(Source: MIRS.news, Published 03/07/2024) The state’s personal income tax rate will not return to 4.05 percent after the Michigan Court of Appeals affirmed the reduction from 4.25 percent applied only to 2023.
The three-judge panel unanimously agreed that there is no language in the state statute “indicating a legislative intent to make the rate reduction . . . permanent.”
Such an argument, the panel held, would “allow compounding reductions that could ultimately result in no income tax,” which would void the “statutory language providing for an income tax," read the opinion from Appeals Judges Michael Gadola, Christopher Murray and Michael Kelly.
The Mackinac Center for Public Policy, which sued on behalf of a coalition that includes two lawmakers, two business groups and individual taxpayers, said their clients are likely to appeal the decision to the Michigan Supreme Court, which they claim will cost Michigan’s taxpayers around $714 million in 2024, to the Michigan Supreme Court.
Patrick Wright, vice president for legal affairs at the Mackinac Center, said the question in the case “has always been what is the clearest reading” of the 2015 gas tax hike bill that included a nuanced tax cut trigger that was activated in 2023.
That trigger lowers the personal income tax rate when the state’s revenue outpaces inflation by a set amount.
Wright said when the law passed, there was a “clear consensus” from lawmakers that the rate reduction would be permanent.
The judges, however, rejected arguments they should review lawmaker comments made when the law passed in 2015 to help them understand the cut was permanent, concluding the “statute is unambiguous” and therefore, “there is no need to consult legislative history.”
However, state Treasurer Rachael A. Eubanks sought Attorney General Dana Nessel’s opinion, and she concluded the rate applied only to 2023 – leading Eubanks to announce the rate would increase to 4.25 percent in 2024.
“We remain convinced that the best reading of the law requires a permanent tax cut,” Wright said.
In December, Court of Claims Judge Elizabeth Gleicher sided with the state, holding 4.25 percent remains the default rate.
Gadola and Murray are appointees of Republican former Govs. Rick Snyder and John Engler, respectively, and Kelly was elected to the appeals bench in 2008.
