Driven by low unemployment, strong business growth, and an overall strong economy, Michigan’s income tax rate will decrease to its lowest level since 2007. In 2015, Michigan enacted a law requiring a temporary reduction of the state income tax if the general fund grows faster than the rate of inflation. Due to recent economic growth, the state’s income tax rate will decrease from 4.25% to 4.05% for the 2023 tax year. According to the Department of Treasury, this equates to a savings of approximately $50 for the average Michigan taxpayer.
Recently, there has been debate on the permanency of the reduction. However, Attorney General Dana Nessel issued a legal opinion this week finding the tax reduction will apply only to the 2023 tax year. Members of the Republican caucuses and former Governor Rick Snyder, who signed the law, dispute that, stating the reduction should be permanent.