The income tax code is complex, but for our purposes, only an approximation of how the code functions is necessary. Under the Income Tax Act of 1967, the state of Michigan collects tax on “taxable income” or “net income,” which Michigan statute defines as an adjusted version of the taxpayer’s taxable income for federal income tax purposes.[137] In fiscal 2007, the tax rate on personal income is 3.9 percent.[138] The total state personal income tax liability is then subject to statutory tax credits.[139]

The portion of the gross state income tax revenue[lxix] that is dedicated to the state school aid fund is equal to 1.012 percent divided by the 3.9 percent income tax rate, or about 25.9 percent.[140] In fiscal 2006, $2,038,983,344 was earmarked from the personal income tax for the state school aid fund.[141]

[lxix] Gross revenue is the amount of state tax due before taxpayers’ refunds are subtracted from the total. For the refund provision for overpayment of income tax liability, see MCL § 206.325. Our reference here does not include “refundable” tax credit provisions — that is, cases where a taxpayer would receive money back from state government if his or her tax liability were zero.