PDF Individual Income Tax 2016

[Pages:11353]MICHIGAN'S INDIVIDUAL INCOME TAX

2016

Michigan Department of Treasury Office of Revenue and Tax Analysis

Tax Analysis Division December 2018

MICHIGAN'S INDIVIDUAL INCOME TAX

2016

Tax Analysis Division December 2018

This report was prepared by Denise T. Heidt under the direction of Howard Heideman, Director of Tax Analysis Division, Office of Revenue and Tax Analysis (ORTA). Scott Darragh, and Eric Krupka of ORTA provided assistance.

TABLE OF CONTENTS

Page

I. EXECUTIVE SUMMARY ............................................................................ 1

Returns and Revenue ................................................................................................... 1 Interstate Comparisons................................................................................................. 1 Property Tax Credit...................................................................................................... 1 Home Heating Credit ................................................................................................... 2 Michigan Earned Income Tax Credit (EITC) .............................................................. 2 Historic Preservation Credit......................................................................................... 2 Credit for Income Paid to Another State...................................................................... 2 Use Tax Payments........................................................................................................ 2 Tax Law Changes in 2017 ........................................................................................... 2

II. INTRODUCTION......................................................................................... 4

III. HISTORY OF THE MICHIGAN INDIVIDUAL INCOME TAX............. 5

USE TAX PAYMENTS .............................................................................................. 8

IV. INCIDENCE OF THE INDIVIDUAL INCOME TAX............................ 10

V. INCOME TAX CREDITS .......................................................................... 21

REFUNDABLE CREDITS ....................................................................................... 21 Homestead Property Tax Credit................................................................................. 21 Home Heating Credit ................................................................................................. 24 Michigan Earned Income Tax Credit......................................................................... 25

NON-REFUNDABLE CREDITS ............................................................................. 25 Historic Preservation Credit....................................................................................... 25 Credit for Income Paid to Another State.................................................................... 26

VI. DESIGNATED CONTRIBUTIONS......................................................... 27

State Campaign Fund................................................................................................. 27 Children's Trust Fund ................................................................................................ 27 Military Family Relief Fund ...................................................................................... 27 Children of Veterans Tuition Grant Program ............................................................ 28 Other Funds................................................................................................................ 28

VII. INTERSTATE COMPARISONS ............................................................ 30

iii

VIII. GEOGRAPHIC PATTERN OF TAX AND CREDITS ......................... 33

IX. FEDERAL INCOME TAX INTERACTION ........................................... 34

Summary of Federal Tax Law Changes Passed Before 2018.................................... 34 2016............................................................................................................................ 35 2017............................................................................................................................ 35 2018............................................................................................................................ 35

X. MICHIGAN PUBLIC ACTS ? INCOME TAX......................................... 37

2016............................................................................................................................ 37 2017............................................................................................................................ 37

XI. EXHIBITS 25 THROUGH 40................................................................... 39

XII. APPENDIX A ........................................................................................... 60

FEDERAL TAX LAW CHANGES (from 2010 through 2015) ............................... 61 2010............................................................................................................................ 61 2011............................................................................................................................ 61 2012............................................................................................................................ 61 2013............................................................................................................................ 63 2014............................................................................................................................ 64 2015............................................................................................................................ 64

MICHIGAN PERSONAL INCOME TAX LEGISLATIVE HISTORY (1967 ? 2015)...................................................................................... 66

1967............................................................................................................................ 66 1968............................................................................................................................ 66 1969............................................................................................................................ 66 1970............................................................................................................................ 67 1971............................................................................................................................ 67 1972............................................................................................................................ 67 1973............................................................................................................................ 68 1974............................................................................................................................ 68 1975............................................................................................................................ 69 1976............................................................................................................................ 69 1977............................................................................................................................ 70 1978............................................................................................................................ 70 1979............................................................................................................................ 70 1980............................................................................................................................ 71 1981............................................................................................................................ 71 1982............................................................................................................................ 72 1983............................................................................................................................ 72

iv

1984............................................................................................................................ 73 1985............................................................................................................................ 73 1986............................................................................................................................ 74 1987............................................................................................................................ 74 1988............................................................................................................................ 75 1989............................................................................................................................ 76 1990............................................................................................................................ 76 1991............................................................................................................................ 76 1992............................................................................................................................ 77 1993............................................................................................................................ 77 1994............................................................................................................................ 78 1995............................................................................................................................ 78 1996............................................................................................................................ 79 1997............................................................................................................................ 80 1998............................................................................................................................ 80 1999............................................................................................................................ 81 2000............................................................................................................................ 81 2001............................................................................................................................ 82 2002............................................................................................................................ 82 2003............................................................................................................................ 83 2004............................................................................................................................ 84 2005............................................................................................................................ 84 2006............................................................................................................................ 85 2007............................................................................................................................ 85 2008............................................................................................................................ 86 2009............................................................................................................................ 87 2010............................................................................................................................ 87 2011............................................................................................................................ 88 2012............................................................................................................................ 90 2013............................................................................................................................ 91 2014............................................................................................................................ 91 2015............................................................................................................................ 92

MICHIGAN INCOME TAX REQUIREMENTS (1967 ? 2017).............................. 94

v

LIST OF EXHIBITS

Exhibit

Page

1 Michigan Individual Income Tax Exemption Allowances ............................................ 6

2 Individual Income Tax Credits ...................................................................................... 7

3 Earmarking of Income Tax Gross Collections............................................................... 8

4 Use Tax Liability Reported on Income Tax Returns ..................................................... 9

5 Fifteen-Year History of Income Tax Rates and Revenue.............................................. 10

6 Annual Collections from Michigan Individual Income Tax.......................................... 11

7 Individual Income Tax - Effective Tax Rate ................................................................ 12

8 Effective Income Tax Rates, 2016................................................................................. 13

9 2016 Income Tax Return Distribution by Residency .................................................... 15

10 2016 Income Tax Returns Distribution by Filing Status ............................................... 15

11 2016 Total AGI, Additions and Subtractions by AGI Group ....................................... 16

12 2016 Total Additions Detail by AGI Group .................................................................. 17

13 2016 Total Subtractions Detail by AGI Group .............................................................. 18

14 Change in Michigan Income from 2015 to 2016 ........................................................... 19

15 2016 Individual Income Tax Credits ............................................................................. 22

16 2016 Homestead Property Tax Credits ......................................................................... 23

17 2016 Home Heating Credits........................................................................................... 24

18 2016 Michigan Earned Income Tax Credits ................................................................. 25

19 Returns Designating Contributions 2004 - 2016 ........................................................... 28

20 Returns Designating Additional Contributions 2009 - 2016 ......................................... 29

21 Discontinued Returns Designating Additional Contributions 2008 ? 2014 ................. 29

22 State Individual Income Taxes for FY2016 ? Per Person and Percentage of Personal Income ..................................................................................... 31

vi

Exhibit

Page

23 State Income Taxes Per Person - Great Lakes Region - FY 2016 ................................. 32

24 State Income Taxes - Percentage of Personal Income Great Lakes Region - FY 2016 ...................................................................................... 32

25 Effective Rate of the Michigan Individual Income Tax, 2016 ...................................... 40

26 Breakdown of Upper Income Filers - Individual Income Tax, 2016............................. 41

27 Tax Base Deductions as a Percentage of AGI - Individual Income Tax, 2016 ............. 42

28 Distribution of Personal Exemptions Claimed on 2016 Individual Income Tax Returns....................................................................................................... 44

29 Distribution of Special Exemptions and Dependent Exemptions Claimed on 2016 Individual Income Tax Returns......................................................... 46

30 Four-Year Comparison of Individual Income Tax Credits............................................ 47

31 Distribution of Property Tax Credits Claimed - Individual Income Tax, 2016 ....................................................................................................................... 48

32 Distribution of Senior Citizen Property Tax Credits by Household Income Individual Income Tax, 2016......................................................................................... 49

33 Distribution of General Property Tax Credits by Household Income Individual Income Tax, 2016......................................................................................... 50

34 Distribution of Farmland Credits by Household Income Individual Income Tax, 2016......................................................................................... 51

35 Distribution of Home Heating Credits by Household Income Individual Income Tax, 2016......................................................................................... 52

36 2016 Income Tax Collections by County ...................................................................... 53

37 2016 Income Tax Data by County ................................................................................. 55

38 Average Adjusted Gross Income by County, 2016 ....................................................... 57 39 Average Property Tax Credits by County, 2016............................................................ 58 40 Average Annual Individual Income Tax Rates.............................................................. 59

vii

I. EXECUTIVE SUMMARY

Returns and Revenue

For tax year 2016, Michigan's personal income tax generated $8.1 billion in state revenues after all credits and refunds were paid. Net revenue increased $124.9 million (1.6 percent) from 2015 levels, reflecting the increase in Adjusted Gross Income (AGI) from 2015 to 2016. About 4.7 million returns were filed for the 2016 tax year, or 75,200 more filers (1.6 percent) than the previous year.

Although the personal income tax was levied at a nominal flat rate of 4.25 percent in 2016, the average effective tax rate varied from negative 49.50 percent for filers with an AGI under $2,000 to positive 3.37 percent for taxpayers with an AGI between $180,001 and $190,000. Including the impact of all refundable and nonrefundable credits, the overall effective tax rate was 2.39 percent. The negative effective rates for lower income groups arise because some taxpayers receive net payments from the state, due principally to the refundable credits for property taxes and home heating expenses, and the Michigan Earned Income Tax Credit (EITC). Most (91.3 percent) of the $8.1 billion in net revenue was paid by income groups with income over $50,000.

Interstate Comparisons

For fiscal year 2016, Michigan's income tax revenue was fourteenth lowest in the nation both on a per capita basis, and as a percentage of personal income, among the 41 states with a general income tax. Compared to the average for those 41 states, Michigan's income tax revenue was 31.3 percent below average on a per capita basis, and 23.3 percent below average as a percent of personal income.

Property Tax Credit

About 1.0 million Michigan homeowners, renters, and farmers received $579.7 million in property tax credits, including farmland preservation credits, for 2016. The average property tax credit was $563. Excluding farmland preservation credits, the average property tax credit for tax year 2016 was $521. The total amount of property tax credits, including farmland preservation credits, increased by $22.6 million (4.0 percent) with 11,200 more taxpayers benefiting compared to tax year 2015.

Senior citizens received about $196.1 million in homestead property tax credits, an increase of $6.1 million from tax year 2015. For about 316,800 senior citizens receiving homestead property tax credits, the average credit was $619.

1

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download