The recent passage of the federal Tax Cuts and Jobs Act (H.R. 1) that was signed by President Trump on December 22, 2017, is likely to have an impact on Michigan’s personal income tax and corporate income tax code. It is already apparent that changes will be needed to Michigan’s tax code with the elimination of the federal personal exemption.
While early indications from the Administration and Legislative Leaders are that state taxpayers should be held harmless from any increase due to federal changes, the situation is complicated by the “tax and spend crowd” salivating over the prospect of increased revenue if nothing is done (estimates are upward of $1.5 billion a year). They are arguing that this money should be spent elsewhere instead of being returned to taxpayers.
“It is imperative that tax relief intended for small business in the federal reforms follow through in Michigan before other tax relief is considered.”
There are also suggestions that the need for state tax code changes, due to the federal reforms, presents an opportunity for more significant tax cuts for Michigan taxpayers beyond what is necessary for conformance. Gubernatorial candidate and current Attorney General Bill Schuette, has already called for rolling the income tax rate back to 3.9 percent. However, lost in all this discussion is the impact on state taxes paid by Michigan small business.
NFIB has already communicated with State Treasurer Nick Khouri, Senate Finance Committee Chair Jack Brandenburg, and House Tax Policy Committee Chair Jim Tedder that it is imperative that tax relief intended for small business in the federal reforms follow through in Michigan before other tax relief is considered. Rest assured that NFIB will be actively involved on behalf of Michigan small business in this debate in the coming weeks and months.