Fiscal Cliff Could Hit Michigan Hard

Residents could pay equivalent of double state income tax

If federal tax cuts that are under review are not extended, Michigan residents could end up paying the equivalent of double their state income tax rate, according to an analysis by the Tax Foundation.

The Tax Foundation looked at the alternative minimum tax (which includes the child tax credit), the Bush tax cuts (which refers to changes to the tax codes that lowered income tax rates) and the 2 percent tax cut to employee-side social security payroll taxes that all expire at the end of the year.

The tax cuts are part of the so-called “fiscal cliff” debate.

Michigan residents would lose on average 4.63 percent of their income if the tax cuts were lost. The Michigan personal income tax rate is 4.25 percent.

"It's asking Michigan residents to effectively pay their state personal income tax twice and even a little more," said Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy.

Stay Engaged

Receive our weekly emails!

The Tax Foundation’s Nick Kasprak said a Michigan family of four has a median household income of $72,336 and would see a $3,349 tax increase from the various fiscal cliff provisions.

Michigan ranks 37th out of the 50 states in terms of percentage of income lost to the tax increases.

"This is because Michigan is a middle-income state, and the combined effects of all the fiscal cliff provisions tend to hit low-income (Bush tax cuts are generally a fixed percent of income at low- to mid-part of the income scale) and high-income (the AMT hits upper middle income families) states hardest. States in the middle not as much,” Kasprak said.

President Barack Obama has said he wants to extend the Bush tax cuts to all but the wealthiest 2 percent of Americans.


See also:

Are You Prepared for 'Taxmageddon'?

Related Articles:

Update: D.C.’s Tax Reform Sausage Making May Still Work Out

Mackinac Center Joins Tax Reform Letter

State Ends Fiscal Year With Surplus After 12 House Republicans Defeat Tax Cut

Tax Hike Cost Michigan Households $1000

Mackinac Center Joins 87 Groups and Activists Calling for Federal Tax Reform

Flatten the Tax Code

Stay Engaged

Simply enter your email below to receive our weekly email:


Renting out the family summer cottage is a common practice in Michigan, and with today’s technologies, it’s easier than ever, empowered by services like AirBnB, HomeAway, VRBO and more. These short-term rentals mean vacationers can find a place much more easily and inexpensively, while owners can earn some extra money. It seems like a win-win. Not everyone agrees. Some in the accommodations and tourism industries aren’t happy with the increased competition and are advocating for limiting people’s rights to rent out their homes. Some homeowner associations are pushing back as well. And while cities like Detroit and Grand Rapids have mostly embraced home sharing, some local governments have restricted and even banned the practice.

Related Sites