Michigan has operated a negative tax for over a decade now, and it’s worth reminding residents of its continued existence.
A negative tax does not raise money for the government. It instead redistributes money to the tax’s filers. In Michigan’s case, those filers happen to be the state’s largest companies.
In 2011, Michigan lawmakers moved from the Michigan Business Tax to a Corporate Income tax. Ford, GM and Chrysler had a lot of say in how the MBT functioned and had also gotten deals for refundable tax credits to be administered through their MBT filings. So when legislators got rid of the MBT, they allowed people who had deals for “certificated credits” to keep filing the MBT.
In other words, the tax exists only as a vessel to hand out money to these companies.
This year the state expects to pay these companies $527.6 million more than the companies owe in taxes. Lawmakers hand out more money to the Big 3 than they spend on community colleges.
The administration considers these payments to be confidential taxpayer information. The state even lost a Supreme Court decision that required this information to be disclosed, but administrators have yet to change their practice.
There are a couple of other filers, but it’s Ford, GM and Stellantis who got the big deals. Every time they pay a worker in Michigan, the companies receive a tax credit for 4.25% of employee pay. The deals cover around 100,000 workers. Math adds up, and there are no other companies that got deals covering so many people.
The automakers are profitable. They make money from the plants they operate and the people they employ in the state. These companies should pay taxes, not receive them. Taxes should be used to fund the state government, not to pay out money to favored corporations that file tax returns.
Yet here we are.
Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.
Get insightful commentary and the most reliable research on Michigan issues sent straight to your inbox.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
Please consider contributing to our work to advance a freer and more prosperous state.