(Source: MIRS.news, Published 01/10/2025) Constitutionally speaking, Michigan government could be taxing its residents much more than it is. A lot more. 

Whether raising taxes is a good idea, politically, is a different question and nobody is out-right suggesting it.  

But under the constitutional revenue limit set by the Headlee Amendment in the late 1970s, Michigan government could collect $12.3 billion more in taxes this year without triggering a process where it could, eventually, start giving money back. 

A mostly unnoticed chart presented at Friday's Consensus Revenue Estimating Conference (CREC) showed that Michigan government is under the “Headlee Cap” by a record level and the number is only projected to grow – to an estimated 14.2 billion in Fiscal Year (FY) 2026 and $15.5 billion in FY '26. 

The Headlee Amendment limits the amount of taxes and fees state government can bring in to a personal income metric. Basically, it says state government can not collect a higher percentage of people's personal wealth than it did in 1979. When state revenue doesn't grow as fast as personal income, the gap increases, said Senate Fiscal Agency economist David Zin at Friday’s CREC. 

In the late 1990s and early 2000s, tax cuts combined with a growing economy and higher incomes “created this wedge," he told MIRS. 

“We have a lower tax burden,” he said, adding that it's not necessarily related to policy changes, but people's spending habits. 

People are spending more of their discretionary spending on services that aren't subject to the sales tax, than goods, for example. Taxes like the cigarette tax or the beer tax don't grow annually, so they're not keeping up with inflation of personal income growth. The only tax that, generally, keeps up with personal income is the income tax, he said. 

The School Aid Fund has been able to keep pace with inflation because new taxes on marijuana and expanding gaming have been earmarked for schools, Zin said.