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Michigan Group Pushes Proposal to Pay for Roads With Corporate Tax Increase

Posted on July 29, 2015 by Maria Koklanaris

This article first appeared in the July 27, 2015 edition of State Tax Today.

Following a proposal by Michigan House Democrats to increase the corporate income tax rate by 3 percentage points to pay for transportation improvements, a coalition of union groups went a step further by announcing a petition to push the tax even higher.

The union groups, calling themselves Citizens for Fair Taxes, would raise the corporate tax from 6 percent to 11 percent to pay for infrastructure improvements. The group submitted language for the petition to the Michigan secretary of state and announced July 23 that they would circulate the petition in hopes of getting enough signatures to place an initiative on the November 2016 ballot.

The Michigan House Democrats proposed to raise the tax to 9 percent, which they estimate would raise $955 million for road and bridge projects.

"It's time for a fair fix to Michigan roads that ensures corporations pay their fair share," Citizens for Fair Taxes said in a statement on its website. "Our plan is simple. Corporations received over $2 billion in unfair and unjustifiable tax giveaways that didn't work. Our plan would recoup about half of those cuts -- $900 million -- and put the money into our crumbling roads and bridges by raising the corporate income tax from its all-time low of 6 percent to 11 percent."

The group's statement refers to the 2011 change in Michigan's corporate tax regime in which the state got rid of the Michigan business tax and switched to a 6 percent corporate income tax rate. The group claims that the change represented an 80 percent tax cut for corporations.

Not surprisingly, business groups responded negatively to the coalition's plan.

"Michigan's landmark tax reform of 2011 put our state on a trajectory for increased jobs, investment and tax revenue. To undo this progress puts at risk the jobs created and further risks the tax revenue from jobs that goes to roads and other vital services," Brad Williams of the Detroit Regional Chamber said in a statement. "The Chamber recognizes businesses and citizens will both have to be part of the solution but the proposal to raise the Corporate Income Tax will halt Michigan's comeback in its tracks."