South Kent News

Michigan's finances have not been hit as hard as expected through the COVID-19 pandemic and Gov. Gretchen Whitmer's push for an increase in taxes.

If Michigan lowered its income tax rate, that would make businesses in the state more competitive and leave taxpayers with more of their income to spend and stimulate the economy, says James Hohman of the Mackinac Center for Public Policy.

The 2007 tax increase was supposed to be "temporary" as lawmakers faced projected overspending, and raising taxes seemed a better approach than cutting from the budget. The tax uptick was intended to boost revenue by $700 annually and would be phased out afterward, according to Mackinac Center for Public Policy.

However, the tax increase didn't solve all of Michigan's problems. Soon after the tax increase went into effect, the national economy crashed, affecting Michigan employment. The state revenue decreased by $3 billion, or 11%, in comparison to the years prior. Federal bailouts stimulated spending in the state, and extra federal money helped the state recover.

State revenue has gone up by over $10 billion since 2010. Part of the reason for the increase is due to skipping the phase-out of the income tax hike, turning the temporary tax increase into a permanent one. The state budget growth means that the issues of 2007 no longer exist, and Michigan can manage to lower its taxes, according to Hohman.

Lowering taxes to reflect what they were pre-2007 would reduce state revenue by $870 million, but it would still increase based on overall growth. In other words, even if the state's tax rate was lowered, Michigan would still have more to spend in 2021 than it did in 2020.

Affording a lower tax rate is transparent in comparison to other spending arrangements. There was talk amongst the Michigan Senate about $300 million in business subsidies, and some Michigan cities asked for $250 million. Some lawmakers also want to subsidize film production, which could have negative effects on taxpayers and the economy.

If lawmakers can afford to reduce taxes, it makes sense to most Americans to be able to pocket more of their hard-earned income, according to the Mackinac Center.