Saturday, September 27, 2014

Graduated Income Tax - Fact vs Fear

The Michigan State Chamber of Commerce is sounding the alarm about a change in state taxes that would CUT TAXES for 90% of us.
Twelve Democrats have introduced a it's-not-going-anywhere-but-will-die-in-committee Constitutional amendment to allow a graduated state income tax. Already the State Chamber has started fear-mongering. Its message, quite simply: a graduated income tax would raise taxes (in the words of a tweet from Chamber president Rich Studley) "working families & job providers."
That is economic baloney.
Michigan State economist Charles Ballard, whose graduated tax proposal is strongly supported by most progressives, says his plan would actually lower income taxes for 90% of Michigan working families (people I call "profit providers" since their labor creates the profits generated by their employers).
A graduated income tax would bring Michigan into line with the overwhelming majority of states. Of the 41 states with an income tax, 34 have a graduated tax. Michigan is one of just 7 with a flat-rate tax.
Institute on Taxation and Economic Policy
Equally troubling is the fact that Michigan's flat-rate income tax is part of a taxing structure that is regressive. A 2013 study by the Institute on Taxation and Economic Policy shows that, in Michigan, the MORE you make, the LESS you pay in state/local taxes.
Institute on Taxation and Economic Policy
Families in the top 1% pay 5.8% of their income in state and local taxes, while the poorest Michiganders (in the bottom 20% of income-earners) pay 9.7%.

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