In the past several years, a large number of careful studies have documented the relationship between relative tax burdens in different states and economic performance. These studies document a strong inverse relationship between personal tax burdens and economic performance, measured by income or employment. These studies conclude that high personal tax burdens slow down the economic growth of a State. 
The relationship between business tax burdens and economic growth has not been established as strongly. In part, this is due to the fact that businesses do not "pay" tax as much as they collect it. Every dollar of business taxation comes from one of three sources: consumers, workers, or investors. The incidence of business taxation among these three parties has been the subject of much debate but little consensus.
In addition, the effectiveness of various government incentives in attracting businesses has not been proven. While these incentives can have a large affect on individual firm's decisions if the incentives are large, they are often ignored in favor of larger considerations. 
On the whole, while the evidence concerning the effectiveness of business taxes and business incentives on business location is mixed, the evidence concerning personal tax burdens is strong. The slow, cumulative effect of differences in incentives and tax burdens obviously affects the growth patterns of industry.
Comparing Michigan's business tax burden with that of other states is complicated by the uniqueness of the SBT. One method overcoming this difficulty is to compare the total tax burdens as a percentage of Personal Income. This method ignores the incentive effects imbedded in different tax rates, but accurately compares the burden with the ability to pay.
US Census Bureau data show that Michigan's 1984-85 Corporate Taxation burden was the second highest among the 50 states per $1,000 of personal income, and the highest among the 11 Midwestern states.  Michigan's corporate tax burden of $12.17 per $1,000 of personal income was nearly double both the national average of $6.45, and significantly higher than its closest Midwestern competitor, Wisconsin, at $6.96.
This method of comparing business tax burdens is not extremely precise, because of the uniqueness of the SBT, the multi-state and multi-national character of many corporations, and the uncertainty surrounding the incidence of business taxation. Nevertheless, these statistics clearly establish that Michigan's business tax burden is high. The finding above that the aggregate SBT burden represented over 20% of the aggregate pretax income of Michigan firms in the sample period confirms this fact.
Placing business taxation in the context of all state taxation, US Census Bureau data establish that Michigan's personal tax burden is clearly high, particularly for income and property taxes. Furthermore, Michigan's high personal tax burden bears considerable blame for its relatively poor economic performance in recent years. 
Thus, the tax burden in Michigan for both businesses (who pass taxes along) and individuals (who pay taxes directly) is clearly high. Given this fact, the Legislature should consider lowering the overall tax burden in the State both for business and individual taxpayers.
Business and Personal Tax Burdens in Michigan
Both business and personal tax burdens in Michigan are significantly higher than the national average. US Census Bureau data show that Michigan's 1984-85 Corporate Taxation burden was the second highest in the nation, double the national average. The finding in this study that the aggregate SBT burden represented over 20% of pretax income for Michigan businesses confirms the large business tax burden of the SBT. Because both theory and experience show that high tax burdens discourage economic growth, the Legislature should lower the overall tax burdens in the State.