Contact: Judy Putnam at (517) 487-5436
Sales tax is Michigan’s most regressive tax; low-income workers must be protected
The following statement was released by the Michigan League for Public Policy in response to potential road funding solutions that include an increase in the sales tax. The statement may be attributed to Michigan League for Public Policy President & CEO Gilda Z. Jacobs.
“It’s clear that Michigan must come up with a solution to repair its broken roads. A funding solution that requires a higher sales tax, however, will be especially difficult for lower-income working families who already pay a greater share of their income in state and local taxes.
“The sales tax is by far Michigan’s most regressive tax, meaning it hits low-income families the hardest. In fact, a Michigan family earning $16,000 or less pays an average 6.7 percent of their income in sales tax. That’s more than seven times the impact on a family earning $331,000 or more, who pays less than 1 percent of their income in sales tax.
“A tax on wholesale fuel will also make it more difficult for workers to afford transportation as the price of fuel rises, but it is a far better option than a sales tax as a dedicated source of revenue. Those workers earning the least in Michigan are paying about $247 million more each year in income taxes as a result of the tax shifts that occurred in 2011, specifically the reduction of the Michigan Earned Income Tax Credit from 20 percent to 6 percent of the federal credit. For Michigan’s economic recovery to reach everyone, workers who can least afford additional costs to get to work should be protected.
“Increasing the Michigan Earned Income Tax Credit would be a perfect vehicle to offset the additional costs on those who can least afford them. This will help workers stay on the job while making sorely needed repairs to the state’s roads.’’
For more information on the sales tax, see the Institute on Taxation and Economic Policy’s Who Pays? report
For information on the change per county in Michigan’s Earned Income Tax Credit see the interactive EITC map.
The Michigan League for Public Policy, www.mlpp.org, is a state-level institute dedicated to economic opportunity for all.