State and Local Taxes

Economic Growth in Michigan

Michigan can report major economic gains to state taxpayers following tax cuts.

In a series of 21 tax reforms, state property taxes were cut by as much as one-half, the personal income tax rate was reduced from 4.6 percent to 4.4 percent, income tax deductions were increased for senior citizens, the inheritance tax was eliminated and exemptions for companies and small businesses were widened -- with the state sales tax increasing.

These dramatic measures -- aided by a rebounding auto industry -- have paid dividends.

  • Since 1990, unemployment has fallen from nearly 11 percent to just 4.5 percent.

  • The state's budget has gone from a $2 billion deficit in 1990 to a $1.1 billion surplus -- third largest in the country.

  • Welfare case loads have fallen by 90,000 -- to a record low of 176,634.

Michigan's rebound reportedly has drawn politicians and professors to the state to see if what's been tried by Gov. John Engler can be applied nationally. Presidential Candidate Bob Dole drew heavily on the experiences and successes in both New Jersey and Michigan to craft his tax policies.

Source: Micheline Maynard, "Big Three Share Honors in Michigan," USA Today, August 23, 1996.

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