Detroit Evening Report: Michigan income tax rate to increase in 2024

The Michigan Department of Treasury announced this week that it expects the state’s personal income tax rate to increase from 4.05% to 4.25% in 2024.

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A state law passed in 2015 by the Republican-controlled Legislature requires a decrease of the state’s individual income tax rate when the general fund revenue grows faster than inflation. That led to the income tax rate falling from 4.25% to 4.05% in 2023.

But for 2024, the general fund declined 8.3% from $15.3 billion in 2022 to $14 billion in 2023, and inflation increased 5.06%, according to Michigan’s Annual Comprehensive Financial Report (ACFR) for 2023.

Now, Treasury officials say the tax rate for 2024 will remain at 4.25%.

“State law requires that a very specific calculation be conducted annually following release of the state’s ACFR to determine the individual income tax rate,” said State Treasurer Rachael Eubanks in a news release. “As anticipated, we found that the conditions were not present for a rate reduction for the 2024 tax year.”

Attorney General Dana Nessel issued a legal opinion last year finding that the tax reduction will apply to the 2023 tax year only. The Michigan Court of Claims reaffirmed that finding after a group of Republican lawmakers and organizations sued, asserting that the calculation should be based on the new rate each year.

Last week, The Detroit News reported, Republicans in the Michigan Senate asked Gov. Gretchen Whitmer to create a “contingency” budget plan for next year in case a court agrees that the 4.05% income tax rate should remain in place. That drop in the rate would cut state revenues by an estimated $700 million. 

Other headlines for Thursday, Feb. 29, 2024:

• Scientists are attributing this week’s unseasonably warm weather to climate change, and it may mean some challenges for Detroit’s more than 2,000 urban farmers and gardeners, Bridge Detroit reports.
• Detroit’s Center for Success Network will host its March Book Madness competition next month in conjunction with its free after-school literacy program.
• The nonprofit BasBlue is hosting a free community event from 4:30 to 6:30 p.m. Friday, March 1, in celebration of Women’s History Month.

Do you have a community story we should tell? Let us know in an email at detroiteveningreport@wdet.org.