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Should Michigan have a graduated income tax?

Feb 17, 2015

Jim Townsend knows something about business.  He has an MBA from the University of Michigan, has been a brand manager for Ford Motor Company, and ran his own strategic marketing firm.

He also knows something about frustration.

Townsend is now in his third and final term in the state House of Representatives. But as a Democrat, he has spent all his time in the minority, which means that most of what he believes hasn't had a chance.

And what he is most interested in is fairness.

He doesn’t think it's fair that under the Michigan Constitution, Dick DeVos, a high school teacher, and a single mother with a high school education all pay the same state income tax rate, currently 4.25 percent.

What that means in practice is, thanks to more deductions for the rich, the single mom actually pays a higher percentage of her income in total taxes.

In an essay this weekend, Townsend asked

“Why is it that an impoverished family living in Flint making $10,000 a year, and a working class family in Howell making $40,000 both contribute 9.2 percent of their hard-earned money? Meanwhile, a billionaire like [Ambassador Bridge owner] Matty Moroun contributes less than five percent towards an education system, work force, and infrastructure that helped him accumulate personal wealth of $1.5 billion?"

Part of the answer is that Michigan’s Constitution forbids a graduated income tax, where the rich pay a higher rate than the poor. Most of the delegates who wrote it were Republicans and felt a graduated tax would be unfair.

But what this means in practice, Townsend said, is that besides steadily growing inequality, the state doesn’t have enough money to do what should be done. 

So Townsend intends to introduce two pieces of legislation. One would put a state constitutional amendment on the ballot to establish a graduated income tax. The other will be a simple statute, to set tax rates once a graduated income tax becomes law.

Now, both the state House and Senate are overwhelmingly controlled by Republicans.

Townsend knows very well his proposals not only won't pass, they probably won't even come up for a vote. But that's not stopping him.

Townsend knows very well his proposals not only won’t pass, they probably won’t even come up for a vote. But that’s not stopping him. He intends to lead a petition drive to put them on the ballot. Besides, he is introducing them in part because he wants to make a record.

He wants to commit his party to taking a stand, something like political parties did in the old days when they put their positions in a platform and took them seriously.

He hasn’t finished working out his proposed rate structure. But he told me more than ninety percent of us would get a tax cut, and the state would end up with maybe half a billion a year in new revenue. He doesn’t want rates set in the Constitution; he recognizes that the lawmakers need the discretion to change them.

Townsend has a tough battle ahead, and knows it. But he believes, as he said in last Sunday’s Detroit Free Press, that a graduated income tax is

“a responsible and fair way to equalize the tax burden and capture the revenue our state needs to create shared prosperity.”

For me, it’s hard to fault the logic or the fairness in that.

Jack Lessenberry is Michigan Radio's political analyst. You can read his essays online at michiganradio.org. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.

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