NCPA - National Center for Policy Analysis


October 3, 2007

Already 14th in tax burden among the 50 states, according to the Tax Foundation, Michigan is now headed up in the rankings, says the Wall Street Journal.


  • A handful of Republicans in the Legislature recently broke days of gridlock and agreed to the $1.48 billion tax increase Democrats were demanding.
  • The state's personal income tax will rise to 4.35 percent from 3.9 percent and the rest of the revenue grab will come from a new 6 percent sales tax on business services.

The tax hike will only worsen what is already a dire situation, says the Journal:

  • Last year, amid the national expansion, Michigan was the only state outside the Gulf Coast to lose jobs and see a decline in economic output.
  • Comerica Bank recently moved its headquarters to Texas, in part because of Michigan's hostile business climate.
  • Michigan's 7.4 percent jobless rate is the highest of all states and far above the 4.6 percent national rate.

The Michigan Chamber of Commerce estimates that two-thirds of the $750 million in new sales tax revenue will apply to business transactions that are tax exempt in most states to avoid a compounding effect that raises costs to final consumers, says the Journal.  The tax is especially unfair to small employers that contract out for activities, such as office services, that large businesses provide in-house with no sales tax applied.  By the way, last year Michigan introduced a new 4.95 percent business income tax, which will be applied on top of the sales tax.

Source: Editorial, "Hail to the Taxers," Wall Street Journal, October 2, 2007.

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