Michigan's individual income tax revenue jumped 25% between 2011 and 2012, a $1.4-billion increase. About $560 million of that is because of income growth, and much of that is because of a one-time spike in national income tied to changes in the federal tax code.
The remainder of the increase can be explained by deductions and tax credits that were either eliminated or modified significantly. For millions of Michigan residents, these were experienced as tax increases.
They include:
■ $270 million from a decrease in the homestead property tax credit.
■ $240 million from cuts to the Earned Income Tax Credit (EITC).
■ $200 million from the pension tax changes.
■ $50 million from the elimination of deductions for children.
■ $50 million from the elimination of the special exemption for age and unemployment compensation.
■ $90 million from elimination of other nonrefundable credits, such as city income tax, homeless/food bank contributions and contributions to public universities and public broadcasting.
The average taxpayer received half as much in credits in 2012 as in 2011. In addition, the new tax code freezes the individual income tax rate at 4.25%; before the changes, that rate was scheduled to drop 0.1 percentage point each year until it reached 3.9% in 2015.
In fact, Michigan had the fifth largest percentage increase in tax revenue collected from individuals, according to a survey of government tax collections by the U.S. Census Bureau during fiscal year 2013.
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