Did you know Michigan has a new tax rate for 2023?
Michigan does an annual review comparing percent increase in revenue and inflation. If Revenue exceeds Inflation, there is a calculation to determine a reduction in tax rate. This year that calculation resulted in a reduction of .20 percent. Michigan’s Base tax rate is 4.25%, so with the reduction there will be a tax rate of 4.05 for 2023. This is a small change and will likely go back to 4.25% in future years. But for most people you may notice a small decrease in your tax liability for the state of Michigan. For more information, below is a link to the State of Michigan’s statement.
Michigan Announces Income Tax Cut for 2023
LANSING, Mich. — Today, following the release of the State’s fiscal year 2022 Annual Comprehensive Financial Report, Treasurer Rachael Eubanks announced that Michigan’s state income tax will decrease to 4.05% for one year. Driven by low unemployment, strong business growth, and an overall strong economy, families will pay lower taxes when they file next year for tax year 2023.
“Michigan’s strong economic position has led to a reduction in the state income tax from 4.25% to 4.05% for 2023,” said Treasurer Rachael Eubanks. “When Michiganders file their 2023 state income taxes in 2024, they will see the rate adjustment in the form of less tax owed or a larger refund.”
“As a result of our growing economy and strong fiscal management, Michigan’s state income tax will decrease to its lowest in 15 years,” said Governor Whitmer. “Our state is headed in the right direction, bolstered by low unemployment, projects bringing jobs and supply chains home, and fiscally responsible, bipartisan leadership that took us from a projected $3.5 billion deficit in 2020 to a $9.2 billion surplus this year, paid down $14 billion in debt, and brought the rainy-day fund to an all-time high. This year, we permanently rolled back the retirement tax on our seniors, quintupled the Working Families Tax Credit for 700,000 families, and now, everyone’s income tax will decrease for a year. In total, we have put $1.6 billion in tax relief back in people’s pockets without cutting any critical services or programs.”
State Income Tax Reduction
In 2015, Michigan enacted a law requiring a temporary reduction of the state income tax if the general fund grew faster than the rate of inflation in any year starting in 2023. Now, because of strong economic growth and robust state revenues, the state income tax will decrease to 4.05% for one year. This will equate to a savings of approximately $50 for the average Michigan taxpayer.
Attorney General Dana Nessel issued a legal opinion finding that the tax reduction will apply to tax year 2023. It requires consensus by and annual reevaluation by the Treasurer, Senate Fiscal Agency, and House Fiscal Agency. It is anticipated the formal step of adopting a consensus with updated revenue estimates will occur as a procedural matter at the May Consensus Revenue Estimating Conference. The tax change will be effective Jan. 1, 2023 for tax year 2023.
Governor Whitmer’s Fiscally Responsible Leadership
Since taking office, Governor Whitmer has signed four balanced, bipartisan budgets paying down $14 billion in debt, and brought the rainy-day fund to an all-time high of nearly $2 billion without raising taxes on working families by a dime. She signed legislation cutting taxes for small business owners, permanently rolling back the retirement tax on seniors, permanently quintupling the Working Families Tax Credit, and established bipartisan economic development tools to help the state land over $16 billion of projects creating 16,000 domestic manufacturing jobs. Thanks to this governor’s strong, fiscally responsible leadership, Michigan received its first credit rating upgrade in a decade from Fitch, a national financial firm.