The Tax Foundation

Michigan

The Facts on Michigan's Tax Climate

Last updated July 1, 2009

Here are some basic facts on Michigan's tax system and how it compares to other states:

Tax Freedom Day Arrives on April 10 in Michigan
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2009, Michigan taxpayers had to work until April 10 to pay their total tax bill, ranking it 24th in the nation. That's three days earlier than national Tax Freedom Day (April 13). The Tax Freedom Days of neighboring states are: Indiana, April 8 (ranked 28th nationally); Ohio, April 11 (ranked 21st nationally); and Wisconsin, April 13 (ranked 12th nationally).
Full study of Tax Freedom Day, nationwide and in each state

Michigan's State/Local Tax Burden Below National Average
Estimated at 9.4% of income, Michigan's state/local tax burden percentage ranks 27th highest nationally, below the national average of 9.7%. Michigan taxpayers pay $3,694 per capita in state and local taxes.
Michigan's State and Local Tax Burdens, 1977-Present
Other States' State/Local Tax Burdens
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2008

Michigan's 2010 Business Tax Climate Ranks 17th
Michigan ranks 17th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Indiana (12th), Ohio (47th), and Wisconsin (42nd).
50-State Comparison of Business Tax Climates (data only)
2009 State Business Tax Climate Index, Sixth Edition (full study)

Michigan's Individual Income Tax System
Michigan's personal income tax system consists of a simple 4.35% tax on an individual's federal adjusted gross income (with some modifications). Among states levying individual income taxes, Michigan's flat tax rate is 38th highest. Michigan's 2006 individual income tax collections were $663 per person, which ranked 34th highest nationally.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Michigan's Corporate Income Tax System
Michigan levies a Single Business Tax (SBT), which is a modified value-added tax (VAT). The rate is 4.95% and there is an additional modified gross receipts tax at a rate of .8%. In 2007, state-level corporate tax collections (excluding local taxes) were $177 per capita, ranking it 19th highest nationally.
50-State Table of Corporate Income Tax Rates
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household
50-State Table of State Corporate Income Tax Collections Per Capita

Michigan Levies Sales Tax at National Median; Cigarette Tax among Highest in the Nation
Michigan levies a 6% general sales or use tax on consumers, at the national median. State and local governments combined collected approximately $800 per capita in sales taxes in 2006, which ranks 30th highest nationally. Michigan's gasoline tax stands at 30.9 cents per gallon, ranking 13th highest nationally. Additionally, Michigan's 6% general sales tax is levied on the sale of gasoline purchases. Michigan's cigarette tax stands at $2.00 per pack of twenty, which ranks 9th highest nationally. The sales tax was adopted in 1933, the gasoline tax in 1925 and the cigarette tax in 1947.
50-State Table of Sales and Excise Tax Rates
50-State Table of  State and Local General Sales Tax Collections Per Capita and Per Household
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita

Michigan Property Taxes
Michigan is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Michigan's localities collected $1,116.73 per capita in property taxes in fiscal year 2006, which is the latest year the Census Bureau published state-by-state property tax collections. At the state level, Michigan collected $221.70 per capita during FY 2006. That brings its combined state/local property tax collections to $1,338.44 per capita, ranking 15th highest nationally.
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Michigan is a Donor State
Michigan taxpayers receive less federal funding per dollar of federal taxes paid than the average state. Per dollar of federal tax collected in 2005, Michigan citizens received approximately $0.92 in the way of federal spending. This ranks the state 37th nationally and represents a rise from 1995, when Michigan received $0.77 per dollar of federal taxes paid (ranked 45nd nationally). Neighboring states and the amount of federal spending they received per dollar of federal taxation paid were as follows: Indiana ($1.05), Ohio ($1.05), and Wisconsin ($0.86).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

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