Lawmakers Consider Bills to Eliminate Michigan Income Tax
Discussion is underway in both the Michigan House and Senate to eventually eliminate the state's 4.25% income tax.
House bill 4001, introduced by State Rep. Lee Chatfield would reduce the tax Michiganders pay to 3.9% in 2018, then lower it by 0.1 percent each year thereafter. Chatfield's bill would gradually phase out taxpayers' burden over a 40-year period.
State Sen. Jack Brandenburg is expected to introduce a more aggressive plan to the Senate, a bill that would eliminate the Michigan income tax in five years.
Edward Cho, an economics professor at the University of Michigan tells Michigan Daily that the plan would infuse Michigan's economy because consumers would have more disposable income.
“The one benefit that you can see here is that by scrapping the tax, you put more money in people’s pockets, and they might spend more,” Cho said.
LSA junior Enrique Zalamea, president of the University’s chapter of College Republicans, says the plan could benefit economically weak areas, such as Flint and Detroit.
“When you look at Detroit and you see where it’s come from, you see the income tax as a way to spur growth there,” Zalamea said. “When people have more money to spend, then they’re going to be spending more of it.”
Obviously both plans come at a cost. Experts say Michigan would either have to reduce spending on its already-decaying infrastructure, or raise the sales tax to make up for the lost revenue.
Cho says raising the state's 6.0% sales tax would be an economic blow to Michigan's low-income residents.
“If you decide to raise the sales tax, that would get back revenue, but the downside is a sales tax is relatively regressive … the tax burden now starts to fall disproportionately on the low income.”
What do you think? Would a plan to phase out Michigan's income tax be a smart move?