25 years ago, Michigan Pondered 38% Income Tax Increase (mortgage, credit)

[tuebor]

I'm not sure I buy the methodology of the MSN study. It lumps together state and local taxes, but local taxes vary quite a bit in Michigan. This ranking is not useful for individuals or businesses who are considering locating in Michigan.

Also, I only briefly skimmed the MSN article, but if I understood it correctly, this ranking is not based on tax RATES, but rather on taxes as a percent of income (pre-tax income, I assume). This means that if Michigan raised its taxes slightly, but MI residents' income increased sufficiently at the same time, Michigan's ranking would improve, even with higher taxes.

[jumpygh]

If you want to know if lowering taxes is a good for economic growth, just look around the country and around the world. Eastern Europe is leading a flat-tax revolution that the rest of Europe is trying to catch up to. These countries clearly recognize that they are in competition with one another. Having high taxes isn't something you advertise in order to lure businesses, is it? Hence, lowering taxes is what should be done to improve the economy.

Anyone suggesting raising taxes in Michigan is nuts, in my opinion. Can anyone make the case that this will help the economy? If raising taxes won't help the economy, then they are a bad idea. Helping the economy will bring in more revenue--period.

[Siberia]

Originally Posted by jumpygh

Anyone suggesting raising taxes in Michigan is nuts, in my opinion.

If one looks at the total tax picture, one sees just how huge the tax burden already is at the current rates. Many don't understand that your income tax isn't the only MI tax on your paycheck, as you have to live and buy "stuff" to exist in Michigan, thus the true tax is 10.8% on your income like the CNN, MSN, Forbes, and mutiple TOTAL state Taxation tables show. Thus, lets look at the big picture for governmental taxation:

10.8% MI TOTAL state Taxation
25-31% Federal Tax (Middle Income, Top Bracket, limited writeoffs other than standard deduction and 1-2 personal exemptions)
15.3% Social Security and Medicare (Self employed pay 15.3%, those who work for others pay "half"...yet don't kid yourself, your employers decrease your paychecks to absorb paying half of the SS/Med tax!)
0.05-1.5% local city income Tax
----------
52.6-58.6%

Tac on another 3% in expenses to drive, cloth, feed, misc yourself in order to be at work...and you have end up taking 40% home for yourself once all is said and done...cha ching.

Oh, and lets not forget to give 10% to the church (which is 7% after tax write-off)...now we take 33% home once we hit the top tax brackets? For those who make middle income, why work the entire year? Once you hit the top tax brackets, you simply don't take home very much of that hard earned cash...

And to think that we have citizens in Michigan that say "More taxes please!". Wow...

Siberia

P.S. That 3% Federal Tax decrease we have all been enjoying the last few years expires soon. Once Dems get a President in office, add another 3% back to the federal taxes (25% goes to 28%, 28% goes to 31%). And if Michigan goes "progressive" and back to the 6.35% of the past, we have an instant 5.45% increase...cha ching...27.5% paychecks...

P.S.S. In order to fix Social Security and Medicare/Medicad budgets, it has been calculated by the Government that without benefit decreases, the income SS/Med tax would need to be increased approximately 10%...cha ching...17.5% paychecks...

[magellan]

Originally Posted by Siberia

If one looks at the total tax picture, one sees just how huge the tax burden already is at the current rates. Many don't understand that your income tax isn't the only MI tax on your paycheck, as you have to live and buy "stuff" to exist in Michigan, thus the true tax is 10.8% on your income like the CNN, MSN, Forbes, and mutiple TOTAL state Taxation tables show. Thus, lets look at the big picture for governmental taxation:

10.8% MI TOTAL state Taxation
25-31% Federal Tax (Middle Income, Top Bracket, limited writeoffs other than standard deduction and 1-2 personal exemptions)
15.3% Social Security and Medicare (Self employed pay 15.3%, those who work for others pay "half"...yet don't kid yourself, your employers decrease your paychecks to absorb paying half of the SS/Med tax!)
0.05-1.5% local city income Tax
----------
52.6-58.6%

Tac on another 3% in expenses to drive, cloth, feed, misc yourself in order to be at work...and you have end up taking 40% home for yourself once all is said and done...cha ching.

Oh, and lets not forget to give 10% to the church (which is 7% after tax write-off)...now we take 33% home once we hit the top tax brackets? For those who make middle income, why work the entire year? Once you hit the top tax brackets, you simply don't take home very much of that hard earned cash...

And to think that we have citizens in Michigan that say "More taxes please!". Wow...

I would guess most Americans don't pay anywhere near the 25 - 31% tax bracket. Especially families who own homes and are in the $55 - $85K household income, once you figure in your standard and itemized deductions, exemptions for dependents, and tax credits for dependents. Our family's federal tax liability bracket usually falls around 8 - 10% (if that), and we don't have $thousands and thousands in itemized deductions.

Here's a question, if lowering taxes is the answer, why has the lowering of taxes by the federal government and in Michigan over the past five years brought us lower wages, negative saving rates, a massive credit bubble, and a massive federal and state (s) budget deficits (I say "states" because the number of states having budget problems in on the rise).

I'm not saying that raising taxes is always good, but neither is lowering taxes always good.

[Siberia]

Originally Posted by magellan

I would guess most Americans don't pay anywhere near the 25 - 31% tax bracket. Especially families who own homes and are in the $55 - $85K household income, once you figure in your standard and itemized deductions, exemptions for dependents, and tax credits for dependents. Our family's federal tax liability bracket usually falls around 8 - 10% (if that), and we don't have $thousands and thousands in itemized deductions.

If you are not in debt and to not itemize, the standard itemized deduction is about $10,000. That, along with personal exemptions for each family member, does drop the top rate for anyone with say two incomes that each make $50K, year, the drop is lets say $20,000 write-offs would be 20%. Thus decrease 25-31% by 20% to get 20-25% effective federal tax rate. Now if you are in debt enough, you can itemize and probably drop the rates another 5-10% to get 10%-20% effective federal tax rate (yee-pee, huge interest payments so I can write-off more taxes...)....but if you carry a low debt, are healthy, and don't have a dozen kids... you simply won't break that $10,500 itemization barrier very easily...

And the 25% tax bracket kicks in at $63,700 for married couples in 2007:

2007 Federal Tax Rate Schedules

If taxable income is over-- But not over-- The tax is:
$0 $15,650 10% of the amount over $0
$15,650 $63,700 $1,565.00 plus 15% of the amount over 15,650
$63,700 $128,500 $8,772.50 plus 25% of the amount over 63,700
$128,500 $195,850 $24,972.50 plus 28% of the amount over 128,500
$195,850 $349,700 $43,830.50 plus 33% of the amount over 195,850
$349,700 no limit $94,601.00 plus 35% of the amount over 349,700

Remember, the tax brackets in the 90s (democratic rates) did not contain the 10% or 15% rates, it started at 20%, went to 28%, then 31%). Thus in a few months, we should see substantial tax rate increase on the Federal level once Hillary wins office...

Originally Posted by magellan

Here's a question, if lowering taxes is the answer, why has the lowering of taxes by the federal government and in Michigan over the past five years brought us lower wages, negative saving rates, a massive credit bubble, and a massive federal and state (s) budget deficits (I say "states" because the number of states having budget problems in on the rise).

Nothing short of another Great Depression will solve the national American negative savings crisis, IMHO. That is not just a Michigan issue. And as far as taxes helping the state, it could have been worse if the taxes had been higher. Also, I do believe myself that business taxes are what really matter, as both the state and citizens do better financially when business taxes are lower, which actually brings in more revenue as more businesses open, pay better, and employ more citizens who go out and buy more stuff which pumps more tax revenue into the state budget which more than compensates for the initial decrease in business tax rates.

[magellan]

Originally Posted by Siberia

If you are not in debt and to not itemize, the standard itemized deduction is about $10,000. That, along with personal exemptions for each family member, does drop the top rate for anyone with say two incomes that each make $50K, year, the drop is lets say $20,000 write-offs would be 20%. Thus decrease 25-31% by 20% to get 20-25% taxes at the top rate. Now if you are in debt enough, you can itemize (yee-pee, huge interest payments so I can write-off more taxes...)....but if you carry a low debt, you simply won't break that $10,500 itemization barrier.

And the 25% tax bracket kicks in at $63,700 for married couples in 2007:

2007 Federal Tax Rate Schedules

If taxable income is over-- But not over-- The tax is:
$0 $15,650 10% of the amount over $0
$15,650 $63,700 $1,565.00 plus 15% of the amount over 15,650
$63,700 $128,500 $8,772.50 plus 25% of the amount over 63,700
$128,500 $195,850 $24,972.50 plus 28% of the amount over 128,500
$195,850 $349,700 $43,830.50 plus 33% of the amount over 195,850
$349,700 no limit $94,601.00 plus 35% of the amount over 349,700

Remember, the tax brackets in the 90s (democratic rates) did not contain the 10% or 15% rates, it started at 20%, went to 28%, then 31%). Thus in a few months, we should see substantial tax rate increase on the Federal level once Hillary wins office...

Yes, but two incomes at $50K is the exception rather than the rule in households in Michigan (or the U.S.). Here is a table showing the per capita income and who itemizes in Michigan:

http://www.taxfoundation.org/files/i...e-20070724.pdf

Median household income in Michigan is somewhere around $46,000, which is the 15% tax bracket (minus standard deductions and credits and it probably drops it to 10%). I'm just saying that using the tax brackets in the analysis, without adjusting for the hundreds of tax exemptions and credits, is not a true picture.

I don't necessarily disagree with the lowering of business taxes, but isn't that what everyone is excited about with the new MBT? Plus, as I mentioned, there are a slew of business tax credits available for jobs producing expansions available through the various economic development offices. But no matter how much you cut business taxes, it won't DRAW a lot of business here when there is such a ****-poor attitude in Lansing and the rest of Michigan, and the constant negative press from the national news outlets. What business wants to be affiliated with a "loser" mentality? Compare that to the hype that is constantly being draped on states like North Carolina, South Carolina, Georgia, Texas and Tennessee. That to me is the biggest problem Michigan faces.

[Siberia]

Originally Posted by magellan

Yes, but two incomes at $50K is the exception rather than the rule in households in Michigan (or the U.S.). Here is a table showing the per capita income and who itemizes in Michigan:

http://www.taxfoundation.org/files/i...e-20070724.pdf

Median household income in Michigan is somewhere around $46,000, which is the 15% tax bracket (minus standard deductions and credits and it probably drops it to 10%). I'm just saying that using the tax brackets in the analysis, without adjusting for the hundreds of tax exemptions and credits, is not a true picture.

I would agree that $100K/year is upper/middle income, I should not have labeled it "middle income". Yet is sad that so many citizens want "the rich to pay their fair share", with the "rich" being anyone who makes over the average. They might as well say "soak the college educated" instead...

Even if we drop the effective rate from 25% to 12.5%, the total tax is about 50% once one factors in everything (not including future Fed and State tax increases, and solving the SS/Med crisis through further taxation).

12.5% Fed
10.8% State
15.3 SS/Med
1.5% local
7% church
3% Get to work expense
------
50%

The majority of taxpayers pay much more than they realize...50% is alot, IMHO...

[rseag]

No doubt some reforms are necessary - but aren't they always?

The current Repub leadership continues to speak about the ever-daunting reforms that have to be made, but they never seem to actually put anything on the table that can get passed - even their own caucus votes against many of the draconian cuts they offer up.

That leaves us with only one viable option - increase taxes. I'm for small government too. However, you have to pay for the government you have. It's childish and inane to believe we can continue to have government and not pay for it. All of the BS accounting tricks have been used up, there is only one choice.

And, since Michigan was the ONLY state that continued cutting taxes after 9-11 and the recession that followed, it stands to reason that our revenues are at a lower point than any time since 1995, and our government is smaller than it has been at any point since 1973.

We have been steadily cutting taxes in Michigan since 1994. There is no question that the biggest contributors to our current deficits are these cuts. Yes, some tax cuts will stimulate the economy - especially those geared toward consumers who will spend the money, rather than investors, who will hoard the money. However, not all tax cuts are beneficial. There comes a point of negative returns - and Michigan has long since passed that point. Otherwise - if all tax cuts stimulate the economy and generate growth, why the heck isn't Michigan - who has cut taxes more than any other state since 1997 - leading the nation in economic growth. (don't give me that crap about the 'ailing auto industry' - either tax cuts work, or they don't)

Siberia... screeds aside - Michigan is NOT a high-tax state, not by any objective measure. In fact, Michigan falls squarely in the middle of the country in Sales Tax, Business Tax, and overall taxation. Our extreme tobacco, liquor and gas taxes are more than offset by our low income and modest property taxes (see Indiana for high property taxes). Don't forget, Michigan is one of only a few states that no longer has an estate tax (think oligarchy) and taxes capital gains (unearned income) at a rate lower that the federal rate. Even the Repub leadership in the Senate admits to these well-documented facts.

Despite all that, Michigan remains a high-service state. If you want to be taxed like Alabama, you shouldn't expect to have services like New York.

[TaxBait]

Originally Posted by rseag

...modest property taxes ...

Hardly. As with any aggregate statistics there' more to the story. Owners of recently built or purchased homes are paying upwards of twice as much as long term property owners. That pulls the average down and masks the real cost to people having within the state or newcomers. I pay twice the property tax I paid in Colorado for the same value home. Even California rates are lower and they aren't so aggresive about over-valuation.

I moved back to Michigan so I could build a decent handcap accessible house and now I have to figure out how to scale down. Property taxes are taking 20% of my income, the cheapest catastrophic health insurance another 20%, and self-employment (FICA) tax another 15%. I don't even make enough to pay federal income tax and I've got less than half of my pay left to live on. Although a higher state income tax won't hit me as bad as the latest anti-development initiative in my township, I still think a general tax increase is the wrong thing to do. We don't need more hardship on the working class. Considering all the various taxes, Michigan is the most regressive state I've lived in.

[magellan]

Originally Posted by TaxBait

Hardly. As with any aggregate statistics there' more to the story. Owners of recently built or purchased homes are paying upwards of twice as much as long term property owners. That pulls the average down and masks the real cost to people having within the state or newcomers. I pay twice the property tax I paid in Colorado for the same value home. Even California rates are lower and they aren't so aggresive about over-valuation.

I moved back to Michigan so I could build a decent handcap accessible house and now I have to figure out how to scale down. Property taxes are taking 20% of my income, the cheapest catastrophic health insurance another 20%, and self-employment (FICA) tax another 15%. I don't even make enough to pay federal income tax and I've got less than half of my pay left to live on. Although a higher state income tax won't hit me as bad as the latest anti-development initiative in my township, I still think a general tax increase is the wrong thing to do. We don't need more hardship on the working class. Considering all the various taxes, Michigan is the most regressive state I've lived in.

Sorry about your situation, but if property taxes are taking 20% of your income, you either way overbought on your home, you live in a high-tax municipality, or you haven't filed for your homestead exemption.

Since taxes on a $200,000 home average about $3000/year, that would mean your income was only $15,000/year, which would mean a $200,000 home is well outside of your means. No?