What’s happening: Today, Governor Whitmer released a proposal to attempt generate $3 billion in new long term road funding revenues. Most significant in the plan is the attempt to raise $1.6 billion in new taxes on Michigan businesses. One of the taxes rumored to be part of the plan is an increase to the state’s Corporate Income Tax (CIT) from the current 6% rate to 8%. Specific details were not made clear, but other sources of revenue listed in the in the plan include:
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A new wholesale tax on marijuana, that would account for $470 million in new revenue;
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Increased fees or taxes on digital advertising, delivery services and heavy trucks; and
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$500 million from “cutting red tape and finding savings in government to pay for roads.”
Why it matters: Michigan’s chronic underfunding of road maintenance and rebuilding has led to Michigan having some of the worst transportation infrastructure in the country.
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While bonding and federal funding have helped in recent years to mitigate a bad problem from getting even worse, those funds are quickly running out and the state faces a significant funding shortfall, or fiscal cliff, for road funding later in 2025.
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Analysis shows that Michigan is chronically underfunding road construction, with an currently has an estimated annual revenue gap of $3.9 billion.
What we’re saying: The Chamber’s 2025-26 Legislative Priorities calls for supporting an impactful, long-term, fiscally sustainable infrastructure investment plan that starts with rethinking how existing tax dollars are allocated and spent.
However, we are cautioning that an increase in the CIT is not a solution we can support. An increase to the CIT would put Michigan’s economic competitiveness and jobs at risk, creating a stifling business climate and would not be an appropriate or sustainable source of revenue.
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87% of businesses that pay the CIT have fewer than 100 employees and are already facing higher costs and economic headwinds from supply chain disruptions, labor shortages and inflation.
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Michigan’s CIT is already higher than half the country, including Midwest competitors like Ohio and Indiana. In fact, 16 states cut their CIT rates since 2018. Moving in the opposite direction will have a chilling effect on future business investment.
What comes next: Budget negotiations are expected to heat up over the coming months, with the Governor presenting her budget to the Joint Appropriations Committee last week. The new taxes proposed today were not included in Governor’s $83.5 billion budget proposal, as reported here. Speaker Matt Hall has already proposed a $3.1 billion road funding plan that relies solely on re-prioritizing existing state revenues.
Go deeper: Read the fast facts leave-behind we’re sharing with policymakers on the dangers of increasing and relying on the CIT. For feedback or Qs, contact our Business Advocacy team.
