Michigan
Rick Haglund: Lots of ideas to overhaul Michigan’s tax system, but little agreement on what to do ⋆ Michigan Advance
I’m sorry, but this column is about tax policy.
Bor-ing, right? Maybe so, but how state lawmakers design a tax structure can have a significant impact on the finances of residents and businesses, and on the state’s economic competitiveness.
Lansing has been consumed by dealing with hateful social media posts by state Rep. Josh Schriver, R-Oxford, and an interminable fight over who is running the state Republican Party. But several proposals that could radically change tax policy in Michigan are floating around the Capitol.
Gov. Gretchen Whitmer’s Growing Michigan Together Council, an initiative aimed at boosting the state’s stagnant population, has triggered a debate over the role of taxes in attracting more people to Michigan.
Republicans complained the council’s report was a surreptitious plot to raise taxes to pay for favored Democratic programs that wouldn’t increase the state’s population.
Council members, including Republican Co-Chairman John Rakolta, denied that, saying the council’s six-month work schedule left no time for a discussion on taxes.
Rakolta, speaking at the Detroit Regional Chamber Detroit Policy Conference last month, said there should be no talk about new taxes until the state develops a tax structure that’s “appropriate for the 21st century.”
But critics of the council’s report are “afraid to go down that path,” he said. Dismissing the council’s work is an “easy way to throw a red herring into the mix and distract everybody and the press that it’s all about taxes. It isn’t about taxes. It’s about: the state of Michigan is broken.”
Rakolta, chairman of industrial construction giant Walbridge, offered no specifics about what he thought a modern tax policy should look like. He said Michigan should implement “zero-based budgeting,” which would require the state to annually justify every program expense.
But some of his fellow business leaders are anxious for tax cuts. The West Michigan Policy Forum, a group of business executives that includes such heavy hitters as Amway Co-Chairman Doug DeVos and office furniture executive Matthew Haworth, is calling for the state to eliminate the personal income tax.
Backers of the idea claim states with no income taxes, including Texas and Florida, have among the fastest-growing populations. But states with no income tax make up lost revenue with other taxes.
The policy forum didn’t offer ideas for replacing Michigan’s $8 billion in annual income tax revenue, nearly two-thirds of state’s general fund tax revenue, but said there should be a “responsible transition” to its elimination.
Meanwhile, a group called AxMITax is seeking to place a proposal on the November ballot that would eliminate residential and business property taxes, the primary source of funding for local governments and a significant revenue pot for local schools.
The summary language of proposal was approved last month by the Michigan Board of State Canvassers, but the board has yet to approve the ballot form.
AxMITax said the measure would end the growing problem of property tax foreclosures. Any new local taxes would require 60% voter approval under the proposed ballot issue. Raising state taxes by more than .1% would require a two-thirds vote of the Legislature.
Karla Wagner of AxMITax said if eliminating property taxes results in libraries and museums closing, so be it.
Another group says Michigan’s tax system must change to support the investments needed for Michigan to thrive in an economy that requires higher levels of education in its workers and make the state more attractive to new residents.
Eliminating property and income taxes is an irresponsible, dangerous idea that, rather than make Michigan a more vibrant state, would likely bankrupt it.
The Michigan League for Public Policy has long called for a graduated income tax system in which those with higher incomes pay a larger percentage of their incomes in taxes than lower-income residents.
Thirty states and the federal government have graduated income taxes. Michigan has a flat income tax rate of 4.05% that will return to last year’s rate of 4.25% in the 2024 tax year because of a court order in a dispute over whether this year’s rate was a permanent or temporary cut.
The MLPP, citing a report by the Institute on Taxation and Economic Policy, said that the top 1% of Michigan earners pay an effective income tax rate of 5.7% while those with the lowest incomes pay an effective rate of 7.1%.
Michigan’s tax system is “upside down,” said Rachel Richards, MLPP’s fiscal policy director, in a Michigan Advance guest column.
While the state’s budget remains stable after billions of dollars in federal COVID-related programs have been exhausted, future state revenues will not be sufficient to “prevent us from returning to the decades of disinvestment in Michigan workers, families and children that we saw prior to the pandemic,” Richards said.
Implementing a graduated tax system would be extremely difficult. It would require voters to change the state constitution and would be vigorously opposed by business lobbying groups.
But eliminating property and income taxes is an irresponsible, dangerous idea that, rather than make Michigan a more vibrant state, would likely bankrupt it.
As large-scale immigration enforcement and deportations take place nationwide, concerns over how and when this may reach Metro Detroit continue to rise, with legal organizations banding together to offer support.
“People need to realize that ICE enforcement is happening in Detroit, and it’s happening really anywhere,” Ramis Wadood, staff attorney for the ACLU of Michigan, said.
Calling it a “coordinated assault on immigrant communities,” people across the country are raising concerns over a surging number of raids and arrests by U.S. Immigration and Customs Enforcement agents.
“Just like it’s happening in LA, in Chicago, in D.C., in New York, it’s happening in Detroit as well. It may not be at the scale of what’s happening in LA or in Chicago, but it’s serious, and it’s definitely increased since the first Trump administration,” said Wadood.
Organizations like the Michigan Immigrant Rights Center and the ACLU of Michigan say they are seeing the number of immigration cases climb at a rate they have never seen before, after the Trump administration called for ICE agents to arrest nearly 3,000 people per day.
“We are watching and expecting for an increase in workplace raids in Michigan; there’s no reason to believe that Michigan would be exempt from that,” said Christine Sauvé, policy, engagement and communications manager for the Michigan Immigrant Rights Center.
In Detroit, MIRC says there are more than 30,000 cases pending, at all levels of status, with most facing hearings without representation.
“Each detention, each removal, has an effect on a local family. Each immigration enforcement action has a repercussion that ripples throughout the community,” said Sauvé.
With nearby cities like Chicago bracing for an increase in activity, both organizations say they are prepared to handle what comes.
“If there’s an accusation that someone’s in the country unlawfully, then they should be able to confront that accusation, either challenge it or seek other forms of relief,” said Wadood.
MIRC and the ACLU of Michigan say they are working together, alongside other community groups, to help as many people as they can, regardless of their status and what they can afford.
Most Michigan State Police (MSP) troopers expressed a lack of confidence in the department’s leadership in a recent internal poll of membership, prompting calls for the leadership to resign from Senate Minority Leader Aric Nesbitt, a Porter Township Republican who is running for governor.
In a one-question survey conducted by the Michigan State Police Troopers Association between June 2 and June 6, 98% (1,167 members) expressed no confidence in the leadership of Col. James Grady and Lt. Col. Aimee Brimacombe.
The union reported that approximately 75% of its more than 1,500 members responded to the survey.
“It’s time for him to go,” said Nesbitt in a one-on-one interview with Local 4 on June 9 in downtown Detroit. “It’s time for new leadership. It’s time to improve the morale of the state police. It’s time to actually get back to what they’re doing—protecting the life and property of the citizens of Michigan.”
Nesbitt went further: “When 98% of your employees say that you are doing an ineffective and poor job, something needs to change. The leadership needs to change. And if the governor’s not willing to change it, that’s why I’ve called on him to resign.”
Nesbitt also promised that, if elected governor, he would act swiftly to replace the top leadership at MSP.
“Day one,” Nesbitt said. “Somebody that can lead the police officers that actually has the backing of the blue — that professionalizes and makes sure we have the most professional state police officers in the nation.”
The MSP Command Officers Association also conducted a similar internal vote, and 90% of its members reported no confidence in the department’s current leadership.
Governor’s office, MSP push back
In response to the report, both the governor’s office and MSP defended Col. Grady’s leadership.
A spokesperson for Gov. Gretchen Whitmer issued a statement, saying in part:
“Thanks to the work of Colonel Grady, Michigan has seen major drops in violent crime. He’s also had troopers’ backs by fighting for pay raises.”
The Michigan State Police issued a more detailed statement defending Grady’s tenure, citing investments in personnel, equipment, and training.
“It has been a priority for Colonel Grady to conduct in-person visits to MSP worksites to listen to member feedback. During these visits, he’s engaged in meaningful conversations, including seeking input from the membership about morale and opportunities for areas of improvement.
Under Colonel Grady’s leadership, the department has continued to invest in better training and professional development opportunities, updated equipment, and improved technology. Further, dozens of new troopers joined the ranks last month, and this year’s proposed budget includes pay raises for troopers and sergeants.”
Michigan State Police
The department said Col. Grady remains committed to moving the department forward and supporting the men and women of the Michigan State Police.
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