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Michigan Supreme Court Issues Ruling on Tax Reform
Late last week, the Michigan Supreme Court upheld the constitutionality of the vast majority of the tax reform plan to implement a new business Corporate Income Tax and modify Michigan's Individual Income Tax.
The tax reform plan includes replacing the jobs-killing Michigan Business Tax with a simple Corporate Income Tax as well as attempting to treat all retirement income, regardless of whether it is from public resources or private, the same.
The Michigan Chamber filed an Amicus Brief in support of the tax reform plan, in which we specifically addressed the question of whether public retirement income should be treated the same as the private-sector retirement income. The Supreme Court agreed that the provision to have everyone pay the same rate, regardless of whether a person worked for a public or private employer, is constitutional. Furthermore, every element of the Corporate Income Tax was upheld and will remain intact. This provision is critical to improving our business tax climate and moving Michigan forward.
The Supreme Court did take issue, however, with provisions which would have phased out the personal exemption for higher wage earners; the Court ruled that this resulted in a graduated income tax which is prohibited by Michigan's Constitution. Ultimately, the ruling keeps intact those exemptions which were aimed at protecting lower income earners, and also extends the exemptions to all income levels. This slight change will result in a budget balance difference of $60 million - which the Governor and Legislature have committed to resolving immediately after returning in December.
If you have any questions, or would like more information, please contact Tricia Kinley, Senior Director of Tax and Regulatory Reform, at tkinley@michamber.com or 517/371-7669.
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