(WWJ) - The Michigan Court of Appeals has ruled that the reduced tax rate will revert back to the original in 2024.
According to an article from MLive, the court made the decision on March 7 to raise the rate from 4.05% back to the the original 4.25%.
“Under Michigan law, if the state’s general fund revenues increase faster than inflation (assuming inflation is increasing), the income tax rate for the following year drops proportionately,” the article said .
Officials said the state revenue was increased in 2022, which is the reason the 2023 tax rate dropped. Part of the increase was due to COVID-19 relief funding.
Treasurer Rachel Eubanks was told to return the tax rate to 4.25% by Michigan Attorney General Dana Nessel, according to the article.
A lawsuit was filed in August that the lower rate should stay. The lawsuit included “two trade organizations, the Associated Builders and Contractors of Michigan and National Federation of Independent Business; two state legislators, state Sen. Ed McBroom and state Rep. Dale Zorn; and six state taxpayers,” the MLive article said.
The law states that when inflation is outpaced by revenue, "the current rate" drops to reflect the change. The group argued that "the current rate" should be considered the most recent rate.
“The Court of Appeals disagreed, writing in an opinion released Thursday afternoon that ‘the statute contains no language indicating a legislative intent to make the rate reduction…permanent,’ and noting that allowing one reduction on top of another ‘could ultimately result in no income tax,’ according to the article.
Vice President for Legal Affairs at the Mackinac Center for Public Policy Patrick Wright said the decision may be appealed to the Michigan Supreme Court.