Experts say Michigan isn’t generating enough revenue to pay for proposals to reverse the state’s population decline.
Gov. Gretchen Whitmer assembled the bipartisan Growing Michigan Together Council last year to identify solutions to increase the state's population. The group came up with a number of recommendations, including investments in workforce innovation, community development and strengthening the state’s public education system.
The council notably did not consider methods to pay for the proposals. A new policy brief from Michigan State University and Wayne State University economists aims to consider that angle, focusing specifically on education.
David Arsen, professor emeritus of education policy and K-12 educational administration at MSU, said a stronger educational foundation has the potential to drive economic growth in the state.
But he noted it will be difficult for Michigan to execute its goals to attract and retain residents without reversing historical revenue trends.
“The council's vision for education cannot be implemented, beyond modest initiatives, without new revenues and a reversal of the state's long-term disinvestment in public services," Arsen said.
While Michigan’s population growth has been on the decline for decades, Arsen says the state’s effective tax rate has also gone down, becoming the 46th lowest in the nation in 2022.
Rather than making minor adjustments to tax rates, Arsen argues the state could consider instituting a graduated state income tax to improve revenue in Michigan. Under that plan, payments for most taxpayers would be lower, while more high-income earners would see an increase on their taxes.
“We could make the needed investments to improve our workforce and infrastructure and still have competitive tax rates that are below our neighbors in the Great Lakes region,” he said.
Changing Michigan’s tax structure would require a constitutional amendment.