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Special report: 10 things every voter should know about Michigan taxes

Editor’s note:


To help voters sift fact from fiction in this fall’s statewide election, this ongoing special report tells it like it is on Michigan taxing and spending issues. Today kicks off our series with the first two of 10 parts, below.


Part 1: Are Michigan’s taxes too high, too low or just right?

Forget porridge and bear beds. In today’s charged political climate, Goldilocks would probably want to know if her taxes were too high, too low or just right. So, what’s the answer in Michigan?

In short, there’s no public consensus. In the largest public opinion measurement in the state, The Center for Michigan recently found no clear agreement on Michigan taxation levels. The public is roughly split into thirds on whether to cut taxes, raise taxes, or keep them the same.

So, how can you draw your own fact-based conclusions about whether your taxes are too high, too low, or just right? Well, for starters, state tax rankings are as common as college football rankings. A few of the most recent quick stats from the Tax Foundation’s “Facts & Figures: How Does Your State Compare” book published in March 2014:

  • Overall, Michigan has the 21st highest total tax burden in the U.S. That means 20 states have higher overall taxes and 29 states have lower overall taxes. Michigan collected $3,505 in state and local taxes for every person in the state in 2011 (the last year for which full nationwide figures are available).
  • In terms of overall state tax climate, Michigan ranks 14th among the states. The Tax Foundation offers insights into its ranking methodology here.
  • In terms of individual rankings on specific types of taxes, Michigan ranks 9th for corporate taxes, 14th for individual income taxes, 7th for sales taxes, 44th for unemployment insurance taxes, and 28th for property taxes.

Did mom and dad pay more taxes?

You'd need years of detailed family tax records to completely answer that question. And everybody's personal taxes are different based on lifestyle, personal tax strategy, and many other factors. But imagine for a moment you're the fictional average taxpayer -- your actual taxes paid match the percentage of total personal income Michigan actually collects in taxes. Now, go back and time and see how Michigan's changing tax burden might have impacted you. Pick an income level most closely matching your current income. The tax time machine will show you how average tax burden has changed in Michigan over the past generation.

Year 1977 1987 1997 2007 2011
Income/Tax rate 10.9% 11.1% 10.7% 10.8% 10.1%
$25,000 $2,740 $2,778 $2,675 $2,695 $2,520
$50,000 $5,480 $5,555 $5,555 $5,390 $5,040
$75,000 $8,220 $8,333 $8,333 $8,085 $7,560
$100,000 $10,960 $11,110 $11,110 $10,780 $10,080
$250,000 $27,400 $27,775 $27,775 $26,950 $25,200

No matter what you think about Michigan’s current tax climate, you may actually pay lower overall state and local taxes than your parents did.

In 1977, Michigan’s total state and local taxes amounted to 10.96 percent of all the personal income earned by state residents. In 2007, those total Michigan taxes amounted to 10.78 percent of personal income. By 2011, those total Michigan taxes amounted to 10.08 percent of personal income. In other words, that’s an effective average overall tax rate decrease of 8 percent over the past generation and 6.5 percent in the four years between 2007 and 2011. (Data source: “Michigan’s Tax Policies: Wrong Turns on the Path to Prosperity.)

State and national experts also measure state taxation levels by comparing taxes collected per capita. Since 1977, Michigan has the lowest growth in tax revenue per capita in the country, according to calculations by retired Michigan state fiscal analyst Doug Drake who wrote the “Wrong Turn” report referenced above on behalf of several education trade groups.

Taxes higher elsewhere

In 1977, Michigan collected $877 in state and local taxes for every resident of the state. In 2011, Michigan collected $3,655 in state and local taxes for every person in the state. At first glance, that may seem like a big increase – an increase of 320 percent. But every other state saw tax revenue per capita growth at a faster clip than that. North Dakota led the way with 900 percent growth, followed by thirteen states that saw more than 500 percent growth. In reality, that 320 percent increase isn’t a 320 percent increase at all. To truly measure it, you must adjust for inflation. That $877 in 1977 is equal to $3,229 in 2011 dollars. That’s an inflation-adjusted increase of 13 percent, not 320 percent.

A citizen’s assessment of whether his or her taxes are too high, too low, or just right might also take into consideration what you’re getting in return. A few examples:

  • As Bridge Magazine has repeatedly documented, education results in Michigan are seriously lagging.
  • A thrifty taxpayer might conclude that it’s good that Michigan hasn’t raised gasoline taxes since 1997. But, as many motorists can attest, Michigan roads are increasingly falling apart. According to state data, 15 percent of non-trunkline roads were in poor condition in 2005, with 63 percent fair and 22 percent in good condition. By 2012-2013, the percentage in poor condition had nearly tripled, to 43 percent, with 41 percent in fair condition and 16 percent in good condition. One study estimated that bad roads in Michigan costs $2.3 billion a year in accelerated vehicle depreciation, added repair bills, increased fuel consumption and other wear and tear.
  • The Michigan Municipal League says the state has cut $6.2 billion in revenue sharing to cities in the past 12 years. That means less public investment in libraries, parks, street and sidewalk repair, sewer and water system upkeep, and, according to the Michigan Commission on Law Enforcement Standards, about 2,300 fewer cops and 1,800 fewer firefighters.

So, the answer is in the eye of the beholder. Beyond all the political campaign balderdash and talk radio huffing and puffing on both the left and the right, are your taxes too high, too low or just right?

Read Part 2: Who wants what in the long war over Michigan taxes.

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