Who’s paying their fair share in Michigan? For decades, the state has had a flat tax – right now, it’s 4.25% – but some say it’s time to join the 34 other states that have a graduated income tax rate. That system would work similar to how the federal income tax does. High-income earners would pay a larger percentage; lower-income earners would pay a smaller percentage.
According to Michigan State Rep. Jim Townsend, a Democrat from Royal Oak, a graduated income tax rate would net about $700 million in new revenue for the state. For most people, it would mean a tax break, if you structured it properly. The change would allow for 95% of Michigan taxpayers to pay less than the 4.25% we all pay now while only 5% would pay more.
Is that about fairness? Would that push us more toward a balanced economic system that provides opportunity at the bottom? Or is it punishing the rich to ask them to pay more?
According to Rep. Townsend, Michigan residents overwhelmingly favor a graduated income tax. So, why hasn’t it been enacted? It appears that the Republican controlled state legislature isn’t so keen on embracing an idea that is high on the Democratic agenda. Does a graduated income tax have a future in Michigan? Can supporters raise enough money — $1 million — to accumulate enough signatures — roughly 315,000 — to get this tax reform measure? It would require a state constitutional amendment on the 2016 ballot.
Rep. Jim Townsend and Eric Lupher, the President of the Citizens Research Council of Michigan, join Detroit Today Host Stephen Henderson to discuss as callers chime in with comments and questions. Here are a coupe points the guests make:
- Rep. Townsend says lower and middle income earners pay a much higher percentage of their income to the Michigan sales tax than the wealthy. The graduated income tax is designed to make sure everyone is paying the same proportion of their income in all state and local taxes combined.
- Lupher says we have a prohibition on graduated income taxes in the Michigan State constitution. He adds later that while we have a 4.25% income tax rate in the state, nobody is paying 4.25% of their income since we have a very high standard deduction.
Click on the player above to hear the conversation.