Ever wonder what percent of your income you pay in state and local taxes? Our system for raising revenue at the state and local level is complicated – we have property taxes, the sales tax, “excise” taxes like the fuel tax and the income tax.
So what is your bottom line? When you add it all up, what percent of your income do you pay in state and local taxes?
Well, that depends on how much you earn each year. In Michigan, the more you make, the less you contribute of your income in state and local taxes. Sound unfair? That’s because it is.
When you add it all up, the bottom 80 percent of families, those making $88,000 a year or less, contribute 9.2 to 9.5 percent of their income, while the wealthiest 1 percent contribute only 5.9 percent.
Why is our tax burden so unbalanced?
The wealthiest one-percent contribute far less than everyone else because Michigan relies heavily on property, sales and “excise” taxes that disproportionately impact the bottom 95 percent of families. The sales tax hits low-income families more than six times as hard as the top one percent, while property taxes take nearly twice as much from middle-income families as it does those at the top.
I haven’t found a single person who believes this is a fair way to distribute our tax burden. So what can we do?
Under a plan I call Tax Equality, we can equalize our tax burden by establishing a graduated income tax that cuts taxes for 95 percent of Michiganians and asks the wealthiest to contribute the same as everyone else.
This plan would make a real difference in the lives of Michigan families who have been getting hit from every angle – declining income, reduced benefits, rising costs and disproportionately higher taxes.
Under this plan, a family of four making less than $176,000 would receive a tax cut that would reach as high as $600 per year for middle-income families.
Over 4.4 million filers would receive a $830 million tax cut to increase demand, stimulate economic growth and create jobs.
Additionally, 89 percent of small business owners would receive a tax cut. It’s time to help hardworking small business owners who don’t benefit from special-interest deals like the MEGA business tax credits.
The Legislature’s GOP leadership refuses to give my plan a hearing because they’re looking out for the wealthiest one-percent, but we can accomplish this through a citizen-led ballot proposal to amend the state constitution.
In the last 16 years, the Legislature changed the income tax rate eight times. What Lansing didn’t do is fix this broken system that subsidizes the top 5 percent at everyone else’s expense. A Tax Equality constitutional amendment would create equal taxation for all and prohibit the Legislature from messing with income tax rates again.
The top 5 percent, would contribute their equal share, generating up to $760 million in new revenue to:
■ Help restore our crumbling roads and bridges
■ Provide our children with the education they need to realize their fullest potential
■ Lower tuition rates to ensure college graduates aren’t burdened by unimaginable debt
Some 33 other states and the federal government have a graduated income tax, including Minnesota, which raised its top income tax rate in 2013 and saw an increase of residents earning over $1 million per year. By the way, Minnesota’s unemployment rate is 3.6 percent and its median household earns $9,000 a year more than Michigan’s.
There is no reason a police officer or a small business owner making $60,000 a year should contribute nearly twice as much of their income as a billionaire making $20 million a year. But that is how our tax system works — at least for now.