Michigan tax facts, part 3: Who pays the taxes in Michigan?

Editor’s note: To help voters make sense of ubiquitous political arguments in this fall’s elections in Michigan, Bridge’s 10-part special report tells it like it is on Michigan taxing and spending issues. Today we present parts three and four. Read each five-minute primer published so far:
Part 1: Are Michigan taxes too high, too low, or just right?
Part 2: Who wants what in the long war over Michigan taxes?

Voters who tune into campaign rhetoric this fall will likely hear all kinds of assertions about Michigan taxes… How some groups of people pay too much, or how other groups pay too little, etc…

Here are some basic facts about who pays what kinds of taxes in Michigan.

The state of Michigan levies and collects dozens of different taxes and fees. Local governments also collect local taxes, fees, etc. This discussion is limited to state tax collections – those taxes managed by the folks near the top of the ballot (governor and state legislators) who voters will choose at the polls in the November.

Everybody in Michigan pays taxes in one form or another, no matter how rich or poor you are. You pay sales taxes when you buy most consumer products (food being a major exception). You pay several taxes every time you buy gasoline. If you own a home you pay property taxes. If you rent your home the cost of property taxes is most likely built into your rent. Likewise, many businesses often seek to build the cost of their tax obligations into the final price of the goods and services they sell.

Here’s the breakdown of each individual state tax:

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Thu, 09/18/2014 - 10:45am
"Who pays" the taxes has different meanings in different contexts. One issue is who pays the taxes by income bracket, with "who pays" measured by who bears the ultimate incidence of the tax, that is, who ultimately bears the burden in terms of who receives a lower net wage or pays a higher gross price as a result of the tax. This requires estimates or assumptions about how taxes are shifted. For example, this requires assumptions about how the business tax burden is divided among the business's owners, the business's workers, and consumers. Probably the most comprehensive incidence studies at the state and local level of taxation are those done by the Institute on Taxation and Economic Policy. Some of their incidence assumptions could be questioned, but they are defensible. ITEP's distribution of Michigan state and local taxes by income group are presented here: http://www.itep.org/pdf/mi.pdfThese results show that for the bottom four "income quintiles" -- the bottom 80% of the income distribution -- all pay roughly the same percentage of income in taxes, between 9 and 10%. The top income quintile pays less, a little more than 7%, and the top 1% pays even less, a little less than 6%. These results are largely driven by the regressive nature of the sales tax and our relatively flat income tax.
Thu, 09/18/2014 - 11:06am
Who cares "who pays". You buy something, you pay a sales tax. You own property, you pay a property tax. You have income, you pay an income tax. Don't try and muddle the conversation with "the rich don't pay enough". Worry about yourself. You want to pay a smaller percentage, earn more money.
Thu, 09/18/2014 - 11:59am
Simple answers to complex issues are usually not helpful or illuminating. Ayn Rand type answer - simple and wrong.
Sat, 09/20/2014 - 1:18am
Rick, I disagree, simple is not always wrong. Especially when a simple problem was made complex by those who used the confusion to expand their power. The tax issue is simple, the government wants money to spend and a source is the people and organizations that earn money. Sales taxes can be simple tax all purchases, income tax can be simple tax everyone the same percentage, etc. Simple problem simple answer. The taxing methods aren't always that simple, both at the state and federal level, and I say that the complexity was created by those wanting to spend the money. The people who want to create the complexity start with claiming they want tax 'fairness', but they always fail to define 'fairness'. By avoiding that defintion the create complexity with the affect of providing a means to make it confusing so they can raise taxes.
Sun, 09/28/2014 - 6:49am
Rick, it just seems backwards that the more affluent pay less in taxes while those with lower incomes pay more?
Charles Richards
Sun, 09/21/2014 - 2:07pm
There are two different issues here. One is what percentage of their income does a family in each income quintile pay? The second is what percentage of the common expenses does a family in each quintile pay? Do you wish to determine "fairness" in terms of the first question or the second? ITEP did not provide enough information to determine what percentage of state taxes a family in each quintile pays, but I strongly suspect that a family in the top quintile is paying a very high percentage of the share of a family in the bottom quintile.
Charles Richards
Thu, 09/18/2014 - 11:59am
This article is absolutely useless. Tim Bartik's comment was far more informative.
Robert Dunn
Thu, 09/18/2014 - 6:41pm
The article was meant to provide a macro view. Tim's response helps break it down. One could write a book on the micro parts of the taxes noted. Generally, people only care about what they pay. A lot of people want to pay as little as possible. But this raises all kinds of questions which is not the purpose of this article.
Sat, 09/20/2014 - 11:24am
Very interesting data, Tim Bartik. Thanks!
Sun, 09/21/2014 - 11:25am
Dear Bridge, Thanks for the type of reporting found no-where else... Regardless of the outcomes in the upcoming election cycle; these reports are illuminating, fact-filled nuggets. Keep up the great work!
Wed, 09/24/2014 - 4:55pm
With all this discussion about how much is paid in the way of taxes in Michigan I cant help but wonder if there are any readily available statistics that show how many men, women and children are in each state, and how many are on public welfare.
Helen Cost
Sun, 09/28/2014 - 9:24am
I enjoyed the article very much. The comments were enlightening also. I hope we can go on to answer Joni's question. What are the stats on welfare recipients? Gender,children breakdown and monies distributed. How are our tax dollars being spent?
Sun, 09/28/2014 - 5:43pm
Why would 'welfare' be relevant? The focus on what's given to those doing without never ceases to amaze me. It isn't as though one can survive on ADC alone.
Thu, 10/02/2014 - 10:29am
Fascinating: business tax down 112% income tax up 18%. Thanks, Bridge for showing real data.