Michigan Group Starts Ballot Drive For Graduated Income Tax

Feb 29, 2020

A ballot drive launched Friday calls for replacing Michigan’s flat personal income tax with a graduated system, which supporters said would cut taxes for more than 90% of residents and raise them on higher earners.

The proposed constitutional amendment would require the Republican-led Legislature and Democratic Gov. Gretchen Whitmer to enact a “fair” individual income tax in 2021, under certain parameters. The 4.25% income tax would have to be reduced for individuals making $175,000 or less ($350,000 for joint filers), and the plan would have to generate $1.5 billion more — half for schools and half for infrastructure.

Branden Snyder, executive director of Detroit Action, a community-organizing group that’s involved in the effort, said schools, roads and water infrastructure have been underfunded.

“All the while, the wealthiest Michiganders have not paid their fair share,” Snyder said. “This ballot proposal will make our tax system fair and raise the revenue needed to fund the critical services that we all need.”

The Michiganders for the Commonwealth ballot committee submitted petition wording for the Fair Tax Michigan measure to the Board of State Canvassers. Once the language is approved, the group will have until early July to gather and submit 425,000 valid voter signatures.

If the proposal makes the ballot and is approved by voters, Whitmer and legislators would be required to enact a graduated income tax before June 2021 and make it effective in January 2022. If they fail to agree on plan, Whitmer would have to enact one by executive order.

The measure would restrict lawmakers from amending the graduated tax until 2025, and it could be done only with two-thirds support in the House and Senate.

Michigan’s constitution prohibits a graduated income tax, and voters overwhelmingly rejected graduated income proposals in 1968, 1972 and 1976.

Democratic lawmakers have proposed putting a repeal of the graduated income ban on the ballot, and they have introduced legislation for graduated tax rates. But the measures have died in the Legislature and have been opposed by business groups such as the Michigan Chamber of Commerce.

Of the 43 states with individual income taxes, nine — including Michigan — have a flat rate, according to the Washington-based Tax Foundation. Thirty-two states levy graduated income taxes.

The ballot drive comes after Whitmer was unable to persuade GOP legislators to back a fuel tax hike for road repairs, and Michigan’s general fund revenue is flat from 20 years ago and well below inflationary levels after a series of tax cuts. The fund also has been increasingly tapped to bolster the transportation budget.

“While the politicians in Lansing argue over what to do, our campaign is offering a solution that is fair for everyone and gets things done for once,” said Eli Isaguirre, campaign manager of Fair Tax Michigan.