LANSING, Mich. (Michigan News Source) – The Michigan Court of Appeals has ruled in the case of the Associated Builders and Contractors of Michigan v. Eubanks that the 4.05% income tax rate for 2023 would not remain in effect for the year 2024. 

What does the decision mean?

State Representative Joe Aragona (R-Clinton Township) shared with Michigan News Source in an interview how he was “surprised and extremely disappointed” about learning the court’s decision. 

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“When you can go ask the Governor at the time and the legislature at the time, what was your intent?” he said, adding later, “Even the Democrats understood at that time that this was supposed to be an income reduction into perpetuity.”

He shared that he was on staff during the time of the legislation’s passing and explained that both parties understood it was to go in perpetuity. 

“So if people who voted yes said yeah this is gonna go into perpetuity, this is not just for a year,” he said during the interview. “Those who voted no, said I’m voting no because this is going to go into perpetuity. So everybody in the Legislature and the Governor assumed this was going into perpetuity. But for some reason this new Governor and Attorney General have decided that they can try and find some sort of legal clause, and unfortunately the court sided with them.” 

How will this affect Michiganders?

“They know how to use their dollars far better than the government does,” he added, “it’s really gonna hurt small business because that’s a really big chunk that’s coming out of small business when their fixed costs are going up, everything is going up, and now unfortunately so is their tax rate, not just their taxes, and they’re going to be paying more money.” 

Rep. Aragona also indicated that he did not think it was likely that the decision would be changed. 

“To be honest I doubt that we are ever going to have a income tax reduction with a Democrat majority and with Governor Whitmer, I don’t see a path forward,” he said in the interview,“I know they want to appeal it, and I hope the Supreme Court does what it should, but if it didn’t I would love to be part of a legislative fix to ensure this does go into perpetuity.” 

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Representative Aragona acknowledged that there are other taxes that Michiganders are already paying. 

“There are gonna be taxes around,” Rep. Aragona said in the interview. “However we do pay plenty of taxes, you’re paying thousands of dollars in property taxes alone, then you’re paying now back up to 4.25% [income tax], you’re paying 6% sales tax, there are a lot of taxes i think that we can reduce and actually have more revenues because people will be able to spend more of their hard earned dollars.” 

He also shared that the states that are “prospering the most” often have low or no income tax.

“That might be something for us to take a hard look at,” he said. 

Support for the court’s decision.

The Michigan Department of the Treasury shared its response to the ruling. 

“The Michigan Department of Treasury is committed to serving taxpayers with integrity when administering state tax laws. Today’s unanimous opinion by the Michigan Court of Appeals has reaffirmed the individual income tax rate change was temporary. We will administer the law as the Courts have ruled and continue to ensure all Michiganders are provided fair and equitable treatment.”

The case decision affirmed an earlier legal opinion issued by Michigan Attorney General Dana Nessel stating that the tax reduction would apply to the 2023 tax year only. 

“The conclusion that any reduction is temporary is supported not only by the plain language of the statute, but also by the nature of the triggering event itself,” AG Nessel said in her opinion. “In particular, the triggering event is based on temporary, impermanent, circumstances that change, and are reviewed, every year.” 

Nessel also cast the responsibility on the legislature for the language.

“Essentially, the Legislature has determined that if a situation exists where a percentage increase in state revenue in the immediately preceding fiscal year is greater than the rate of inflation for that same year and the inflation rate is positive, then the State can afford to provide relief to taxpayers,” the opinion said. “But because that situation is only temporary, it makes sense that, rather than provide a permanent tax reduction based on the (perhaps unusual) economic circumstances of a single fiscal year, the Legislature intended the relief to taxpayers to be only temporary as well.  Simply put, the statute provides temporary relief based on temporary circumstances.” 

The Attorney General’s full opinion can be found here.