The Tax Foundation

Research Areas

Michigan

The Facts on Michigan's Tax Climate

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

Tax Freedom Day Arrives on April 16 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 2008, Michigan taxpayers had to work until April 16 to pay their total tax bill, ranking it 31st in the nation. That's seven days earlier than national Tax Freedom Day (April 23). The Tax Freedom Days of neighboring states are: Indiana, April 17 (ranked 29th nationally); Ohio, April 17 (ranked 28th nationally); and Wisconsin, April 24 (ranked 14th nationally).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Michigan's State/Local Tax Burden Above National Average in 2007
Estimated at 11.2% of income, Michigan's state/local tax burden percentage ranks 14th highest nationally, above the national average of 11.0%. Michigan taxpayers pay $4,202 per capita in state and local taxes, and per capita state income is $37,538.
Michigan's State-Local Tax Burden, 1970-Present

Michigan's 2008 Business Tax Climate Ranks 29th
Michigan ranks 29th 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 (46th), and Wisconsin (39th).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth 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 40th highest. Michigan's 2005 individual income tax collections were $650 per person, which ranked 32nd 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 2006, state-level corporate tax collections (excluding local taxes) were $186.83 per capita, ranking it 14th highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Michigan Levies Sales Tax above National Median; Cigarette Tax Fourth Highest in the Nation
Michigan levies a 6% general sales or use tax on consumers, above the national median of 5.4 percent State and local governments combined collect approximately $1,166 per capita in sales taxes, which ranks 30th highest nationally. Michigan's gasoline tax stands at 36 cents per gallon, ranking 5th 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 4th 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 and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Michigan Property Taxes: Middle of the Pack Locally, Higher than Most at the State Level
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 $9,886,721,000 in property taxes in fiscal year 2004, which is the latest year the Census Bureau published state-by-state property tax collections. At the state level, Michigan collected $2,091,933,000 in property taxes during FY 2004. That brings its combined state/local property tax collections to $11,978,654,000, or $1,186 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

Articles from the Tax Foundation