Nik Rajkovic / news@whmi.com

The Michigan Supreme Court last week dismissed a lawsuit from the Mackinac Center for Public Policy seeking a permanent income tax reduction as passed by the Legislature in 2015, ruling instead that it was only temporary.

Shane Hernandez with ABC Michigan, a statewide trade association, says the ruling hurts small business owners and contractors.

"To me it was very clear when the road deal was passed this was meant to be a permanent tax cut. In fact, some of the arguments on the House floor against the bill were that this was permanent and could be damaging to the state. So now here we have a court saying that's no the case, it was just a temporary cut," said Hernandez.

Excess revenue in 2022 triggered the first income tax reduction, lowering the rate from 4.25% to 4.05% in 2023. However, the Michigan treasurer announced it would only be temporary.

The Mackinac Center sued the Michigan Department of Treasury in August 2023 on behalf of Associated Builders and Contractors of Michigan, National Federation of Independent Business, Inc., Senator Ed McBroom, Representative Dale Zorn and six individual taxpayers from across the state.

The Center argued its lawsuit would have saved taxpayers $700 million per year. Hernandez believes this is why people and businesses are fleeing Michigan for more tax-friendly states.

"We can look at examples around the country, whether it's Florida or Tennessee, the states that are growing are the ones that don't have an income tax. That's where people are moving," he says.

"When you have more money in your pocket, you have more opportunity to grow and more opportunity to put money back into the economy. That's shown clearly through those states that are growing in the country right now."

Some have argued the state doesn't have other revenues to reduce or eliminate the income tax altogether.

"The only way you could trigger that is if the state was growing fast enough to trigger it. That would mean the state's revenue would be growing, because that's how the trigger works. I don't understand why that's an argument against it," says Hernandez.

"Everybody who is talking about cutting the income tax or actually eliminating it, is open to having conversations around that. I'm also a believer that we could cut it a fair amount without needing to replace revenue as well. Revenues are up over $20 billion in the past four years. I think they can manage."

See the ruling attached below.