LANSING – Michigan’s overall tax burden on residents is at one of its lowest levels in years, helped by the condition of declining overall state revenues at a time when state personal income continues to increase.
Based on fiscal estimates on how much revenue the state will raise during the 2004-05 fiscal year, the state’s tax burden will amount to roughly 7.4 percent of personal income. At that level, the tax burden will be less than 7.5 percent estimated in 1978 when the Headlee Tax Limitation Amendment was adopted by the state’s voters.
The Michigan Senate Fiscal Agency said calculating the tax burden is done by taking the state’s total personal income and dividing it by the total revenues that could be raised under the Headlee amendment (the actual revenues raised have been less).
Because of the slowdown in the economy, beginning four years ago, total state revenues have either decreased or slowed because of increases in unemployment and reduced retail sales. Even so, total personal income has increased during this period.
For the 2004-05 fiscal year, the May revenue estimating conference anticipated total revenues that could be raised under the Headlee Amendment of $24.4 billion. Meanwhile, it anticipated total personal revenue of $330.4 billion. That produces the overall tax burden of 7.4 percent.
The lowest tax burden the state saw was during another economic slowdown, during the 1991-92 fiscal year, when the average tax burden was 6.6 percent.
The highest average tax burden was during the economic boom of 1997-98, when it averaged 8.5 percent.
For the current fiscal year, the SFA estimated an average personal tax burden of 7.6 percent.
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