MIDLAND, Mich. — In a blow to Michigan taxpayers, the Court of Claims dismissed today the Mackinac Center for Public Policy’s lawsuit over the state treasurer’s decision to increase the personal income tax rate beginning next year. The Mackinac Center sued the Department of Treasury on behalf of Associated Builders and Contractors of Michigan, National Federation of Independent Business, Inc., Senator Ed McBroom, Representative Dale Zorn and six individual taxpayers from across the state.

Attorney General Dana Nessel issued an opinion in March stating that the reduction from 4.25% to 4.05% would only apply to 2023 state income taxes.

In her decision, Judge Elizabeth Gleicher adopted the state’s argument that the tax rate cut had to be temporary or else the rate might one day go down to zero. This extraordinarily unlikely scenario failed to persuade the legislators who passed the law in 2015.

“The law was drafted so that any income tax rate reduction would be permanent,” said Rep. Zorn. “This fundamental error should be corrected on appeal.”

Rep. Zorn and Sen. McBroom were both lawmakers in 2015 and voted on the tax cut law.

“This decision is very disappointing, but it follows the usual trend of the current administration to protect its revenue and take more taxes from people, even when the law was so clearly written to reduce that burden on taxpayers,” said Sen. McBroom. “When this passed, everyone, supporters and opposition, recognized the potential that it could lead to a tax rate of zero, but only if times were so good that we didn’t need to collect taxes anymore.”

Part of the debate on this law concerned the meaning of the phrase “then the current rate shall be reduced.” A permanent reduction was set to occur any time revenue outpaced inflation by a significant amount.

“In effect, the decision eliminated the word ‘current’ from the statute,” said Patrick Wright, vice president for legal affairs at the Mackinac Center. “That word is important because it sets a tax-rate ceiling. Contrary to the judge’s opinion, ‘current rate’ means the tax rate can only go lower.”

The judge’s interpretation would cost Michigan’s 4.9 million taxpayers $714.2 million in 2024.

“We’re disappointed in this decision because the intent and wording of the Legislature was clear,” said Amanda Fisher, Michigan State Director for the National Federation of Independent Business, Inc. “We will keep fighting so that small businesses and the people of Michigan get the tax cut they were promised and deserve, especially during this time of high prices and inflation.”

“At a time when businesses are already dealing with increased costs and more government burdens, this decision is another slap in the face to small business owners,” said Shane Hernandez, president of the Associated Builders and Contractors of Michigan. “We hope that this error will be corrected on appeal so that millions of Michiganders can receive the tax relief they deserve.”

An appeal will be filed soon.

Learn more about the case here. Read the decision here.