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Two Michigan lawmakers join Mackinac Center’s tax cut lawsuit

Some $714 million in state tax revenue at stake in action to restore lawful tax cut

Two lawmakers who voted for the 2015 law that created this year’s tax cut joined the Mackinac Center Thursday in a lawsuit against Michigan Treasurer Rachael Eubanks. 

The suit seeks to preserve the reduction in the state income tax rate. The authors of that law say they intended the tax cut, which was automatically triggered by a revenue surplus in 2022, to be permanent. Attorney General Dana Nessel, on the other hand, argues that the tax cut is event-driven, not permanent.

The 2015 law specified that the “current” tax rate would be reduced if the previous year’s budget surplus exceeded inflation. State fiscal authorities determined at the beginning of this year that the budget surplus met the conditions to trigger a tax cut. Accordingly, the Senate Fiscal Agency calculated a rate reduction from 4.25% to 4.05%.

“At issue is whether Michigan’s approximately 5 million individual income tax filers will have permanent tax-cut relief or whether any rate cut will generally revert to 4.25%,” the lawsuit reads. “As to state income-tax collection, the annual difference between a 4.05% income tax rate and a 4.25% income tax rate is around $714 million.”

The 28-page lawsuit was filed in the Michigan Court of Claims.

Read the lawsuit for yourself

The treasurer’s office has operated on Nessel’s opinion. The state told taxpayers that the income tax rate for 2024 will be 4.25%, not the 4.05% it was in 2023.

Two Michigan lawmakers, Sen. Ed McBroom, R-Waucedah Township, and Rep. Dale Zorn, R-Onsted, joined in the lawsuit, along with the Associated Builders and Contractors of Michigan, and the National Federation of Independent Businesses. Six individual taxpayers also joined the suit: Rodney Davies, Kimberley Davies, Owen Pyle, William Lubaway, Barbara Carter and Ross VanderKlok.

Patrick Wright, vice president for legal affairs at the Mackinac Center, explained the lawsuit in a two-minute video on Twitter.

The lawsuit seeks resolution of the question by Dec. 15, 2023.

The timing request is made “so that Michigan’s 5 million individual income taxpayers will know their rights and will not overwhelm the Department of Treasury, this Court, and/or the Tax Tribunal with individual challenges to the income tax rate,” the lawsuit reads.

Both McBroom and Zorn were lawmakers in 2015. Both say the 2015 tax cut was permanent. They were joined in that interpretation by the House Fiscal Agency, which wrote at the time that the lower tax rate, once triggered, would “continue indefinitely on an annual basis.”

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.