(Source: MIRS.news, Published 11/22/2024) The University of Michigan’s 2025-2026 Economic Outlook for Michigan released Friday says “election results have amplified the uncertainty surrounding Michigan’s economic outlook,” following a period of economic decline since the spring of this year.  

The report says inflation is expected to decline to 3.3% by the end of 2025, reach 2.2% in 2026 and increase to 2.7% in 2026 due to tariffs on products imported from China.  

Business tax revenue is primarily gained through Michigan’s corporate income tax, which “held relatively flat” in 2024, according to the report. Insurance company premiums grew, and oil and gas services declined, making the business tax revenue directed to the General Fund go up 0.7% in 2024.   

The report predicted corporate income tax payments and GF business tax revenue to decline slightly in 2025, but rebound in 2026. Economists project a more than 30% rise in corporate income tax payments and GF-bound business tax revenue to rise 30.8%.   

Total GF revenue grew 2.8%, or $400 million in 2024 after a $1.8 billion loss in 2023. The report attributed this rebound to net personal income tax revenue gains and consumption taxes declining while business taxes stayed stagnant.   

The report “forecasts growth to pick up over the next two years,” through the continued growth of personal income taxes and rebounding sales tax revenue to go up by 3.9%, or $570 million, in 2025.   

The report predicts a growth of $820 million, or 5.5%, in 2026 due to revenue source contributions and the forecasted rebounding business tax revenue.   

The School Aid Fund revenue only increased by 0.3% in 2024. The report states “the recent weakness has largely been due to the contraction of sales tax revenue over the past two fiscal years” after the increase in pandemic spending.  

The report attributes the 0.3% increase to an increase in State Education Property tax payments. The report predicts school tax revenue to increase by 3.7% in 2025 and 3.3% in 2026.   

As for Michigan's job market, the unemployment rate is on a trend of slight decline throughout this fiscal year. The report attributes the slow decline to changes in immigration policy creating a slower growing labor force.  

The report predicts “a small dip” in the remaining 2024 fiscal year followed by “moderate job gains” in 2025 and 2026. Cyclical job industries will “largely tread water over the next two years.”   

“The outlook depends critically on uncertain policy decisions and the subsequent market responses,” the report reads.