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Proposal would abolish Michigan income tax
April 15, 2009 - Jim Anderson
Given Michigan’s fiscal and economic troubles, there’s every reason to take a serious look at radical proposals to restructure the tax system.
Michigan FairTax Association, based in Sterling Heights, wants to institute a new consumption tax (on just about everything) of 9.75 percent.
The MI FairTax would fully replace the Michigan Sales and Use Tax, Michigan Business Tax, the Individual Income Tax, the Property Tax on personal property (mostly paid by businesses on equipment), and the business portion of the State Education Tax, as well as reduce the rate in the Insurance Premiums Tax.
In short, you’d pay no more state income tax. You would still pay property taxes, along with a consumption tax of 9.75 percent on most everything, including services and new homes.
Purchases up to the federal poverty level would be exempt from the MI FairTax. Based on 2008 guidelines, for a household of one, the annual credit would be $1,014. There would be an additional credit of $351 for each additional person in the household.
According to the group’s analysis, a family of two adults and two children would receive an annual credit of $2,067. If their income were $50,000, and they spent all of their income on taxable items, their net state tax for the year would be $2,808. (Keep in mind, the FairTax would replace the current sales tax, as well as the state income tax.)
In the end, the MI FairTax revenue is projected annually at $18.5 billion, just enough to replace the $18.4 billion that would be lost by eliminating those other taxes. (According to an analysis prepared by Gary Wolfram and Bruce Ikawa, economics professors at Hillsdale College.)
The proposal would constitutionally guarantee revenue sharing for counties, townships, cities, and villages.
You can find more information at www.mifairtax.org
Apparently, the group is still looking for coordinators in Dickinson and Iron counties.
I’m not convinced that the new tax would be particularly “fair.” There are also obvious problems for retailers in border areas like our own.
But, with the various tax cuts for businesses, supporters claim there would be many economic benefits.
Along with one less tax form to file.
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