UP Gazette

On Aug. 24, the Mackinac Center for Public Policy filed a lawsuit against the state treasurer in Michigan, contesting the removal of an income tax cut set to take effect this year. Representing various groups, lawmakers, and individual taxpayers, the lawsuit aims to ensure that the tax reduction, triggered when state revenue surpasses inflation, remains intact.

This is about the law,” said Patrick Wright, vice president for legal affairs at the Mackinac Center for Public Policy. “A clear reading of the statute shows that lawmakers put in place a permanent income tax rate reduction. The personal income tax rate on all Michigan citizens went down to 4.05% and should stay there absent new legislation.”

According to Bridge Michigan, a legal battle is unfolding in Michigan over an automatic income tax cut that has sparked controversy between Democratic officials and conservative groups, along with Republican lawmakers. At the heart of the dispute is whether the tax reduction should be permanent or temporary. In 2015, a Republican-backed road funding law was enacted, which stipulated that if state revenue growth significantly exceeded inflation, the income tax rate should be cut.

The conflict was triggered when Democratic Attorney General Dana Nessel interpreted the law's language, stating that it should be temporary and that the statute provided relief only for temporary circumstances, Bridge Michigan reported. However, the Mackinac Center for Public Policy, a conservative organization, has challenged Nessel's opinion and argued that the law intends to establish a permanent income tax rate reduction. This lawsuit not only raises legal questions but also has significant financial implications for Michigan's approximately 5 million individual taxpayers and could impact state budgeting and spending plans. The case highlights the ongoing debate over taxation policy and the role of legislative intent in interpreting laws, with potential ramifications for taxpayers and the state's fiscal management.

In a lawsuit, the Mackinac Center for Public Policy is seeking a court declaration that the income tax rate for the 2024 tax year in Michigan is fixed at 4.05% and is requesting a mandamus to compel the defendant to implement this rate. This assertion contradicts Attorney General Opinion No. 7320 issued on March 23, 2023, which stated that the 2024 income tax rate would return to 4.25% after a one-year reduction to 4.05%.

"When we passed this particular issue, those opposing it were clear they understood it was a permanent drop — they even complained it could lead to a 0% rate eventually," said Michigan State Sen. Ed McBroom (R-Waucedah Township), according to a press release. "Now they have created a novel interpretation to suit their present need and have thrown the people and the Legislature into an uncertain position. This lawsuit will provide the people and the Legislature with the certainty they need and deserve that the law does what it says and the tax reduction will continue."