News Story

Mackinac Center to appeal tax rate case

$714M in taxpayer money is at stake

The Mackinac Center Legal Foundation will appeal a Court of Claims ruling that dismissed its lawsuit over the 2024 state income tax rate. 

At stake is $714 million in taxpayer money, depending on whether the 2024 tax rate is 4.05%, as the Mackinac Center and its fellow plaintiffs argue, or 4.25% per Attorney General Dana Nessel’s interpretation.

Nessel is interpreting a 2015 law that mandated a tax cut if certain budget conditions were met. Those conditions were met in 2023, and the tax rate for that year fell to 4.05%. The Mackinac Center is joined on the case by two current lawmakers, Sen. Ed McBroom, R-Vulcan, and Rep. Dale Zorn, R-Ida, who were also serving in 2015. 

Part of the debate on this law concerned the meaning of the phrase “then the current rate shall be reduced.” A permanent reduction was set to occur any time revenue outpaced inflation by a significant amount.

“In effect, the decision eliminated the word ‘current’ from the statute,” said Patrick Wright, vice president for legal affairs at the Mackinac Center. “That word is important because it sets a tax-rate ceiling. Contrary to the judge’s opinion, ‘current rate’ means the tax rate can only go lower.”

While the plaintiffs argue the 2015 tax cut is permanent once the conditions are met, Nessel argues the tax cut is event-driven. It’s the Nessel interpretation that State Treasurer Rachael Eubanks is acting on. 

Nessel issued her attorney general’s opinion in March, one day after Eubanks requested it. 

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.