Proposed Corporate Income Tax Increase Will Hurt Michigan Businesses

Today, Gov. Gretchen Whitmer announced a plan that is expected increase taxes on businesses by raising the corporate income tax that C-corps are required to pay by up to two points or 33%, bringing the corporate income tax from 6% to about 8%.This increase penalizes the entire economy and creates a new challenge for doing business in Michigan. While the Detroit Regional Chamber thanks Whitmer and Speaker Hall for seeking a long-term solution for road funding, that conversation needs to focus on user fees instead of giving more reasons to do business elsewhere.

While it may seem like the corporate income tax only affects the largest businesses, it actually impacts businesses of all sizes. In fact, 87% of C-corps have fewer than 100 employees, and C-corps in Michigan employ half of the state’s private sector workforce, meaning half of Michigan’s population will be subject to budget cuts, decreased wages, and reduced spending power.

What’s at Stake for Michigan Businesses  

Amid a host of changes that will likely harm Michigan’s business climate and attractiveness, this update could further jeopardize the state’s competitiveness.

Next week, there will be an increase in the minimum wage and a new requirement for sick time for all employees. Additionally, an increase in unemployment benefits was enacted at the beginning of the year and new tariffs on imported materials used primarily in the automotive industry were just announced – all actions that will negatively impact Michigan’s economy.

Sixteen states have cut their corporate income tax in the past seven years, but Michigan wants to join the ranks of California, Illinois, and Minnesota as a top 10 state for the highest corporate income tax, instead of making the state more attractive to new investments. States like Arizona, Colorado, Florida, North Carolina, Texas, and Nevada, that are adding jobs and residents, have corporate tax rates equal to or lower than Michigan’s.

Make no mistake, infrastructure improvement is a critical priority for the state, and one the Chamber and MichAuto continues to champion. However, if there are serious intentions to find sustainable solutions for road funding, the conversation needs to center on existing revenue sources for roads and spending cuts that can compensate for the budget shortfall.  

The Chamber’s Public Policy and Business Advocacy team and MichAuto have already begun meeting with the Governor’s office and legislators to urge them to reconsider raising taxes on small business and will continue to advocate for businesses as negotiations progress. Additionally, research is being completed to fully understand the costs of this proposed increase in conjunction with other revenue proposals on the table.  

The Chamber is calling on its members to promptly reach out to legislators on both sides of the aisle to ensure they understand the detrimental impact this will cause, and urge them to change course. For additional guidance or questions, contact the Chamber’s Public Policy and Business Advocacy team.