LANSING, Mich. (MIRS News) – After Attorney General Dana Dana Nessel issued her opinion that the state income tax rollback would only last one year, the Citizens Research Council of Michigan did its own deep dive into the now-confirmed drop to 4.05% for tax year 2023.
Its finding concurred with Nessel’s March 28 legal opinion that the rollback, the result of a trigger added to state law in 2015, will only last one year.
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In her opinion, Nessel wrote that it was apparent the Legislature intended any reduction to be for that tax year only, and the Citizens Research Council agreed, though on a slightly different rationale.
In an April 3 blog post explaining its position, the Council wrote that though the cut was intended by the Legislature to be permanent, flawed language undermines any ability for the tax cut to stay during years when the trigger is not activated.
AG Nessel’s opinion focuses on the definition of “current rate,” which she says should be defined as the 4.25% baseline. However, arguments can be made that if the trigger determination for 2024 is made next year when the rate is 4.05%, then that would be the “current rate.”
However, regardless of what the current rate is, the Council argued that there isn’t likely to be a triggering event in 2023 as revenue growth is predicted to fall, and HB 4001 will reduce growth further by providing additional tax credits.
Once a triggering event is not met in a subsequent year, the Council found there is nothing in statute that explains what happens next in terms of the income tax rate.
There is no language maintaining the reduced rate, meaning without a successful triggering event, the only rate in statute is the 4.25% mentioned previously.
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The council wrote, “In our mind, the fairest interpretation of this language is that the income tax rate reverts to 4.25 percent in any tax year for which the triggering event – annual GF/GP growth exceeding inflation – does not occur. That will most certainly include tax year 2024.”
The council determined further that because the legislature intended any tax cut to be permanent, the interpretation is a result of flawed language, which is unlikely to be changed with Democrats in control of the legislature this year.
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