Even Without Tax Hikes State Will Collect $1.2 Billion More Next Year

Correction: The budget is projected to increase by $1.2 billion next year or by $2.63 billion if Gov. Gretchen Whitmer's proposed tax hikes are approved. Original calculations excluded local and private sources for FY 2019 but not FY 2020.

Even before Gov. Gretchen Whitmer proposed tax hikes as part of an annual budget that will collect and spend an additional $2.63 billion next year, budget officials had been projecting that the state would bring in an additional $1.2 billion with no tax hikes.

Whitmer's budget proposes $36.11 billion in spending next year covered by state taxes and fees, a $2.63 billion gain over the initial 2018-19 budget, a 9.2 percent increase partly paid for by increases in those taxes. But even with no tax hikes, current projections show the state will take in $1.6 billion more next year, a 4.9 percent increase.

The extra revenue with no tax hikes is due to a state economy that continues to grow. For example, revenue from the state sales and use taxes are projected to rise from the $8.9 billion collected in the 2016-17 fiscal year to $10.1 billion in the 2019-20 fiscal year, which begins Oct. 1. Economic growth-driven increases in the amounts collected by these and other state taxes and fees are responsible for the projected $1.2 billion state tax revenue increase.

The total Michigan budget, including spending covered by federal and local dollars plus money collected by the state, has increased for seven consecutive years. Even without Whitmer’s proposed tax increases, current projections show the state on track to make that eight years in a row. The overall budget was $47.6 billion in 2011-12, and Whitmer’s proposed first budget tops out at $59.2 billion.

Gov. Whitmer’s office did not reply to an email seeking comment.

“The Governor’s budget is bloated and contains policy changes that have been irrefutably proven to not work and are counter to the notion of pro-growth and spending restraint,” said Senate Majority Leader Mike Shirkey, R-Clarklake, in an email. “No one argues that we need to invest more in roads. And the legislature will do so. But we are not going to support massive tax increases, in any form, that result in making Michigan unattractive to capital investment and job creation.”