Plaintiffs in a lawsuit over a Michigan income tax cut triggered this year by high revenue say they plan to appeal a court’s decision to dismiss the case.
The plaintiffs, which include some business groups and Republican state lawmakers, argue a 2015 state law that created the income tax cut mechanism meant for any reductions to carry forward permanently.
The state, however, is relying on an opinion from Attorney General Dana Nessel that found any decreases triggered under the law were temporary.
On Thursday, the Michigan Court of Claims found the lawsuit was premature ahead of the expected rebound in the tax rate from the lowered rate of 4.05% to the original rate of 4.25%.
“(A)lthough defendant (and the Attorney General) have opined that the tax rate will revert back to 4.25% for the 2024 tax year, a determination whether to reduce that rate under the exception outlined in MCL 206.51(1)(c) may occur as late as the January 2024 revenue estimating conference,” Judge Elizabeth Gleicher wrote in her opinion.
Mackinac Center vice president for legal affairs Patrick Wright disagreed with the ruling.
Wright said the case should be decided now, not later.
"There’s 4.9 million people that will be filing taxes or having money withheld, there’s people that do quarterly income taxes, so all of this is going to lead to a lot of mass confusion as to how this is done,” Wright said.
Beyond the issue of timing, the court ruled the plaintiffs don’t have the standing to bring the lawsuit.
The opinion reasoned that neither lawmaker involved had a “specialized interest” in the case.
“(A) general reduction in a lawmaker’s ability to do his or her job does not confer standing,” Gleicher wrote in reference to a previous state Supreme Court finding.
The court found the other groups, despite being involved in the state’s budget writing process, had no official right to claim they had been harmed by the tax rate’s impact on the budget.
The court also agreed with the state’s interpretation of the law that a tax cut should be temporary.
Wright, however, said the court made several errors in its analysis.
“It’s unambiguous that the law was written that the tax cut was permanent, we think that the judge was actually looking at policy arguments, which according to the Michigan Supreme Court, are impermissible. We think that the claim is ready to be heard at this time,” Wright said.
He argued that, if lawmakers had intended for the rate to go back up, they would have been specific about that while crafting the law.
When asked about the timing for an appeal, Wright noted the courts are closed through the Christmas holiday. He said he plans to pick up the issue the day after.
