Michigan leaders have revised their tax revenue projections for the next fiscal year, reducing expectations by $1.8 billion.
Tax law changes lead to a $1.8 billion drop in Michigan’s revenue expectations
However, they emphasized that the changes resulted from authorized tax relief measures and highlighted the strength of the state’s economy. The impact of the revised projections will be somewhat mitigated because Michigan currently has a surplus of approximately $7.5 billion.
Governor Gretchen Whitmer had proposed a $79 billion budget for the upcoming fiscal year, but the new revenue estimates suggest only a slight reduction in her proposal. The tax revenue figures were determined during the Consensus Revenue Estimating Conference held on Friday at the state Capitol, where lawmakers will utilize the projections to shape the state budget in the coming weeks.
The revised revenue figures primarily stem from purposeful and sustainable tax policy changes that were enacted earlier this year
The tax relief measures, supported by Democratic lawmakers who currently control the Legislature, included reductions in taxes on retirement income, an increased Earned Income Tax Credit benefiting low-wage workers, and the diversion of corporate income tax revenue towards the state’s business incentive program.
In addition to these changes, Michigan’s personal income tax rate dropped from 4.25% to 4.05% for 2023 due to ballooning state revenues and a law enacted in 2015. While Democrats and Whitmer’s administration have indicated that the income tax cut is temporary, Republicans are arguing for the rate to remain at 4.05% beyond this year and may contest the administration’s interpretation of the 2015 law in court.
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