Michigan slips nationally in tax competitiveness ranking

Michigan’s tax competitiveness slipped two places this year to 16th place, according to the latest State Tax Competitiveness Index released by the Washington, D.C.-based Tax Foundation.

Michigan dropped five places in the rankings for the individual income tax since last year. It fell 13 spots in the ranking for corporate taxes.

The report attributes the state’s overall drop of two places in part to “new targeted corporate incentives but mostly from rate competition in other states.” Michigan’s tax rates stayed unchanged, but Georgia, Idaho, Louisiana, Nebraska and Utah lowered their individual and corporate income tax rates.

“This is the kind of competition elected officials ought to care about, and it shows that Michigan is falling behind,” said James Hohman, fiscal policy director at the Mackinac Center for Public Policy.

The index, formerly known as the State Business Tax Climate Index, evaluates states on how well their tax systems promote growth and attract business investment.

Each state is evaluated on five areas: individual income taxes, corporate taxes, sales taxes, property taxes and unemployment insurance taxes.

Michigan’s drop in the ranking contrasts with a substantial rise in competitiveness during the first two decades of this century.

The state improved from 36th place overall in 2004 to 14th in 2014, according to previous reporting by Michigan Capitol Confidential. Its ranking on corporate taxation rose from 50th to 9th.

In 2021 CapCon reported that Michigan’s position had was declining, from 14th in 2014 to 17th by 2020. The state rebounded to 14th place in subsequent rankings.

The index, rebranded last year to reflect a broader focus on overall tax competitiveness, can guide policymakers and others as they evaluate and reform state tax codes.

Gov. Gretchen Whitmer did not respond to an email seeking comment.