Michigan’s tax code includes all major tax types and has traditionally ranked well on the Index. The state’s individual income tax is flat with a relatively low rate of 4.25 percent, along with a modest 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, lower than in all other Midwestern states except Wisconsin. Michigan does not authorize cities and counties to impose local option sales taxes, simplifying the consumption tax system compared to most other states.
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.
| Category | Rank | Rank Change | Score |
|---|---|---|---|
| Overall | 16 | -2 | 5.44 |
| Corporate Taxes | 22 | -14 | 5.39 |
| Individual Income Taxes | 19 | -5 | 5.70 |
| Sales Taxes | 10 | 0 | 5.56 |
| Property Taxes | 29 | 0 | 5.00 |
| Unemployment Insurance Taxes | 28 | -2 | 5.11 |
Get facts about taxes in your state and around the US
Tax collections vary widely by state, making per capita collections figures—a measure of collections per person—especially useful, as they allow comparisons across differences in tax rates and bases, economic capacities, and policy decisions that impact the size and scope of government.
5 min read
Rental cars are some of the most heavily taxed transactions in the US. Rather than levying additional taxes on rental cars by trying to export the tax burden to nonresidents, municipalities should enact principled, neutral transportation tax policy that is unlikely to discourage visitors, tourists, and other economic activity.
5 min read
Millions of Americans, along with significant amounts of income and economic activity, are moving from high-tax states to those with more competitive tax systems and lower overall costs of living.
8 min read