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AG: State Income Tax Rollback Lasts 1 Year

April 4, 2023

Article courtesy MIRS News for SBAM’s Lansing Watchdog e-newsletter

Decreases in the state income tax due to revenue increases under a 2015 law are temporary – lasting one year, according to an opinion from Attorney General (AG) Dana Nessel Tuesday.

The cut, if made permanent, could cost the state billions in revenue over time.

“… It is apparent that the Legislature intended any income tax reduction under [MCL 206.51(1)(c)] to be for that tax year only, where the conditions described in subsection (1)(c) apply,” Nessel’s opinion, sought by state Treasurer Rachael Eubanks, reads. “… Simply put, the statute provides temporary relief based on temporary circumstances.”

Not everyone, however, agrees with the AG’s opinion.

Brian Calley, who was Lieutenant Governor in 2015 and current president and chief executive officer of the Small Business Association of Michigan, said the drafters of the 2015 tax cut provision agree the rate is permanent, noting that in January both the House and Senate fiscal agencies, as well as the Department of Treasury, “published consensus revenue estimates that clearly indicated the tax cut continued in future years.”

A Treasury spokesperson said Calley’s state about the consensus revenue estimates “is incorrect as the consensus revenue estimates did not consider the potential income tax reduction for current or future years.”

Calley said it is “disappointing the politics that state government will play to raise taxes on individuals and small businesses,” and called on the Treasury and Gov. Gretchen Whitmer to “ignore this partisan opinion.”

Former Michigan Gov. Rick Snyder, past House Speaker Kevin Cotter and previous Senate Majority Leader Arlan B. Meekhof (R-West Olive) each said in a joint press release that the tax cut law they helped craft was meant to be permanent.

Nessel’s opinion precedes the upcoming publication of the Annual Comprehensive Financial Report for fiscal year 2022, which is expected to trigger a drop in the state’s personal income tax rate from 4.25% to about 4.05% for the 2023 tax year.

If the AG’s opinion stands, the rate returns to 4.25% for the 2024 tax year. The future also could include legal challenges.

Other Republicans also blasted Nessel’s opinion.

Senate Minority Leader Aric Nesbitt (R-Lawton) said on Twitter that the state government is sitting on $9 billion of the taxpayers’ money and “Democrats are fighting tooth and nail to keep every penny of it from you.”

House Republican Leader Matt Hall (R-Kalamazoo) said Nessel and Whitmer “are resorting to fringe legal theories to keep long-lasting relief out of people’s pockets.” He said the “language, history and legislative intent” of the state statute makes clear “that the tax cut should be permanent.”

Mary Drabik, communications director for Michigan Freedom Fund, called Nessel’s opinion a “politically motivated opinion that raises” taxes on Michigan families.

“Nessel’s opinion should infuriate families across the state, as they still struggle with the ever-rising cost of living brought on by broken Democrat policies,” she said. “Michigan Democrats have gone on an unprecedented spending spree over the first three months of 2023, prioritizing special interests over the interests of Michigan taxpayers.”

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