MIDLAND, Mich. — The Michigan Department of Treasury’s misinterpretation of a 2015 law stands in the way of a tax cut for 4.9 million taxpayers throughout the state, the Mackinac Center for Public Policy argues in a response brief submitted today. The brief was filed after the Attorney General moved to dismiss the Center's lawsuit defending a permanent tax cut.
The Mackinac Center filed the suit in August on behalf of Associated Builders and Contractors of Michigan, National Federation of Independent Business, Inc., Senator Ed McBroom, Representative Dale Zorn and six individual taxpayers from across the state. The challenge to the Department of Treasury seeks to ensure the state follows the law by preserving the income tax cut that took effect this year.
The treasury department is incorrectly interpreting a law from 2015, according to the brief. The statute created a trigger that lowers the personal income tax rate when the state’s revenue outpaces inflation by a set amount. Last year’s revenues were high enough to trigger that rollback, and the rate fell from 4.25% to 4.05%.
The rate reduction was clearly intended to be permanent, but after seeking an opinion from the Attorney General, State Treasurer Rachael A. Eubanks announced that the rate would go back up to 4.25% in 2024. This amounts to be a $714 million tax hike for Michiganders.
The brief also argues that Michigan lawmakers are entitled to accurate revenue estimates. These revenue estimates are necessary for lawmakers to budget properly. By ignoring the tax cut, the treasurer is allowing the Legislature to appropriate tax revenue it isn’t entitled to.
“By neglecting its duty to apply the correct tax rate, the state is creating unnecessary confusion for 4.9 million taxpayers,” said Patrick J. Wright, vice president for legal affairs at the Mackinac Center. “The reading of the statute is clear: The income tax reduction trigger that lawmakers passed in 2015 was intended to be permanent. At a time when every family and small business is feeling the pressure of rising costs and inflation, government officials shouldn’t be fighting to force people to give up even more of their own money.”
Read the brief here. Learn more about the case here.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
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