Michigan Corporations to Pay $0 in Taxes This Year, Despite Crises in Flint and Detroit

While residents of beleaguered Flint face rate hikes for the city’s lead-poisoned water and Detroit sees teachers staging sickouts after lawmakers threatened to withhold their full salaries, the state treasury announced this week that Michigan businesses are to effectively pay nothing in taxes this year.

In fact, Michigan is projected to give corporations a net refund—even while it faces a budget shortfall of $460 million.

“Officials are projecting a net loss of $99 million in revenue from the state’s principal business taxes,” reported Detroit News, as corporations “effectively contribute nothing to the state coffers in 2016.“

This shortfall “should be a wake-up call for Lansing Republicans hell-bent on smothering government with cuts and miserly policy—and it shouldn’t be an excuse for lawmakers to withhold necessary help from the (mostly poor, mostly black) City of Flint and Detroit Public Schools,” argued the editorial board of the Detroit Free Press.

The cause of the budget shortfall is a confluence of recent tax code rewrites: automakers and other large companies have continued to take advantage of enormous tax credits enacted after the Great Recession in an attempt to keep jobs in the state, while under Republican Gov. Rick Snyder the state’s Corporate Income Tax was rewritten in 2011 to cut business taxes to a flat 6% rate at the same time that it increased personal income taxes and the sales tax. (Policy experts have previously argued that this change not only unfairly burdened individual taxpayers but also failed to instigate the job growth it was intended to.)

Corporate tax credits will drain $1.03 billion from the state this year, reports Detroit News, while revenue from the Corporate Income Tax is projected to only total $932 million. The state treasury indicated that a 20-percent drop in annual business revenue was to blame for the nearly $1 billion net loss in corporate tax income.

Meanwhile, personal income taxes are expected to bring in about $9.4 billion, sales tax about $7 billion, and $950 million and $850 million are expected to be collected from the so-called “sin taxes” on alcohol and the state lottery.

“Fuel taxes and registration fees are also set to increase next year as part of a new road funding plan that critics say does not go far enough to reverse deteriorating conditions,” Detroit News writes.