Two lawmakers who voted for the 2015 law that created this year’s tax cut joined the Mackinac Center Thursday in a lawsuit against Michigan Treasurer Rachael Eubanks. 

The suit seeks to preserve the reduction in the state income tax rate. The authors of that law say they intended the tax cut, which was automatically triggered by a revenue surplus in 2022, to be permanent. Attorney General Dana Nessel, on the other hand, argues that the tax cut is event-driven, not permanent.

The 2015 law specified that the “current” tax rate would be reduced if the previous year’s budget surplus exceeded inflation. State fiscal authorities determined at the beginning of this year that the budget surplus met the conditions to trigger a tax cut. Accordingly, the Senate Fiscal Agency calculated a rate reduction from 4.25% to 4.05%.

“At issue is whether Michigan’s approximately 5 million individual income tax filers will have permanent tax-cut relief or whether any rate cut will generally revert to 4.25%,” the lawsuit reads. “As to state income-tax collection, the annual difference between a 4.05% income tax rate and a 4.25% income tax rate is around $714 million.”

The 28-page lawsuit was filed in the Michigan Court of Claims.

Read the lawsuit for yourself

The treasurer’s office has operated on Nessel’s opinion. The state told taxpayers that the income tax rate for 2024 will be 4.25%, not the 4.05% it was in 2023.

Two Michigan lawmakers, Sen. Ed McBroom, R-Waucedah Township, and Rep. Dale Zorn, R-Onsted, joined in the lawsuit, along with the Associated Builders and Contractors of Michigan, and the National Federation of Independent Businesses. Six individual taxpayers also joined the suit: Rodney Davies, Kimberley Davies, Owen Pyle, William Lubaway, Barbara Carter and Ross VanderKlok.

Patrick Wright, vice president for legal affairs at the Mackinac Center, explained the lawsuit in a two-minute video on Twitter.

The lawsuit seeks resolution of the question by Dec. 15, 2023.

The timing request is made “so that Michigan’s 5 million individual income taxpayers will know their rights and will not overwhelm the Department of Treasury, this Court, and/or the Tax Tribunal with individual challenges to the income tax rate,” the lawsuit reads.

Both McBroom and Zorn were lawmakers in 2015. Both say the 2015 tax cut was permanent. They were joined in that interpretation by the House Fiscal Agency, which wrote at the time that the lower tax rate, once triggered, would “continue indefinitely on an annual basis.”

President Joe Biden announced another student loan cancellation plan Wednesday. The newly announced Save Plan acknowledges that student loan payments will resume in the fall but makes another attempt to shift costs from students and former students to taxpayers.

Rather than pause the loans again or attempt to forgive them, the Save Plan tweaks the system of income-based repayment. Rather than paying 10% of their discretionary income, student loan debtors would pay 5%. As long as they pay 5%, interest on the loan won’t grow.

Biden explained the system in a two-minute video on Twitter. In the video, Biden takes an oblique swipe at the Mackinac Center.

“We've already approved over $116 billion in debt cancellation for 3.4 million Americans,” Biden said, “no matter how many lawsuits, challenges and roadblocks Republican elected officials or special interests try to put our way.”

The Mackinac Center is among the “special interests” Biden is referring to.

Past Biden efforts to shift private student debt onto taxpayers have resulted in new laws and litigation. The debt ceiling bill that Biden signed in June will bring an end to the student loan pause as of Aug. 29. Litigation in Biden v. Nebraska resulted in a U.S. Supreme Court ruling that the Biden scheme was unconstitutional, because the president was usurping the role of Congress.

The Mackinac Center, in partnership with the New Civil Liberties Alliance and the Cato Institute, sued the U.S. Department of Education Aug. 4 to ensure the student loan pause can’t be resumed or replaced by a similar plan. The lawsuit alleges that Biden is governing via press release rather than working through constitutional channels:

The Alliance argues the Department of Education’s actions violate the Constitution’s Appropriations Clause, which grants Congress near-exclusive authority to cancel debt owed to the Treasury. Even if Congress has delegated some authority to the Department of Education, it would still have needed to adopt this plan through the required rulemaking process under the Administrative Procedure Act. Instead, the Department simply issued a press release that did not identify any law providing the authority to enact the Department’s plan.

That lawsuit was dismissed a week later for lack of standing. The Alliance has filed an appeal.