Thursday, November 19, 2009

Taxes in Michigan: The Poor Pay More

Great reporting gods Gongwer pointed out this new study from the non-partisan Institute on Taxation & Economic Policy yesterday: The poor and middle class in Michigan pay a greater percentage in taxes than the wealthy do. Surprise! (Not.)

Most of Michigan's income and local taxes come from the state's poorest residents, resulting in a regressive tax that "no one" would intentionally design, according to a report released Wednesday by the Institute on Taxation & Economic Policy.

While non-elderly residents who make less than $15,000 per year typically pay about 9 percent of their income toward taxes and those who make between $32,000 and $54,000 pay nearly 10 percent, the very rich pay about a third less, said the study, titled: Who Pays? A Distributional Analysis of the Tax Systems in All 50 States.

The rich, defined as those with average annual incomes of $1.1 million, typically pay about 6.4 percent toward taxes, the study said.

"No one would ever design an income tax with lower tax rates for the best-off taxpayers," said Matthew Gardner, executive director of the institute and the study's lead author. "But that is exactly what Michigan's tax system overall does: it allows the very wealthiest individuals to contribute less of their income, on average, than middle and lower-income families must pay. In other words, Michigan has an unfair, regressive tax system."

Check out the breakdown for Michigan here. We do get points for "the state earned income tax credit, a homestead property tax credit and personal tax exemptions indexed to inflation", but as you know, lawmakers are eyeing those when it comes to solving our budget issues. Republicans are insisting that the poor and middle class be made to pay, while they lobby for more tax cuts for the rich and "business". Just something to keep in mind when we do get around to fixing our broken tax system.

Looks like it's time for some people to start paying their fair share. And spare us the whining about how "everyone will leave!" when we go to do this. 30 states have already raised taxes in this budget year, 35 are already facing major shortfalls in their current budget, 48 states are looking at huge deficits for 2010, and everyone is looking at falling off the cliff in 2011. There is nowhere to run to anymore.

Hope everyone enjoyed their Bush tax cuts. The party is now over, those of you who indulged a bit more at the bar need to settle your tab with the house.