Advance Notice: Briefs

Michigan is one of 16 states with lower tax revenue than before the Great Recession

By: - December 4, 2018 5:50 am

Gov. Rick Snyder is fond of bragging about Michigan’s “comeback” since the Great Recession, but one key economic indicator continues to lag. Tax revenue in the Great Lakes State is still coming in lower than it did before the recession, according to a report from the Pew Charitable Trust.

Michigan’s tax revenue for the fourth quarter of 2017 was still 4.2 percent lower than our peak quarter of revenue before the end of the recession, when adjusted for inflation. That means we’re behind 39 other states when it comes to the percentage of tax revenue flowing in. The average increase was 9.1 percent.

But how can that be? If you’re like many Michiganders, you’re paying more in taxes than you did before Snyder became governor eight years ago. That’s because there’s been a big tax shift in Michigan. Snyder’s 2011 tax overhaul dramatically cut business taxes while raising taxes on individuals, such as increasing the income tax. Just before the 2014 election, the Detroit Free Press ran a story with the gut-punch headline: “Michigan taxes: Businesses pay less, you pay more.”

Bridge took another look in February at state tax revenue and reached the same basic conclusion, reporting that “nearly 70 percent of the revenue in the general fund budget this year comes from income taxes, up from 54.6 percent in the 2012 fiscal year. Business taxes, meanwhile, are an estimated 1.9 percent of the state revenue pot this year, considerably less than 12.4 percent in 2012.”

In the Pew study, Alaska, which heavily depends on revenue from the oil industry, was the hardest-hit state. Its tax revenue clocked in 88.4 percent lower than before the recession. Wyoming was the second-worst state with revenue 36.4 percent lower, followed by Florida at 11.3 percent. Michigan’s neighbor, Ohio, experienced a decrease of 7.3 percent, according to the Pew study.

The state whose tax revenue bounced back the most from the downturn was North Dakota with a 31.8 percent increase. The Peace Garden State was followed by Oregon, which saw a 24.8 percent increase in tax revenue. Minnesota realized a bump of 24.1 percent.

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Susan J. Demas

Susan J. Demas is a 22-year journalism veteran and one of the state’s foremost experts on Michigan politics, appearing on MSNBC, CNN, NPR and WKAR-TV’s “Off the Record.” In addition to serving as Editor-in-Chief, she is the Advance’s chief columnist, writing on women, LGBTQs, the state budget, the economy and more. For almost five years, Susan was the Editor and Publisher of Inside Michigan Politics, the most-cited political newsletter in the state. Susan’s award-winning political analysis has run in more than 80 national, international and regional media outlets, including the Guardian U.K., NBC News, the New York Times, the Detroit News and MLive.