Michigan’s business tax climate is mediocre, survey says

Correction: An earlier version of this story misstated Michigan’s place in the rankings.

If the words 2023 State Business Tax Climate Index shut your brain off, worry not. What you need to know is that Michigan ranks 12th out of 50 states.

The index, published annually by the Tax Foundation, is one means of measuring where states rank across different aspects of tax policy. As The Wall Street Journal said about last year’s edition of the index, it “deserves broader coverage as evidence of which states are serious about competing for labor and capital.”

So just how serious is Michigan about competition for labor and capital?

Michigan scored #25 out of 50, with #1 being best. Michigan’s property tax ranking accounted for 15% of the total tax score from the Tax Foundation, at a respectable #12. But what do these scores mean?

“The Index’s property tax component evaluates state and local taxes on real and personal property, net worth, and asset transfers,” the Tax Foundation explained. “States are in a better position to attract business investment when they maintain competitive real property tax rates and avoid harmful taxes on tangible personal property, intangible property, wealth, and asset transfers.”

James Hohman, director of fiscal policy at the Mackinac Center, believes that Michigan’s score this year was likely affected by the personal property taxes levied by the state.

“Though Michigan did a lot to limit [personal property taxes], it still belongs in the category of states that levy the tax,” Hohman told CapCon.

Thus the lower score.

If Michigan wants to make itself more attractive to entrepreneurs and businesses, it needs to become more competitive in the areas where it is falling behind other states, such as in the personal property aspect of property tax policy.

Caroline Vanchura is a Michigan Capitol Confidential intern.