Michigan’s Tax Gamble Could Risk Its Competitive Edge

Michigan voters may soon consider a dramatic change to the state’s income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. .

A progressive-backed ballot initiative would upend the state’s flat income tax system by imposing a 5 percent surtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services. on high earners — those making more than $500,000 individually or $1 million jointly. The proposal, intended to boost K-12 education funding, would raise the state’s top income tax rate from 4.25 percent to 9.25 percent, vaulting Michigan into the top tier of high-tax states.

While the goal may be commendable, the method is not. If passed, the shift would make Michigan’s tax burden anomalously high regionally and nationally, positioning it just behind high-tax states such as California, Hawaii, New York, New Jersey, Oregon and Minnesota. For a state that has worked hard to cultivate a pro-growth business climate, this would be a step in the wrong direction.