. The nonpartisan House and Senate fiscal agencies will meet with Eubanks at the May Consensus Revenue Estimating Conference to determine next year's economic forecast and the likelihood of a rate reduction for the 2024 tax year as well.