Outline of the Michigan Tax System

April 2019

103 YEARS OF UNCOMPROMISING POLICY RESEARCH

Outline of the Michigan Tax System

2019 Edition

38777 Six Mile Road, Suite 208 | Livonia, MI 48152 | 734.542.8001 115 West Allegan, Suite 480 | Lansing, MI 48933 | 517.485.9444 P.O. Box 1612 | Holland, MI 49422 | 616-294-8359 |

BOARD OF DIRECTORS

Chair Aleksandra A. Miziolek

Vice Chair Michael P. McGee

Treasurer Laura Appel

Todd Anderson Blue Cross Blue Shield of Michigan

Laura Appel Michigan Health & Hospital Association

Sandy K. Baruah Detroit Regional Chamber

Beth A. Bialy Plante Moran, PLLC

Lawrence N. Bluth Penske Corporation

Chase Cantrell Building Community Value

Stephan W. Currie Michigan Association of Counties

Daniel Domenicucci Ernst & Young LLP

Terence M. Donnelly Dickinson Wright PLLC

Randall W. Eberts W. E. Upjohn Institute

Tyler Ernst Michigan Farm Bureau

Richard A. Favor, Jr. Deloitte

Ann D. Fillingham Dykema

Ron Fournier Truscott Rossman

June Summers Haas Honigman Miller Schwartz and Cohn LLP

Jason Headen Quicken Loans

Renze L. Hoeksema DTE

Marybeth S. Howe Wells Fargo Bank

Earle "Win" Irwin Irwin Seating Company

Wendy Lewis Jackson The Kresge Foundation

Harry Kemp Lear Corporation

Nick Khouri Former State Treasurer

Thomas G. Kyros Varnum

Michael P. McGee Miller, Canfield, Paddock and Stone PLC

Anne Mervenne Mervenne & Company

Aleksandra A. Miziolek Cooper Standard

Paul R. Obermeyer Comerica Bank

James M. Polehna Kelly Services

Kirk Profit Governmental Consultant Services, Inc.

Carolee K. Smith Consumers Energy

Christine Mason Soneral ITC Holdings Corp.

Kathleen Wilbur Michigan State University

BOARD OF TRUSTEES

Chair Eugene A. Gargaro, Jr.

Laura Appel Michigan Health & Hospital

Association

Donald Bachand Saginaw Valley State University

Susan E. Borrego University of Michigan-Flint

Beth Chappell RediMinds, Inc.

Brian M. Connolly Oakwood Healthcare, Inc., Retired

Matthew P. Cullen Rock Ventures LLC

Stephen R. D'Arcy Detroit Medical Center

Terence M. Donnelly Dickinson Wright PLLC

David O. Egner Ralph C. Wilson, Jr. Foundation

David L. Eisler Ferris State University

Scott Ellis Michigan Licensed Beverage

Association

Eugene A. Gargaro, Jr. Manoogian Foundation

Daniel P. Gilmartin Michigan Municipal League

Allan D. Gilmour Wayne State University, Emeritus

Richard C. Hampson Citizens Bank

Paul C. Hillegonds Michigan Health Endowment Fund

Marybeth S. Howe Wells Fargo Bank

Daniel J. Kelly Deloitte. Retired

Mary Kramer Crain Communications, Inc.

William J. Lawrence, III 42 North Partners LLC

Edward C. Levy, Jr. Edw. C. Levy Co.

Daniel T. Lis Attorney-At-Law

Daniel Little University of Michigan

Alphonse S. Lucarelli Ernst & Young LLP. Retired

Kate Levin Markel McGregor Fund

Michael P. McGee Miller, Canfield, Paddock

and Stone PLC

Larry Merrill MIchigan Townships Association

Anne Mervenne Mervenne & Co.

Aleksandra A. Miziolek Cooper Standard

Glenn D. Mroz Michigan Technological University

Tim Nicholson PVS Chemicals

Ora Hirsch Pescovitz Oakland University

Philip H. Power The Center for Michigan

James E. Proppe Plante Moran

Milton W. Rohwer TALENT 2025

Mark S. Schlissel University of Michigan

John M. Schreuder First National Bank of Michigan

Reginald Turner Clark Hill PLC

Amanda Van Dusen Miller, Canfield, Paddock

and Stone PLC

Theodore J. Vogel CMS Energy Corporation, Retired

Outline of the Michigan Tax System

TABLE OF CONTENTS

2019 Update.................................................................................................................................................................................................iv Introduction....................................................................................................................................................................................................v Significant Events in the History of the Michigan Tax System.................................................................................................................... viii

TAX DESCRIPTIONS

State Taxes (black header)

Local Taxes (teal header)

Page

Income Taxes............................................................................................................................................................................................... 1 Personal Income Tax......................................................................................................................................... 2 Corporate Income Tax....................................................................................................................................... 6 Uniform City Income Tax............................................................................................... 9

Business Privilege Taxes.............................................................................................................................................................................11 Unemployment Insurance Tax......................................................................................................................... 12 Quality Assurance Assessment Fees ............................................................................................................. 13 Insurance Provider Assessment Tax............................................................................................................... 15 Foreign Insurance Company Retaliatory Tax.................................................................................................. 16 Captive Insurance Company Tax.................................................................................................................... 16 Oil and Gas Severance Tax ............................................................................................................................ 17 Corporate Organization Tax............................................................................................................................ 17 Horse Race Wagering Tax ............................................................................................................................ 18 State Casino Gaming Tax ............................................................................................................................... 18 State 9-1-1 and Emergency 9-1-1 Charges ................................................................................................... 19 Minerals Severance Tax ................................................................................................................................. 19 Local Casino Gaming Tax........................................................................................... 20 County 9-1-1 Charge................................................................................................... 20

Sales-Related Taxes................................................................................................................................................................................... 21 Sales Tax ........................................................................................................................................................ 22 Use Tax / State Share Tax .............................................................................................................................. 27 Tobacco Products Tax..................................................................................................................................... 32 Marihuana Excise Tax..................................................................................................................................... 34 Liquor Markup................................................................................................................................................. 34 Liquor Taxes.................................................................................................................................................... 36 Beer Tax ......................................................................................................................................................... 37 Wine Tax.......................................................................................................................................................... 37 Mixed Spirits Tax............................................................................................................................................. 38 Airport Parking Tax.......................................................................................................................................... 39 Use Tax / Local Community Stabilization Share Tax................................................... 40 Accommodations (Hotel-Motel) Taxes......................................................................... 41 Convention and Tourism Marketing Fees.................................................................... 42 Uniform City Utility Users Tax...................................................................................... 43 Stadium and Convention Facility Tax.......................................................................... 43

Property Taxes............................................................................................................................................................................................ 44 State Education Tax........................................................................................................................................ 45 State Real Estate Transfer Tax........................................................................................................................ 46 Utility Property Tax.......................................................................................................................................... 47 State Essential Services Assessment Tax....................................................................................................... 49 General Property Tax.................................................................................................. 50 Ad Valorem Special Assessments............................................................................... 56 Mobile Home Trailer Coach Tax.................................................................................. 56

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Outline of the Michigan Tax System

Industrial Facilities Tax................................................................................................ 57 Obsolete Properties Tax.............................................................................................. 57 Neighborhood Enterprise Zone Facilities Tax.............................................................. 58 Hydroponics and Aquaculture Facilities Specific Tax.................................................. 59 Eligible Tax Reverted Property Specific Tax................................................................ 59 County Real Estate Transfer Tax................................................................................. 60 Commercial Rehabilitation Tax.................................................................................... 61 Commercial Facilities Tax ........................................................................................... 61 Commercial Forest Tax............................................................................................... 62 Qualified Forest Tax.................................................................................................... 63 Transitional Qualified Forest Property Tax ................................................................. 64 Low Grade Iron Ore Specific Tax ............................................................................... 65 Transportation Taxes.................................................................................................................................................................................. 66 Motor Vehicle Registration Fees..................................................................................................................... 67 Gasoline Tax.................................................................................................................................................... 70 Diesel Fuel Tax................................................................................................................................................ 71 Environmental Protection Fee......................................................................................................................... 71 Alternative Fuel Tax......................................................................................................................................... 72 Motor Carrier Fuel Tax..................................................................................................................................... 72 Motor Carrier Single State Registration Tax.................................................................................................... 74 Watercraft Registration Fee............................................................................................................................ 74 Aviation Gasoline Tax...................................................................................................................................... 75 Aircraft Weight Fee.......................................................................................................................................... 75 Snowmobile Registration Fee ........................................................................................................................ 76

Revenue History Charts

Chart 1 Chart 2 Chart 3 Chart 4 Chart 5 Chart 6 Chart 7 Chart 8 Chart 9 Chart 10 Chart 11 Chart 12 Chart 13 Chart 14 Chart 15 Chart 16

Michigan Personal Income Tax Revenue, 1968 ? 2017............................................................................................................. 5 Michigan Corporate Income Tax / Value Added Tax Revenues, 1954 - 2017............................................................................. 8 Michigan Sales Tax Revenue, 1934 - 2017.............................................................................................................................. 26 Michigan Use Tax Revenue, 1938 - 2017................................................................................................................................. 31 Michigan Tobacco Products Tax Revenue, 1948 ? 2017 ......................................................................................................... 33 Michigan Liquor Markup Tax Revenue, 1960 - 2017................................................................................................................ 35 Michigan Liquor Tax Revenues, 1958 - 2017........................................................................................................................... 36 Michigan Beer, Wine, and Mixed Spirits Tax Revenues, 1934 ? 2017..................................................................................... 38 Michigan State Education Tax Revenue, 1994 ? 2017............................................................................................................. 45 Michigan Utility Property Tax Revenue, 1915 - 2017................................................................................................................ 48 Total Michigan Local Property Tax Collections, 1914 ? 2018................................................................................................... 54 Michigan Statewide Average Property Tax Rate, 1927 ? 2018 ............................................................................................... 55 Michigan Property Tax Revenues by Unit of Government, 1966 ? 2018.................................................................................. 55 Michigan Motor Vehicle Registration Tax Revenue, 1920 ? 2017............................................................................................ 69 Michigan Motor Fuel Tax Revenues, 1925 ? 2017................................................................................................................... 73 Michigan Estate Tax Revenue, 1915 - 2016............................................................................................................................. 93

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Outline of the Michigan Tax System

APPENDICES

Appendix A 2018 Changes in Michigan Tax Laws..................................................................................................................................... 78

State Taxes (black header)

Local Taxes (teal header)

Tax Administration........................................................................................................................................................................ 78

Income Taxes............................................................................................................................................................................... 78

Personal Income Tax....................................................................................................................................... 78

Corporate Income Tax..................................................................................................................................... 78

Uniform City Income Tax................................................................................................................................. 78

Business Privilege Taxes............................................................................................................................................................. 79

Health Insurance Claims Assessment Fees.................................................................................................... 79

Insurance Provider Assessment Tax............................................................................................................... 79

Sales-Related Taxes.................................................................................................................................................................... 79

Sales Tax......................................................................................................................................................... 79

Use Tax/State Share....................................................................................................................................... 79

Marihuana Excise Tax..................................................................................................................................... 80

Use Tax/Local Community Stabilization Share................................................................................................ 80

Property Taxes............................................................................................................................................................................. 80

State Real Estate Transfer Tax........................................................................................................................ 80

State Essential Services Assessment Tax....................................................................................................... 80

General Property Tax...................................................................................................................................... 80

Ad Valorem Special Assessments................................................................................................................... 81

Obsolete Properties Tax.................................................................................................................................. 81

Commercial Rehabilitation Tax........................................................................................................................ 81

Transportation Taxes.................................................................................................................................................................... 81

Motor Vehicle Registration Fees..................................................................................................................... 81

Gas Tax........................................................................................................................................................... 81

Appendix B Glossary of Terms.................................................................................................................................................................. 82

Appendix C Collections from Major Michigan Taxes, 2014-2017.............................................................................................................. 84

Appendix D Michigan Business Tax.......................................................................................................................................................... 85

Appendix E Estate Tax.............................................................................................................................................................................. 91

Appendix F Enterprise Zone Facilities Tax................................................................................................................................................ 92

The Citizens Research Council of Michigan wishes to acknowledge the generous assistance rendered by Michigan Department of Treasury staff in preparation of this document. However, any errors or omissions are solely the responsibility of the Citizens Research Council. (Data used to prepare these charts were drawn from reports of the Michigan Department of Treasury, the Michigan Unemployment Insurance Agency, and the State Tax Commission from various years.)

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