The Headlee Amendment: Serving Michigan for 25 Years

Michigan Revenue Under the Headlee Amendment
The Headlee Amendment has held revenue below 9.49% of personal income all but three times since 1978.

It’s been a quarter-century since Michigan voters approved a controversial proposal to amend the state Constitution known as the “Headlee Amendment.” Should we celebrate or commiserate? If you believe in sound policy, fiscal discipline, and good government then the answer is two cheers for Headlee!

Named for taxpayer advocate and insurance company executive Richard Headlee, the 1978 amendment put limits on state and local government by incorporating the following provisions in Article IX of the Michigan Constitution:

  • From all of its taxes, fees and other sources, the state’s total revenue cannot exceed 9.49 percent of personal income in Michigan;

  • If the state mandates that local governments provide any new or expanded programs, the state must provide full funding;

  • Local governments cannot add new taxes or increase existing ones, or increase certain bonded indebtedness, without securing approval of the voters;

  • The state cannot reduce the portion of its outlays that goes to local governments below 41.61 percent, the level where it was when the amendment passed.

The time was right for such restraints to be imposed. State government was growing faster than the state’s population, personal income and inflation. It was piling unfunded mandates upon local government, which in turn burdened taxpayers with ever higher taxes and debt. Headlee himself noted just three months before voters approved the amendment by a comfortable margin that “no statewide candidate can be elected this year without first backing tax limitation.”

A September 1994 report of the Headlee Blue Ribbon Commission to then-Gov. John Engler concluded that the amendment had been, in its first 15 years, “fairly effective” in achieving its objectives — an assessment that now accurately describes the quarter-century Headlee has been a part of the Constitution. The state’s share of personal income has been consistently below 9.49 percent, except for three years when it went slightly over the limit, only one of which required a refund to taxpayers. The provision regarding unfunded state mandates has afforded local governments considerable protection, though not without occasional litigation. The portion of state outlays that goes to local government has remained well above the minimum (it was nearly 60 percent last year), and new or increased local taxes have rarely escaped a vote of the people.

Without the restraints on government provided for in the Headlee Amendment, Michigan workers and families would be struggling today to make do with less. Both the tax burden and the Lansing bureaucracy would be larger, at the cost of an exodus of people and their businesses from Michigan.

So why only two cheers, not three, for the Headlee Amendment? One reason is that it could be even better. Indeed, we could have what Colorado has — a “Taxpayer Bill of Rights,” approved by voters in that state in 1992 and ranked as the best tax and expenditure limitation in the nation by the Cato Institute. It limits spending growth to population growth plus inflation and requires immediate refunds of surplus revenues above that limit. Because of it, Colorado reduced taxes more than any other state in the late 1990s and enjoyed the fastest economic growth in the nation.

As demonstrated in a recent Mackinac Center review of state spending, Headlee doesn’t do liposuction. The fat in the Michigan budget still includes a state-owned ski resort, a lodge reserved primarily for government employees, and the 1965 “prevailing wage” law that mandates millions of dollars of needless spending on construction projects as a sop to organized labor. Michiganians need to watch how their legislators are spending public money and sometimes crowding out private initiatives in the process.

In keeping with the spirit of the amendment, the Legislature should act to prevent subterfuges intended to get around it. For example, what some municipalities claim to be “user fees” and therefore immune to Headlee’s requirement for a public vote are sometimes nothing more than disguised taxes. The Legislature should draw a bright line between user fees and taxes. Other suggestions for strengthening the enforcement of the amendment were offered in the 1994 commission report and still await action in Lansing.

Richard Headlee, now retired and a resident of Utah, has earned a permanent and prominent place in Michigan history as the prime mover of a state constitutional amendment that bears his name. Michiganians made the right decision when they endorsed it in 1978; they just need to remain vigilant and do their part to help it make government better and smaller.


(Lawrence W. Reed is president of the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, and was a member of the Headlee Amendment Blue Ribbon Commission. More information is available at Permission to reprint in whole or in part is hereby granted, provided the author and his affiliation are cited.)


Two cheers for Michigan’s Headlee Amendment, passed in 1978, for limiting the ability of state government to tax citizens and overburden local governments. But Michigan could do even better by following the example of Colorado’s “Taxpayer Bill of Rights.”

Main Text Word Count: 732