michigan tax revenue€¦ · fund/general purpose (gf/gp) tax revenue is estimated to be $20,266.5...
TRANSCRIPT
Background Briefing
MICHIGAN TAX REVENUE
Jim Stansell, Senior Economist
February 2015
Fiscal information in this briefing is based on January 2015 Consensus Revenue Estimates.
MAJOR STATE TAXES
Major State Taxes
Individual Income Tax
Sales and Use taxes
Business taxes
– Corporate Income Tax (CIT)
– Michigan Business Tax (MBT)
– Insurance company taxes
State property taxes
– State Education Tax (SET)
– Real Estate Transfer Tax (RET)
House Fiscal Agency: February 2015 3
House Fiscal Agency: February 2015 4
Major State Taxes
Total combined FY 2015-16 School Aid Fund (SAF) and General
Fund/General Purpose (GF/GP) tax revenue is estimated to be
$20,266.5 million
The largest sources of revenue are (in millions):
These account for almost 94% of all SAF and GF/GP tax revenue
Individual Income Tax $8,395.5
Sales Tax $7,608.8
Use Tax $1,448.2
State Education Tax $1,845.3
Real Estate Transfer Tax $247.8
Business taxes
Corporate Income Tax (CIT)
Michigan Business Tax (MBT)
Insurance company taxes
$655.9
Individual Income Tax
Base starts with federal adjusted gross income
TY 2014 Rate = 4.25%
$4,000 personal exemption
Retirement income taxable for most filers born after 1946
Refundable property tax credit for homeowners and renters
Estimated Distribution in FY 2015-16
– Approximately 29.1% to SAF
– Approximately 70.8% to GF/GP
House Fiscal Agency: February 2015 5
Sales and Use Taxes
Sales Tax
– 6% levied on retail sale of tangible personal property for use or
consumption
– Major Exemptions: food, prescription drugs
– Estimated Distribution in FY 2015-16
72.8% to SAF
15.7% to GF/GP
10.2% to local units (Constitutional revenue sharing)
1.3% to the Comprehensive Transportation Fund
Use Tax
– 6% levied on some services, telephone/utility services, motor
vehicle leases and private sales, hotels/motels
– Complements sales tax
– Estimated Distribution in FY 2015-16
33.3% to SAF
66.7% to GF/GP
House Fiscal Agency: February 2015 6
Business Taxes
Corporate Income Tax (CIT)
– Replaced MBT effective January 1, 2012; MBT will be repealed
after all existing certificated credits have been claimed
– Business income taxed at 6%
– CIT only applies to C corporations
– Credits awarded (certificated credits) under the MBT will be
retained for the duration of the agreements provided a taxpayer
continues to file under the MBT
– No CIT credits, except for the small business credit
Disposition of CIT:
– 100% to GF/GP
House Fiscal Agency: February 2015 7
Business Taxes
Michigan Business Tax (MBT)
– Although the CIT has replaced the MBT as the primary tax on
business activity, taxpayers that have outstanding certificated
credits may still file under the MBT until the credits have expired
– Existing credits are anticipated to extend through at least 2030,
and reduces GF/GP revenue by as much as $600 million
annually
– Disposition of MBT: 100% to GF/GP
Insurance Company Taxes
– Levied on gross premiums of out-of-state insurance companies
– Effective tax rate 1.25%
– Disposition of Insurance taxes: 100% to GF/GP
House Fiscal Agency: February 2015 8
State Property Taxes
State Education Tax (SET):
6-mill levy on taxable value of real and some personal property
Real Estate Transfer Tax (RET):
0.75% of fair market value of real property
Disposition of SET and RET: 100% to SAF
House Fiscal Agency: February 2015 9
0.0%
1.0%
2.0%
3.0%
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15(Est)
FY16(Est)
FY17(Est)
Individual Income Tax Sales and Use Taxes Business Taxes State Property Taxes
Tax Revenue by Source
As a Percent of Michigan Personal Income
House Fiscal Agency: February 2015 10
RECENTLY ENACTED
TAX CHANGES
Personal Property Tax Changes
Public Acts 397-404 and 406-408, of 2012.
Exempts all commercial and industrial personal property owned
by a single taxpayer in a local unit provided the combined market
value is $80,000 or less, effective January 1, 2014.
Eliminates personal property taxes on “eligible manufacturing
personal property” (a new definition within the legislation)
acquired before 2006 or after 2012, effective January 1, 2016.
Eligible manufacturing personal property (EMPP) acquired
between 2006 and 2012 will be exempted one year at a time so
that by 2023, all eligible manufacturing personal property will be
exempt.
House Fiscal Agency: February 2015 12
Personal Property Tax Changes
In August 2014, a statewide election approved a use tax levy by
the Metropolitan Areas Metropolitan Authority (MAMA) created by
the legislation.
Beginning in FY 2015-16, the MAMA will levy a portion of the 6%
statewide use tax to reimburse local units of government for the
revenue loss based on formulas contained within the legislation.
Beginning January 1, 2016, the state will levy a special
assessment against taxpayers benefitting from the PPT
elimination to help offset some of the revenue loss.
The net reduction in GF/GP revenue is estimated to be about
$125.0 million in FY 2015-15 and $350.0 million in FY 2016-17.
When fully implemented, the annual GF/GP revenue reduction
will be about $500.0 million.
House Fiscal Agency: February 2015 13
MAJOR STATE FUNDS
Major State Funds
Earmarking: dedication or restriction of an amount or percentage of
revenue from a source to a specific fund or purpose
School Aid Fund (SAF)
– Used primarily for K-12 education
– Major sources include sales and use taxes, individual income
tax, 6-mill state education tax, tobacco taxes, the real estate
transfer tax, and state lottery revenue
General Fund/General Purpose (GF/GP)
– Appropriated for any/all budget area(s)
– Major sources include individual income tax, sales and use
taxes, and net business taxes
House Fiscal Agency: February 2015 15
Sales Tax$5,535.846.6%
Income Tax Earmarking$2,446.620.6%
State Education Tax$1,845.315.5%
Lottery Transfer$760.06.4%
Use Tax$482.74.1%
Tobacco Taxes$345.92.9%
Real Estate Transfer Tax$247.82.1%
Casino Wagering Tax$111.00.9%
Other SAF Taxes$66.90.6%
Liquor Excise Tax$47.10.4%
School Aid Fund Tax and Lottery Revenue
Estimated FY 2015-16 Total = $11,889.1 million
House Fiscal Agency: February 2015 16
Individual Income Tax$5,948.165.1%
Sales Tax$1,202.813.2%
Business Taxes$655.97.2%
Use Tax$965.510.6%
Other GF/GP Taxes$85.50.9%
Tobacco Taxes$180.12.0%
Liquor, Beer, & Wine Taxes$99.51.1%
Estimated FY 2015-16 Total = $9,137.4 million
GF/GP Tax Revenue
House Fiscal Agency: February 2015 17
Sales Tax$7,608.834.1%
Use Tax$1,448.2
6.5%
Individual Income Tax$8,395.537.7%
State Education Tax$1,845.3
8.3%
Business Taxes$655.92.9%
Tobacco Taxes$917.54.1%
Lottery$760.03.4%
Other GF/GP & SAF Taxes$657.83.0%
Estimated FY 2015-16 Total = $22,289.8 million
Combined GF/GP and School Aid Fund
Tax and Lottery Revenue
House Fiscal Agency: February 2015 18
Trends in GF/GP and SAF Revenue
Change in SAF and GF/GP revenue from previous fiscal year:
– FY 2007-08 saw increases due primarily to tax changes
– Great recession reduced FY 2008-09 and FY 2009-10 revenue
– Economic recovery increased FY 2010-11 revenue
– Projected increases in FY 2014-15 and FY 2015-16 due to
economic gains largely offset by business tax cuts
As a % of Michigan personal income (relative to Michigan’s economy):
– SAF revenue estimated to decline from 3.3% in FY 2000-01 to
2.8% in
FY 2016-17
– GF/GP revenue is estimated to decline from 3.3% in FY 2000-01
to 2.2% in FY 2016-17
SAF and GF/GP Revenue
– Between FY 2000-01 and FY 2015-16, average annual SAF
growth is expected to be 1.4%
– Between FY 2000-01 and FY 2015-16, average annual GF/GP
growth is expected to be -0.1%.
House Fiscal Agency: February 2015 19
$104.7
$13
9.9 $
58
0.8
-$99
.4
$29
4.6
$17
2.1
$71
.2 $35
9.9
-$59
0.9 -$
10
6.6
$43
2.7
-$36
9.4
$39
0.9
$25
0.8
$36
8.6
$37
4.6
$3
77
.2
($778.2
)
($553.3
)
($452.6
)
$72.8
$289.1
($26.6
)
$32.4
$1,0
72.8
($2,0
49.7
)
($608.7
)
$1,1
34.5
$433.4
$316.0
($544.0
)
$482.9
$211.8
$287.4
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15(Est)
FY16(Est)
FY17(Est)
Mill
ion
s
SAF GF/GP
Revenue Change From Previous Fiscal Year
House Fiscal Agency: February 2015 20
3.3% 3.3% 3.3%3.4%
3.3% 3.3% 3.3%3.2% 3.3% 3.2%
3.1% 3.1%
2.9%2.9% 2.9% 2.8% 2.8% 2.8%
3.3%
3.0%
2.8%
2.5%
2.8% 2.8%2.7%
2.7%
2.9%
2.4%
2.2%
2.4% 2.4% 2.5%
2.2% 2.3% 2.2% 2.2%
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15(Est)
FY16(Est)
FY17(Est)
SAF GF/GP
SAF and GF/GP Revenue
As a Percent of Michigan Personal Income
House Fiscal Agency: February 2015 21
$9,994 $10,134
$10,715 $10,615$10,910 $11,082 $11,153
$11,513
$10,922 $10,816$11,248
$10,879$11,270
$11,521$11,889
$12,264$12,641
$9,902
$9,349$8,897 $8,969
$9,258 $9,232 $9,264
$10,337
$8,287
$7,679
$8,813$9,247
$9,563
$9,019$9,501 $9,713
$10,001
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15(Est)
FY16(Est)
FY17(Est)
SAF GF/GP
SAF and GF/GP Revenue
House Fiscal Agency: February 2015 22
Revenue: House Fiscal Agency Role
Prepare House Fiscal Agency forecast as part of consensus
estimates
– National and state economic forecast
– GF/GP and SAF forecast
Review and estimate fiscal impact of bills discussed in Tax
Policy, Commerce, and other standing committees
Prepare documents for House members
– Revenue Source and Distribution: June
– Revenue Review: Quarterly
House Fiscal Agency: February 2015 23
For more information about Michigan
Tax Revenue, contact:
Jim Stansell, Senior Economist
Adam Desrosiers, Economist
(517) 373-8080