Issue Paper - September 1998 - An Update on Tax Changes in Michigan 1991 Through August 1998

APPENDIX C

ESTIMATED NET IMPACT OF MAJOR STATE AND LOCAL GOVERNMENT TAX CHANGES IN MICHIGAN:
FY 1991-92 TO FY 1999-2000
(millions of dollars)

Effective Date FY 1991-92 FY 1992-93 FY
1993-94 FY
1994-95 FY
1995-96 FY
1996-97 FY
1997-98 FY
1998-99 FY 1999-2000 Total FY 1992 to
FY 2000

TAX DECREASES:

Property Tax (net decrease):

One-Year Freeze in Assessed Values 1992 Taxes ($114) ($234) ($194) ($158) ($164) ($171) ($179) ($187) ($195) ($1,596)

Net Decrease In School & Other PT Due To SFR 1) 1994 Taxes (2,076) (4,350) (4,707) (5,164) (5,632) (6,017) (6,406) (34,352)

New State Education Property Tax 1) 1994 Taxes 447 1,065 1,111 1,157 1,224 1,293 1,360 7,656

Reduction in Property Tax Credit 1) 1994 Taxes 589 621 664 724 768 810 4,175

Expand Agriculture Homestead Definition 1) 1994 Taxes (10) (21) (21) (22) (22) (23) (23) (142)

Increase Renters' Property Tax Credit 1) 1994 Taxes (40) (41) (43) (44) (46) (48) (262)

Exempt Leased Water Softeners 1997 Taxes (3) (6) (6) (6) (22)

Renaissance Zone Exemption 1997 Taxes (3) (8) (9) (10) (30)

Subtotal Property Tax Net Decrease ($114) ($234) ($1,833) ($2,915) ($3,202) ($3,585) ($3,944) ($4,228) ($4,519) ($24,574)

Income Tax:

Homeless/Foodbank Credit Created 1992 Taxes ($3) ($5) ($6) ($7) ($8) ($8) ($9) ($10) ($56)

Tax Rate Reduced to 4.4% 1) May 1994 (102) (279) (298) (328) (344) (358) (372) (2,080)

Medical Care Savings Credit Created 2) 1994 Taxes 0 0 0 0 0 0 1

Pension Exemption Increased Oct 1994 (64) (68) (71) (75) (79) (84) (441)

Interest/Dividend Exemption for Seniors Created Oct 1994 (6) (6) (7) (7) (7) (8) (41)

Interest/Dividend Exemption for Seniors Increased Jan 1997 (18) (49) (61) (63) (191)

College Tuition Credit Created 1995 Taxes 0 (8) (12) (14) (14) (15) (64)

Increased College Tuition Credit 1998 Taxes (19) (20) (38)

Personal Exemption Increased * Jan 1995 (69) (92) (115) (145) (152) (175) (747)

Personal Exemption Increased (1998 & after, $200 increase) Jan 1998 (45) (60) (60) (165)

Headlee 2% Income Tax Refund 1995 Taxes (113) (113)

Renaissance Zone Exemption 1996 Taxes (1) (1) (2) (2) (5)

Child Exemption Jan 1998 (29) (30) (59)

Subtotal Income Tax ($3) ($107) ($537) ($479) ($558) ($688) ($790) ($838) ($3,999)

*Personal Exemption (Changes effective Jan. 1, Indexed to inflation 1998+) $2,100 $2,100 $2,100 $2,400 $2,400 $2,500 $2,800 $2,800 $2,900

Single Business Tax:

Gross Receipts Filing Threshold Increased to $60,000 Jan 1991 ($2) ($2) ($2) ($3) ($3) ($3) ($4) ($4) ($4) ($27)

Gross Receipts Filing Threshold Increased to $100,000 Jan 1992 (3) (8) (8) (9) (9) (10) (10) (11) (11) (79)

Profits Tax Rate Decreased from 4% to 3% Jan 1992 (8) (9) (10) (10) (11) (12) (12) (13) (86)

Small Business Credit Gross Receipts Cap Increased to $10 mil. Jan 1992 (7) (7) (8) (9) (9) (9) (10) (10) (69)

Homeless/Foodbank Credit Created 1992 Taxes (1) (1) (2) (2) (2) (2) (2) (2) (14)

Double-Weighted Sales Apportionment Factor Adopted Jan 1993 (25) (34) (35) (37) (40) (42) (43) (45) (302)

Tax Rate Reduced from 2.35% to 2.3% Oct 1994 (47) (49) (53) (55) (58) (60) (323)

Gross Receipts Filing Threshold Increased to $250,000 Oct 1994 (30) (31) (34) (35) (37) (38) (206)

Profits Tax Decreased from 3% to 2% Oct 1994 (10) (10) (11) (12) (12) (13) (69)

SBT Base Reduced (excluded FICA, Unemp Ins, Worker Comp) Jan 1995 (79) (112) (121) (126) (131) (136) (706)

90% Sales Factor (Phased In) & In-State Apportioned CAD Jan 1997 8 11 (46) (68) (95)

Brownfield Tax Credit 1997 Taxes (3) (10) (11) (12) (35)

Renaissance Zone Exemption Jan 1997 (3) (5) (7) (8) (23)

Apprenticeship Tax Credit 1997 Taxes (5) (5) (5) (15)

Tree Sales & Farm Co-op Exemptions Nov 1997 (3) (2) (3) (8)

Small Business Credit Increase & Officer Pay Phase Out Jan 1998 (16) (22) (23) (60)

Subtotal SBT ($5) ($51) ($61) ($233) ($274) ($293) ($334) ($413) ($450) ($2,115)

Unemployment Insurance Tax:

Reduced Minimum Tax Rate from 1.0% to 0.5% Jan 1994 ($8) ($10) ($10) ($10) ($10) ($10) ($10) ($68)

Reduced Minimum Tax Rate from 0.5% to 0.4% Jan 1996 (5) (7) (8) (9) (9) (37)

Reduced Unemployment Tax Rates by 10% Jan 1996 (104) (142) (148) (154) (160) (707)

Subtotal Unemployment Insurance Tax ($8) ($10) ($118) ($159) ($166) ($172) ($179) ($811)

Inheritance/Estate Tax:

Increase Exemption for Relatives Jan 1993 ($1) ($1) ($1) ($1) ($1) ($1) ($1) ($1) ($8)

Exempt Family Business/Farm Jan 1993 (3) (3) (3) (3) (3) (3) (4) (4) (26)

Inheritance Tax Repeal Oct 1993 (73) (65) (65) (68) (71) (74) (78) (494)

Estate Tax - Adopted Federal Exemption Increase July 1998 (4) (4) (8)

Subtotal Inheritance Tax ($4) ($77) ($69) ($69) ($72) ($75) ($83) ($87) ($536)

Insurance Tax:

Reduce Base of Insurance Tax 1996 Taxes ($8) ($2) ($2) ($2) ($14)

Intangibles Tax:

Increase Exemption 1994 taxes ($14) ($15) ($16) ($18) ($19) ($20) ($102)

Phase-Out Tax ** 1994 taxes (31) (37) (76) (138) (195) (203) (680)

Subtotal Intangibles Tax ($45) ($52) ($92) ($156) ($214) ($223) ($782)

**Intangibles Tax Phase-Out (% Reductions) 0% 0% 0% 25% 25% 50% 75% 100% 100%

Sales Tax:

Mobile Vendor Food Exemption April 1994 ($3) ($6) ($6) ($6) ($7) ($7) ($7) ($42)

Commercial Aircraft Exemption June 1994 (2) (2) (2) (2) (2) (2) (12)

Commercial Advertising Exemption Nov 1995 (3) (4) (4) (4) (5) (20)

Vended Juice Exemption Jan 1997 (2) (3) (3) (3) (10)

Heavy Trucks and Parts Exemption Jan 1997 (15) (21) (22) (23) (82)

Church Construction Exemption July 1998 (4) (4) (8)

Other Various (1) (2) (4) (4) (4) (4) (4) (23)

Subtotal Sales Tax ($4) ($10) ($15) ($33) ($41) ($46) ($48) ($197)

Use Tax:

Exempt Heavy Trucks & Parts Jan 1997 ($3) ($5) ($6) ($6) ($20)

Exempt Certain Telecommunications Equipment 1997 Taxes (5) (1) (1) (1) (8)

Church Construction Exemption July 1998 (1) (1) (2)

Subtotal Use Tax ($8) ($6) ($8) ($8) ($30)

SUBTOTAL TAX DECREASES ($119) ($292) ($2,090) ($3,819) ($4,209) ($4,809) ($5,412) ($5,955) ($6,352) (33,057)

TAX INCREASES:

Sales and Use Taxes:

Sales Tax Rate Increase 1) May 1994 $658 $1,563 $1,657 $1,733 $1,809 $1,894 $1,981 $11,296

Use Tax Rate Increase 1) May 1994 124 296 326 342 359 378 395 2,221

Include Cigarette Tax in Sales Tax Base 1) May 1994 4 17 17 17 17 17 17 107

Interstate Telephone Tax (Use Tax) 1) May 1994 23 54 57 59 62 65 68 387

Subtotal Sales and Use Taxes $809 $1,930 $2,057 $2,151 $2,247 $2,355 $2,462 $14,011

Transportation Taxes:

Motor Carrier Diesel Fuel Tax Increase April 1997 (3) 16 16 17 46

Gasoline Tax Rate Increase Aug 1997 $31 $189 $193 $197 $609

Truck Registration Fee Increases Oct 1997 35 36 37 108

Other Fee Increases Oct 1997 8 8 8 24

Subtotal Transportation Taxes $28 $247 $253 $258 $786

Other Tax Increases:

Liquor Price Markup May 1993 14 32 32 32 33 33 33 33 242

Tobacco Tax Increase 1) May 1994 $158 $388 $356 $328 $318 $333 $323 $2,204

Real Estate Transfer Tax 1) Jan 1995 91 161 193 194 184 184 1,007

SUBTOTAL TAX INCREASES $0 $14 $999 $2,441 $2,606 $2,733 $3,039 $3,158 $3,259 $18,250

TOTAL NET TAX CHANGES ($119) ($278) ($1,091) ($1,378) ($1,603) ($2,076) ($2,373) ($2,797) ($3,093) ($14,807)

Local Tax Changes (114) (234) (2,256) (4,505) (4,868) (5,339) (5,821) (6,216) (6,615) (35,968)

State Tax Changes: (5) (44) 1,165 3,127 3,266 3,263 3,449 3,420 3,522 21,161

School Finance Reform Tax Changes Only $0 $0 ($774) ($627) ($762) ($1,064) ($1,336) ($1,512) ($1,711) ($7,784)

Local Tax Changes 0 0 (2,062) (4,347) (4,704) (5,162) (5,630) (6,016) (6,405) (34,326)

State Tax Changes 0 0 1,288 3,720 3,943 4,098 4,295 4,505 4,694 26,542

Other Tax Changes Only ($119) ($278) ($317) ($751) ($841) ($1,012) ($1,037) ($1,286) ($1,382) ($7,023)

Local Tax Changes (114) (234) (194) (158) (164) (176) (191) (200) (210) (1,642)

State Tax Changes (5) (44) (123) (593) (677) (836) (846) (1,085) (1,172) (5,381)

TOTAL NET TAX CHANGE AFTER FEDERAL DEDUCTIBILITY

Federal Deductibility Impact:

Increase in Federal Tax Due To Reduction In Deductible State & Local Taxes $22 $57 $282 $497 $562 $662 $734 $824 $883 $4,524

Net Tax Change After Federal Deductibility Tax Adjustment ($97) ($221) ($808) ($881) ($1,040) ($1,414) ($1,639) ($1,973) ($2,210) ($10,283)

1) Part of Proposal A School Finance Reform (SFR) Package. 2) Tax cut less than $0.5 million each year.

Source: Senate Fiscal Agency

ESTIMATED NET IMPACT OF MAJOR STATE AND LOCAL GOVERNMENT TAX CHANGES IN MICHIGAN: FY 1991-92 TO FY 1999-2000 (millions of dollars)
			Effective Date	FY 1991-92	FY 1992-93	FY 1993-94	FY 1994-95	FY 1995-96	FY 1996-97	FY 1997-98	FY 1998-99	FY 1999-2000	Total FY 1992 to FY 2000
TAX DECREASES:
	Property Tax (net decrease):
		One-Year Freeze in Assessed Values	1992 Taxes	($114)	($234)	($194)	($158)	($164)	($171)	($179)	($187)	($195)	($1,596)
		Net Decrease In School & Other PT Due To SFR 1)	1994 Taxes			(2,076)	(4,350)	(4,707)	(5,164)	(5,632)	(6,017)	(6,406)	(34,352)
		New State Education Property Tax 1)	1994 Taxes			447	1,065	1,111	1,157	1,224	1,293	1,360	7,656
		Reduction in Property Tax Credit 1)	1994 Taxes				589	621	664	724	768	810	4,175
		Expand Agriculture Homestead Definition 1)	1994 Taxes			(10)	(21)	(21)	(22)	(22)	(23)	(23)	(142)
		Increase Renters' Property Tax Credit 1)	1994 Taxes				(40)	(41)	(43)	(44)	(46)	(48)	(262)
		Exempt Leased Water Softeners	1997 Taxes						(3)	(6)	(6)	(6)	(22)
		Renaissance Zone Exemption	1997 Taxes						(3)	(8)	(9)	(10)	(30)
		Subtotal Property Tax Net Decrease		($114)	($234)	($1,833)	($2,915)	($3,202)	($3,585)	($3,944)	($4,228)	($4,519)	($24,574)

	Income Tax:
		Homeless/Foodbank Credit Created	1992 Taxes		($3)	($5)	($6)	($7)	($8)	($8)	($9)	($10)	($56)
		Tax Rate Reduced to 4.4% 1)	May 1994			(102)	(279)	(298)	(328)	(344)	(358)	(372)	(2,080)
		Medical Care Savings Credit Created 2)	1994 Taxes				0	0	0	0	0	0	1
		Pension Exemption Increased	Oct 1994				(64)	(68)	(71)	(75)	(79)	(84)	(441)
		Interest/Dividend Exemption for Seniors Created	Oct 1994				(6)	(6)	(7)	(7)	(7)	(8)	(41)
		Interest/Dividend Exemption for Seniors Increased	Jan 1997						(18)	(49)	(61)	(63)	(191)
		College Tuition Credit Created	1995 Taxes				0	(8)	(12)	(14)	(14)	(15)	(64)
		Increased College Tuition Credit	1998 Taxes								(19)	(20)	(38)
		Personal Exemption Increased *	Jan 1995				(69)	(92)	(115)	(145)	(152)	(175)	(747)
		Personal Exemption Increased (1998 & after, $200 increase)	Jan 1998							(45)	(60)	(60)	(165)
		Headlee 2% Income Tax Refund	1995 Taxes				(113)						(113)
		Renaissance Zone Exemption	1996 Taxes						(1)	(1)	(2)	(2)	(5)
		Child Exemption	Jan 1998								(29)	(30)	(59)
		Subtotal Income Tax			($3)	($107)	($537)	($479)	($558)	($688)	($790)	($838)	($3,999)
		*Personal Exemption (Changes effective Jan. 1, Indexed to inflation 1998+)		$2,100	$2,100	$2,100	$2,400	$2,400	$2,500	$2,800	$2,800	$2,900

	Single Business Tax:
		Gross Receipts Filing Threshold Increased to $60,000	Jan 1991	($2)	($2)	($2)	($3)	($3)	($3)	($4)	($4)	($4)	($27)
		Gross Receipts Filing Threshold Increased to $100,000	Jan 1992	(3)	(8)	(8)	(9)	(9)	(10)	(10)	(11)	(11)	(79)
		Profits Tax Rate Decreased from 4% to 3%	Jan 1992		(8)	(9)	(10)	(10)	(11)	(12)	(12)	(13)	(86)
		Small Business Credit Gross Receipts Cap Increased to $10 mil.	Jan 1992		(7)	(7)	(8)	(9)	(9)	(9)	(10)	(10)	(69)
		Homeless/Foodbank Credit Created	1992 Taxes		(1)	(1)	(2)	(2)	(2)	(2)	(2)	(2)	(14)
		Double-Weighted Sales Apportionment Factor Adopted	Jan 1993		(25)	(34)	(35)	(37)	(40)	(42)	(43)	(45)	(302)
		Tax Rate Reduced from 2.35% to 2.3%	Oct 1994				(47)	(49)	(53)	(55)	(58)	(60)	(323)
		Gross Receipts Filing Threshold Increased to $250,000	Oct 1994				(30)	(31)	(34)	(35)	(37)	(38)	(206)
		Profits Tax Decreased from 3% to 2%	Oct 1994				(10)	(10)	(11)	(12)	(12)	(13)	(69)
		SBT Base Reduced (excluded FICA, Unemp Ins, Worker Comp)	Jan 1995				(79)	(112)	(121)	(126)	(131)	(136)	(706)
		90% Sales Factor (Phased In) & In-State Apportioned CAD	Jan 1997						8	11	(46)	(68)	(95)
		Brownfield Tax Credit	1997 Taxes						(3)	(10)	(11)	(12)	(35)
		Renaissance Zone Exemption	Jan 1997						(3)	(5)	(7)	(8)	(23)
		Apprenticeship Tax Credit	1997 Taxes							(5)	(5)	(5)	(15)
		Tree Sales & Farm Co-op Exemptions	Nov 1997							(3)	(2)	(3)	(8)
		Small Business Credit Increase & Officer Pay Phase Out	Jan 1998							(16)	(22)	(23)	(60)
		Subtotal SBT		($5)	($51)	($61)	($233)	($274)	($293)	($334)	($413)	($450)	($2,115)

	Unemployment Insurance Tax:
		Reduced Minimum Tax Rate from 1.0% to 0.5%	Jan 1994			($8)	($10)	($10)	($10)	($10)	($10)	($10)	($68)
		Reduced Minimum Tax Rate from 0.5% to 0.4%	Jan 1996					(5)	(7)	(8)	(9)	(9)	(37)
		Reduced Unemployment Tax Rates by 10%	Jan 1996					(104)	(142)	(148)	(154)	(160)	(707)
		Subtotal Unemployment Insurance Tax				($8)	($10)	($118)	($159)	($166)	($172)	($179)	($811)

	Inheritance/Estate Tax:
		Increase Exemption for Relatives	Jan 1993		($1)	($1)	($1)	($1)	($1)	($1)	($1)	($1)	($8)
		Exempt Family Business/Farm	Jan 1993		(3)	(3)	(3)	(3)	(3)	(3)	(4)	(4)	(26)
		Inheritance Tax Repeal	Oct 1993			(73)	(65)	(65)	(68)	(71)	(74)	(78)	(494)
		Estate Tax - Adopted Federal Exemption Increase	July 1998								(4)	(4)	(8)
		Subtotal Inheritance Tax			($4)	($77)	($69)	($69)	($72)	($75)	($83)	($87)	($536)

	Insurance Tax:
		Reduce Base of Insurance Tax	1996 Taxes						($8)	($2)	($2)	($2)	($14)

	Intangibles Tax:
		Increase Exemption	1994 taxes				($14)	($15)	($16)	($18)	($19)	($20)	($102)
		Phase-Out Tax **	1994 taxes				(31)	(37)	(76)	(138)	(195)	(203)	(680)
		Subtotal Intangibles Tax					($45)	($52)	($92)	($156)	($214)	($223)	($782)
		**Intangibles Tax Phase-Out (% Reductions)		0%	0%	0%	25%	25%	50%	75%	100%	100%

	Sales Tax:
		Mobile Vendor Food Exemption	April 1994			($3)	($6)	($6)	($6)	($7)	($7)	($7)	($42)
		Commercial Aircraft Exemption	June 1994				(2)	(2)	(2)	(2)	(2)	(2)	(12)
		Commercial Advertising Exemption	Nov 1995					(3)	(4)	(4)	(4)	(5)	(20)
		Vended Juice Exemption	Jan 1997						(2)	(3)	(3)	(3)	(10)
		Heavy Trucks and Parts Exemption	Jan 1997						(15)	(21)	(22)	(23)	(82)
		Church Construction Exemption	July 1998								(4)	(4)	(8)
		Other	Various			(1)	(2)	(4)	(4)	(4)	(4)	(4)	(23)
		Subtotal Sales Tax				($4)	($10)	($15)	($33)	($41)	($46)	($48)	($197)

	Use Tax:
		Exempt Heavy Trucks & Parts	Jan 1997						($3)	($5)	($6)	($6)	($20)
		Exempt Certain Telecommunications Equipment	1997 Taxes						(5)	(1)	(1)	(1)	(8)
		Church Construction Exemption	July 1998								(1)	(1)	(2)
		Subtotal Use Tax							($8)	($6)	($8)	($8)	($30)
SUBTOTAL TAX DECREASES				($119)	($292)	($2,090)	($3,819)	($4,209)	($4,809)	($5,412)	($5,955)	($6,352)	(33,057)

TAX INCREASES:
	Sales and Use Taxes:
		Sales Tax Rate Increase 1)	May 1994			$658	$1,563	$1,657	$1,733	$1,809	$1,894	$1,981	$11,296
		Use Tax Rate Increase 1)	May 1994			124	296	326	342	359	378	395	2,221
		Include Cigarette Tax in Sales Tax Base 1)	May 1994			4	17	17	17	17	17	17	107
		Interstate Telephone Tax (Use Tax) 1)	May 1994			23	54	57	59	62	65	68	387
		Subtotal Sales and Use Taxes				$809	$1,930	$2,057	$2,151	$2,247	$2,355	$2,462	$14,011

	Transportation Taxes:
		Motor Carrier Diesel Fuel Tax Increase	April 1997						(3)	16	16	17	46
		Gasoline Tax Rate Increase	Aug 1997						$31	$189	$193	$197	$609
		Truck Registration Fee Increases	Oct 1997							35	36	37	108
		Other Fee Increases	Oct 1997							8	8	8	24
		Subtotal Transportation Taxes							$28	$247	$253	$258	$786

	Other Tax Increases:
		Liquor Price Markup	May 1993		14	32	32	32	33	33	33	33	242
		Tobacco Tax Increase 1)	May 1994			$158	$388	$356	$328	$318	$333	$323	$2,204
		Real Estate Transfer Tax 1)	Jan 1995				91	161	193	194	184	184	1,007
SUBTOTAL TAX INCREASES				$0	$14	$999	$2,441	$2,606	$2,733	$3,039	$3,158	$3,259	$18,250

TOTAL NET TAX CHANGES				($119)	($278)	($1,091)	($1,378)	($1,603)	($2,076)	($2,373)	($2,797)	($3,093)	($14,807)
	Local Tax Changes			(114)	(234)	(2,256)	(4,505)	(4,868)	(5,339)	(5,821)	(6,216)	(6,615)	(35,968)
	State Tax Changes:			(5)	(44)	1,165	3,127	3,266	3,263	3,449	3,420	3,522	21,161

School Finance Reform Tax Changes Only				$0	$0	($774)	($627)	($762)	($1,064)	($1,336)	($1,512)	($1,711)	($7,784)
	Local Tax Changes			0	0	(2,062)	(4,347)	(4,704)	(5,162)	(5,630)	(6,016)	(6,405)	(34,326)
	State Tax Changes			0	0	1,288	3,720	3,943	4,098	4,295	4,505	4,694	26,542

Other Tax Changes Only				($119)	($278)	($317)	($751)	($841)	($1,012)	($1,037)	($1,286)	($1,382)	($7,023)
	Local Tax Changes			(114)	(234)	(194)	(158)	(164)	(176)	(191)	(200)	(210)	(1,642)
	State Tax Changes			(5)	(44)	(123)	(593)	(677)	(836)	(846)	(1,085)	(1,172)	(5,381)

TOTAL NET TAX CHANGE AFTER FEDERAL DEDUCTIBILITY
Federal Deductibility Impact:
	Increase in Federal Tax Due To Reduction In Deductible State & Local Taxes			$22	$57	$282	$497	$562	$662	$734	$824	$883	$4,524
	Net Tax Change After Federal Deductibility Tax Adjustment			($97)	($221)	($808)	($881)	($1,040)	($1,414)	($1,639)	($1,973)	($2,210)	($10,283)
1) Part of Proposal A School Finance Reform (SFR) Package. 2) Tax cut less than $0.5 million each year.