Lawsuit seeks to make Michigan income tax cut permanent
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A coalition including a pair of Republican lawmakers and business advocacy groups has filed a lawsuit against the state treasurer seeking to permanently roll back Michigan's income tax rate to 4.05%, rather than a one-time reduction from an income tax rate of 4.25%. The lawsuit seeks to reverse a legal opinion issued by Attorney General Dana Nessel earlier this year stating the tax cut only extends to the current year.
The lawsuit, filed Thursday, seeks declaratory relief from a judge against State Treasurer Rachael Eubanks to permanently extend the income tax cut, and asks a judge to weigh in before Dec. 15, 2023, to provide clarity on tax rates for the future.
The income tax rollback was triggered thanks to a surplus in state revenues. Permanently enacting the tax cut would create major headaches for the Whitmer administration, since the 2024 budget recently signed into law essentially drained that surplus and is built on the assumption that the income tax rate will return to 4.25% for the 2024 tax year.
In a 2015 road funding law, Republican lawmakers and former Gov. Rick Snyder, also a Republican, adopted language reducing the state income tax rate from 4.25% to 4.05% if Michigan had enough surplus revenue in its coffers.
Nessel, in an opinion issued in March, wrote the rollback would be a one-time reduction in the income tax for 2023 only, rather than a permanent one. Snyder and GOP legislative leaders from 2015 disagreed with Nessel’s opinion.
When Eubanks announced the tax cut, she said it would be a one-time cut only, unless the state exceeded the surplus revenue cap again. House Minority Leader Matt Hall, R-Richland Township, said Republican lawmakers would continue to fight for a permanent tax cut.
A family with taxable income of $50,000 will see about $100 in savings when they file their taxes next year under the tax cut. The rollback will cost the state about $700 million in annual revenue for the 2023 tax year.
The lawsuit was filed in the Michigan Court of Claims by the Mackinac Center for Public Policy, a conservative think tank based in Midland, and lists state Sen. Ed McBroom, R-Waucedah Township; state Rep. Dale Zorn, R-Onsted; the Associated Builders and Contractors of Michigan; the National Federation of Independent Businesses, and six individuals as plaintiffs.
A spokesperson for the Michigan Department of Treasury said the department had not been served with the lawsuit as of Thursday afternoon and does not comment on pending litigation.
“This is about the law,” Patrick Wright, vice president for legal affairs at the Mackinac Center, said in a statement. “A clear reading of the statute shows that lawmakers put in place a permanent income tax rate reduction. The personal income tax rate on all Michigan citizens went down to 4.05% and should stay there absent new legislation.”
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Free Press Lansing Bureau Chief Paul Egan contributed to this report.
Contact Arpan Lobo: alobo@freepress.com. Follow him on X (Twitter) @arpanlobo.
This article originally appeared on Detroit Free Press: Lawsuit seeks to permanently reduce Michigan's income tax rate
