-
Overall Rank
25
Down 9 places since 2026 -
26
Down 2 places since 2026 -
30
Down 12 places since 2026 -
9
Up 1 place since 2026 -
29
Down 2 places since 2026 -
Unemployment Insurance Tax Rank
27
Up 1 place since 2026
Michigan ranks 25th overall on the 2027 State Tax Competitiveness Index.
Score 5.21 / 10
Notable Changes Michigan is singled out in the study for this year's changes.
In the 2027 Index
Michigan’s score was very close to several other states in 2026 but fell behind them in 2027 when it did not conform to the improved expensing provisions in the OBBBA. Combined with a new exemption for tipped and overtime income and a comparatively low Section 179 limit, the Great Lake State dropped 9 places overall, from 16th to 25th, and from 18th all the way to 30th on the individual income tax component.
Snapshot date: The 2027 Index measures each state's tax law as of July 1, 2026. Changes enacted after that date are not reflected in these ranks.
About Michigan's Tax Code
Michigan’s tax code includes all major tax types and has traditionally ranked well on the Index, although it finds itself closer to the middle of the pack in 2027. The state’s individual income tax is flat with a relatively low rate of 4.25 percent, along with a relatively high personal exemption. However, Michigan faces significant regional competition, as Indiana, Ohio, and Pennsylvania all have lower state individual income tax rates, although all four states authorize localities to impose local income taxes.
Michigan has a flat 6 percent corporate income tax, which is close to the national average. The state has no throwback rule or capital stock tax, and, unlike Ohio, it does not impose a gross receipts tax. However, the state does not offer full expensing, which could be an important element of future pro-growth reforms aimed at attracting capital-intensive businesses.
The state’s sales tax rate is 6 percent. Michigan does not authorize cities and counties to impose local option sales taxes, simplifying the consumption tax system compared to most other states and resulting in lower average sales taxes than in all Midwestern states except Wisconsin.
Michigan’s property tax system is reasonably competitive with an average property tax burden. The state taxes tangible personal property but offers a generous de minimis exemption of $180,000, reducing compliance costs for small businesses. Michigan also does not impose estate, inheritance, or gift taxes, making it more attractive for high-net-worth individuals.
Component Scores
#25 overall · 5.21 / 10Each component is scored from 0 to 10, where 10 is best. Select a component for its detail page.
| Component | Rank | Score | |
|---|---|---|---|
| Corporate Taxes | #26 | 5.25 / 10 | |
| Individual Income Taxes | #30 | 5.14 / 10 | |
| Sales Taxes | #9 | 5.51 / 10 | |
| Property Taxes | #29 | 4.98 / 10 | |
| Unemployment Insurance Taxes | #27 | 5.10 / 10 |
Ranking Changes, 2020–2027
#25 in 2027 · down 11 places from 2020Michigan ranked 14th in 2020 and ranks 25th in 2027, a decline of 11 places. The axis is zoomed to the state's range. Ranks for 2020 through 2026 are backcast under the current methodology.
Show the Table
| Year | Overall | Corporate | Individual Income | Sales | Property | Unemployment Insurance |
|---|---|---|---|---|---|---|
| 2020 | 14 (5.47) | 11 (5.54) | 12 (5.73) | 11 (5.50) | 30 (5.05) | 22 (5.19) |
| 2021 | 12 (5.48) | 12 (5.56) | 12 (5.75) | 10 (5.54) | 25 (5.17) | 27 (5.00) |
| 2022 | 13 (5.52) | 11 (5.60) | 12 (5.79) | 8 (5.56) | 31 (5.09) | 25 (5.10) |
| 2023 | 14 (5.48) | 11 (5.58) | 12 (5.76) | 11 (5.47) | 27 (5.09) | 26 (5.08) |
| 2024 | 15 (5.47) | 12 (5.56) | 13 (5.74) | 11 (5.51) | 27 (5.07) | 28 (4.95) |
| 2025 | 14 (5.45) | 12 (5.54) | 14 (5.68) | 11 (5.51) | 27 (5.05) | 25 (5.11) |
| 2026 | 16 (5.40) | 24 (5.33) | 18 (5.63) | 10 (5.55) | 27 (5.02) | 28 (5.12) |
| 2027 | 25 (5.21) | 26 (5.25) | 30 (5.14) | 9 (5.51) | 29 (4.98) | 27 (5.10) |
Michigan Compared across the States
#25 overallEach row places the states on a 0 to 10 score scale for one measure. Michigan is the large outlined dot, and the dashed line is the 50-state median, so a dot to its right scores better than the typical state. Hover over or tab to any dot for detail, and select it to open that state's profile.
Overall
#25 5.21
Corporate Taxes
#26 5.25
Individual Income Taxes
#30 5.14
Sales Taxes
#9 5.51
Property Taxes
#29 4.98
Unemployment Insurance Taxes
#27 5.10
- Michigan
- Other states, by rank (1st to 50th)
- 50-state median
Michigan and Its Neighbors
#25 overallMichigan borders 3 states and ranks 25th overall; 2 of them rank higher and 1 ranks lower.
What Each Component Includes
The five components of the Index, what each one covers, and where Michigan lands. Open any component for the full breakdown.
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Corporate Taxes
Rank #26Includes corporate income taxes and gross receipts taxes. Measures the impact of each state’s principal tax on business activities.
Full Breakdown for Michigan → -
Individual Income Taxes
Rank #30Covers the tax individuals pay on income, and with it a significant number of businesses — sole proprietorships, partnerships, and S corporations — that report their income through the individual income tax code.
Full Breakdown for Michigan → -
Sales Taxes
Rank #9Covers the general sales tax levied on the purchase price of goods and services, plus excise taxes on gasoline, diesel, tobacco, vapor products, beer, and spirits, and taxes on digital advertising.
Full Breakdown for Michigan → -
Property Taxes
Rank #29Includes taxes on real and personal property, net worth, and the transfer of assets — among them capital stock, estate, inheritance, and real estate transfer taxes.
Full Breakdown for Michigan → -
Unemployment Insurance Taxes
Rank #27Covers the taxes employers pay into the state unemployment insurance program to finance benefits for workers recently unemployed.
Full Breakdown for Michigan →
Tax Data Explorer
Every policy variable behind Michigan's 2027 scores, grouped by the report's tables, as of July 1, 2026. Its bordering states are shown alongside to start. Search the variables and values, or add up to 4 states to compare side by side.
150 data points · Shaded values differ from Michigan
Corporate Taxes: Corporate Income Tax Rates
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Bracket 1 | 6.0% > $0 | 4.9% > $0 (differs) | None (differs) | 7.9% > $0 (differs) |
| Gross Receipts Tax | No | No | Yes (differs) | No |
| Gross Receipts Tax Minimum Rate | n.a. | n.a. | 0.26% (differs) | n.a. |
| Gross Receipts Tax Maximum Rate | n.a. | n.a. | 0.26% (differs) | n.a. |
| Gross Receipts Tax Rate Used in the Index | n.a. | n.a. | 0.26% (differs) | n.a. |
Corporate Taxes: Tax Credits and Gross Receipts Deductions
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Job Credits | No | Yes (differs) | Yes (differs) | Yes (differs) |
| Research and Development Credits | Yes | Yes | Yes | Yes |
| Investment Credits | No | Yes (differs) | Yes (differs) | Yes (differs) |
| Compensation Expenses Deductible | n.a. | n.a. | No (differs) | n.a. |
| Cost of Goods Sold Deductible | n.a. | n.a. | No (differs) | n.a. |
Corporate Taxes: Net Operating Losses
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Conforms to Federal NOL Treatment | No | No | n.a. (differs) | No |
| Carryback (Years) | 0 | 0 | n.a. (differs) | 0 |
| Carryback Cap | $0 | $0 | n.a. (differs) | $0 |
| Carryforward (Years) | 10 | 20 (differs) | n.a. (differs) | 20 (differs) |
| Carryforward Cap | Unlimited | Unlimited | n.a. (differs) | Unlimited |
Corporate Taxes: Treatment of Capital Investment
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Section 168(k) Expensing | 0% | 0% | 100% (differs) | 0% |
| Conforms to Section 163(j) Limitation | Yes | No (differs) | No (differs) | No (differs) |
| GILTI Inclusion | Decouples | Decouples | n.a. (differs) | Decouples |
| Section 174 Expensing | No | Yes (differs) | Yes (differs) | Yes (differs) |
| Section 168(n) Expensing | No | No | Yes (differs) | No |
Corporate Taxes: Other Corporate Base Variables
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Federal Income Used as State Tax Base | Yes | Yes | Yes | Yes |
| Conformity Status | Rolling | Static (current) (differs) | Static (current) (differs) | Static (not current) (differs) |
| Allows Federal ACRS or MACRS Depreciation | Yes | Yes | Yes | Yes |
| Allows Federal Depletion | Yes | Yes | Yes | Yes |
| Throwback Rule | No | No | No | Yes (differs) |
| Foreign Tax Deductibility | No | Yes (differs) | Yes (differs) | No |
| Corporate AMT | No | No | No | No |
| Brackets Indexed for Inflation | Flat CIT | Flat CIT | GRT (differs) | Flat CIT |
Individual Income Taxes: Individual Income Tax Rates
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Bracket 1 | 4.25% > $0 | 2.95% > $0 (differs) | 2.75% > $26,050 (differs) | 3.5% > $0 (differs) |
| Bracket 2 | n.a. | n.a. | n.a. | 4.4% > $14,680 (differs) |
| Bracket 3 | n.a. | n.a. | n.a. | 5.3% > $50,480 (differs) |
| Bracket 4 | n.a. | n.a. | n.a. | 7.65% > $323,290 (differs) |
| Standard Deduction (Single Filer) | n.a. | n.a. | n.a. | $13,960 (differs) |
| Personal Exemption (Single Filer) | $5,900 | $1,000 (differs) | $2,400 (differs) | $700 (differs) |
| Personal Exemption Credit (Single Filer) | n.a. | n.a. | n.a. | n.a. |
| Personal Exemption per Dependent | $5,900 | $1,000 (differs) | $2,400 (differs) | $700 (differs) |
| Personal Exemption Credit per Dependent | n.a. | n.a. | n.a. | n.a. |
| Average Local Income Tax Rate | 1.95% | 1.76% (differs) | 2.50% (differs) | None (differs) |
| Surtaxes on Wage Income | n.a. | n.a. | n.a. | n.a. |
Individual Income Taxes: Marriage Penalty, Capital Income, Indexation
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Marriage Penalty | No | No | Yes (differs) | Yes (differs) |
| Married Couples Can File Separately on One Return | No | No | No | No |
| Convenience Rule | No | No | No | No |
| Interest Taxed | Yes | Yes | Yes | Yes |
| Dividends Taxed | Yes | Yes | Yes | Yes |
| Capital Gains Taxed | Yes | Yes | Yes | Yes |
| Combined Capital Gains Tax Rate | 6.2% | 4.755% (differs) | 3.125% (differs) | 5.355% (differs) |
| Tax Brackets Indexed for Inflation | Yes | Yes | No (differs) | Yes |
| Standard Deduction Indexed for Inflation | Yes | Yes | Yes | Yes |
| Personal Exemption Indexed for Inflation | Yes | No (differs) | No (differs) | No (differs) |
| Progressivity Ratio | 1.00 | 1.00 | 1.00 | 1.74 (differs) |
Individual Income Taxes: Other Individual Base Variables
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Federal Income Used as State Tax Base | Yes | Yes | Yes | Yes |
| Conformity Status | Rolling | Static (current) (differs) | Static (current) (differs) | Static (not current) (differs) |
| Credits for Taxes Paid to Other States | Yes | Yes | Yes | Yes |
| AMT Levied | No | No | No | No |
| Recognition of S Corporation Status | Yes | Yes | Yes | Yes |
| Section 179 Expensing Limit | $1,250,000 | $25,000 (differs) | $446,667 (differs) | $2,560,000 (differs) |
| Tips | Exempt | Exempt | Taxable (differs) | Taxable (differs) |
| Overtime | Exempt | Exempt | Taxable (differs) | Taxable (differs) |
| Filing and Withholding Threshold Index | 0 | 10 (differs) | 0.169 (differs) | 2.263 (differs) |
Individual Income Taxes: Other Individual Income Variables
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Income Recapture | No | No | No | No |
Sales Taxes: Sales and Excise Tax Rates
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| State Sales Tax Rate | 6.00% | 7.00% (differs) | 5.75% (differs) | 5.00% (differs) |
| Average Local Sales Tax Rate | 0.00% | 0.00% | 1.54% (differs) | 0.72% (differs) |
| Maximum Local Sales Tax Rate | None | None | 2.25% (differs) | 2.90% (differs) |
| Gasoline Tax (Cents per Gallon) | 53.40 | 63.10 (differs) | 38.50 (differs) | 32.90 (differs) |
| Diesel Tax (Cents per Gallon) | 53.4 | 64 (differs) | 47 (differs) | 32.9 (differs) |
| Cigarette Tax (Dollars per Pack of 20) | $2.00 | $2.995 (differs) | $1.60 (differs) | $2.52 (differs) |
| Beer Tax (Dollars per Gallon) | $0.2032 | $0.115 (differs) | $0.18 (differs) | $0.0645 (differs) |
| Spirits Tax (Dollars per Gallon) | $14.61 | $2.68 (differs) | $12.33 (differs) | $3.25 (differs) |
| Vapor Tax Ratio to Cigarette Tax | n.a. | 78.50% (differs) | 10.00% (differs) | 5.00% (differs) |
Sales Taxes: Business-to-Business Exemptions
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Business Inputs | Some Taxable | Some Taxable | Some Taxable | Some Taxable |
| Farm Equipment | Exempt | Exempt | Exempt | Exempt |
| Office Equipment | Taxable | Taxable | Taxable | Taxable |
| Manufacturing Machinery | Exempt | Exempt | Exempt | Exempt |
| Manufacturing Raw Materials | Exempt | Exempt | Exempt | Exempt |
| Business Fuel and Utilities | Exempt | Exempt | Exempt | Exempt |
| Business Leases and Rentals | Taxable | Taxable | Taxable | Taxable |
| Information Services | Exempt | Exempt | Taxable (differs) | Exempt |
| Software as a Service (SaaS) | Exempt | Exempt | Taxable (differs) | Exempt |
| Platform as a Service (PaaS) | Exempt | Exempt | Taxable (differs) | Exempt |
| Digital B2B Products | Exempt | Exempt | Taxable (differs) | Exempt |
| Payroll Services | Exempt | Exempt | Taxable (differs) | Exempt |
| Data Center Purchases | Exempt | Exempt | Taxable (differs) | Exempt |
| Digital Advertising Tax | No | No | No | No |
Sales Taxes: Consumer Goods and Services in the Base
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Groceries | Exempt | Exempt | Exempt | Exempt |
| Clothing | Taxable | Taxable | Taxable | Taxable |
| Prescription Medication | Exempt | Exempt | Exempt | Exempt |
| Nonprescription Medication | Taxable | Taxable | Taxable | Taxable |
| Gasoline | Exempt | Exempt | Exempt | Exempt |
| Landscaping | Exempt | Exempt | Taxable (differs) | Taxable (differs) |
| Repair Services | Exempt | Exempt | Taxable (differs) | Taxable (differs) |
| Real Estate Services | Exempt | Exempt | Exempt | Exempt |
| Parking | Exempt | Exempt | Exempt | Taxable (differs) |
| Dry Cleaning | Taxable | Exempt (differs) | Taxable | Taxable |
| Fitness Services | Exempt | Exempt | Taxable (differs) | Exempt |
| Barber Services | Exempt | Exempt | Exempt | Exempt |
| Veterinary Services | Exempt | Exempt | Exempt | Exempt |
| E-Books | Exempt | Taxable (differs) | Taxable (differs) | Taxable (differs) |
| Streaming Video | Exempt | Taxable (differs) | Taxable (differs) | Taxable (differs) |
| Medical Services | Exempt | Exempt | Exempt | Exempt |
| Legal Services | Exempt | Exempt | Exempt | Exempt |
| Financial Services | Exempt | Exempt | Exempt | Exempt |
| Accounting Services | Exempt | Exempt | Exempt | Exempt |
| Sales Tax Holiday | No | No | Yes (differs) | No |
Sales Taxes: Sales Tax Structure
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Uniform Base Definitions | Yes | Yes | Yes | Yes |
| Unified Tax Administration | Yes | Yes | Yes | Yes |
| Safe Harbor for Remote Sellers | Sales or Transactions Threshold | Gross Sales Threshold (differs) | Sales or Transactions Threshold | Gross Sales Threshold (differs) |
Property Taxes: Property and Capital Stock Tax Rates
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Property Tax Collections per Capita | $1,894 | $1,487 (differs) | $1,688 (differs) | $1,905 (differs) |
| Property Tax as a Percentage of Personal Income | 2.96% | 2.32% (differs) | 2.61% (differs) | 2.81% (differs) |
| Assessment Limit | Yes | No (differs) | No (differs) | No (differs) |
| Levy Limit | Yes | Yes | Yes | Yes |
| Capital Stock Tax Rate | None | None | None | None |
| Capital Stock Tax Maximum Payment | n.a. | n.a. | n.a. | n.a. |
| Payment Options for Capital Stock and Corporate Income Taxes | n.a. | n.a. | n.a. | n.a. |
Property Taxes: Property Tax Bases
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Tangible Personal Property Tax | Yes | Yes | No (differs) | No (differs) |
| Tangible Personal Property De Minimis Exemption | $180,000 | $2,000,000 (differs) | n.a. (differs) | n.a. (differs) |
| Intangible Property Tax | No | No | No | No |
| Inventory Tax | Partial | No (differs) | No (differs) | No (differs) |
| Real Estate Transfer Tax | Yes | No (differs) | Yes | Yes |
| Split Roll | No | No | No | No |
| Split Roll Ratio | 1.00 | 1.00 | 1.00 | 1.00 |
| Estate Tax | No | No | No | No |
| Inheritance Tax | No | No | No | No |
| Gift Tax | No | No | No | No |
Unemployment Insurance Taxes: UI Tax Rates
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Minimum Rate | 0.06% | 0.50% (differs) | 0.55% (differs) | 0.00% (differs) |
| Maximum Rate | 12.20% | 7.40% (differs) | 10.25% (differs) | 12.00% (differs) |
| Taxable Wage Base | $9,500 | $9,500 | $9,000 (differs) | $14,000 (differs) |
| Most Favorable Schedule: Minimum Rate | 0.00% | 0.00% | 0.00% | 0.00% |
| Most Favorable Schedule: Maximum Rate | 6.30% | 5.40% (differs) | 6.30% | 10.70% (differs) |
| Least Favorable Schedule: Minimum Rate | 0.00% | 0.75% (differs) | 0.30% (differs) | 0.07% (differs) |
| Least Favorable Schedule: Maximum Rate | 6.30% | 10.20% (differs) | 6.70% (differs) | 10.70% (differs) |
| Employer Contributions as a Share of Total Wages | 0.47% | 0.25% (differs) | 0.42% (differs) | 0.37% (differs) |
| Employer Contributions as a Share of Taxable Wages | 2.75% | 1.32% (differs) | 2.44% (differs) | 1.50% (differs) |
| Trust Fund Solvency Ratio | 0.5 | 0.77 (differs) | 0.43 (differs) | 0.79 (differs) |
| New Employer Rate | 2.70% | 2.50% (differs) | 2.70% | 3.25% (differs) |
Unemployment Insurance Taxes: Experience Formulas and Charging Methods
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Experience Formula Based On | Benefits Ratio | Reserve Ratio (differs) | Reserve Ratio (differs) | Reserve Ratio (differs) |
| Benefits Charged in Proportion to Base-Period Wages | Yes | No (base-period employers in inverse chronological order) (differs) | Yes | Yes |
| Charged If Employee's Benefit Award Is Reversed | Yes | No (differs) | No (differs) | Yes |
| Charged for Reimbursements on Combined Wage Claims | No | No | No | No |
| Charged If Employee Left Voluntarily | No | No | No | No |
| Charged If Employee Was Discharged for Misconduct | No | No | No | No |
| Charged If Employee Refused Suitable Work | No | Yes (differs) | No | No |
| Charged If Employee Continues to Work Part-Time | No | No | No | Yes (differs) |
Unemployment Insurance Taxes: Other UI Base Variables
| Variable | Michigan | Indiana | Ohio | Wisconsin |
|---|---|---|---|---|
| Solvency Tax | Yes | No (differs) | Yes | Yes |
| Taxes for Socialized Costs or Negative Balance Employers | Yes | No (differs) | Yes | No (differs) |
| Loan and Interest Repayment Surtaxes | Yes | Yes | No (differs) | Yes |
| Reserve Taxes | No | No | No | No |
| Surtaxes for UI Administration or Non-UI Purposes | No | No | Yes (differs) | Yes (differs) |
| Temporary Disability Insurance | No | No | No | No |
| Voluntary Contributions | Yes | Yes | Yes | Yes |
| Years to Qualify for Experience Rating | 1 | 3 (differs) | 1.5 (differs) | 3 (differs) |
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About the Authors
Janelle Fritts is a Senior Policy Analyst with the Tax Foundation’s Center for State Tax Policy. She is the lead researcher on the annual State Tax Competitiveness Index and serves as a resource to policymakers in their efforts to modernize and improve the structures of their state tax codes. Her work has been cited in The New York Times, the Associated Press, Bloomberg, and numerous state media outlets across the country.
Jared Walczak is a Senior Fellow at the Tax Foundation, where he spent five years as Vice President of State Projects, and president of Walczak Policy Consulting.
Nicole Fox is a Policy Analyst with the Center for State Tax Policy at the Tax Foundation, where she serves as a resource to policymakers in their efforts to modernize and improve the structure of their state tax codes.
Katherine Loughead is the Vice President of State Tax Policy at the Tax Foundation, where she oversees the state tax policy team’s research agenda and serves as a resource to policymakers in their efforts to modernize and improve the structure of their state tax codes.
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