Michigan Tax Debate Heats Up As GOP Candidates Push Income Tax Elimination Amid Concerns Over West Michigan School Funding

Michigan gubernatorial candidates are making income tax elimination their defining issue, but experts warn the $13 billion annual revenue source funds critical state services that West Michigan communities depend on.

GOP hopefuls Perry Johnson, Mike Cox, Aric Nesbitt and Ralph Rebandt have all called for axing the state income tax, with Johnson's campaign running a reported $10 million ad blitz behind the proposal.

Savings overstated

Johnson's campaign points to a social media video in which he explains: "The median income for a family of four is $111,690. A savings of 4.25% in income tax would be $4,747 every year in your pocket."

But taxes are not so simple. After exemptions, subtractions and credits, single and joint filers who earn between $110,000 and $120,000 paid an effective Michigan income tax rate of 3.01% in 2021, the most recent year for which state data is available.

Filers with gross incomes of $111,691 paid an average state tax of $3,406 that year – about 30% less than Johnson claimed.

The real numbers

According to state budget expert Bob Schneider with the non-partisan Citizens Research Council of Michigan, the median income for a four-person household is currently about $123,010.

Filers who earned that much in 2021 paid an effective tax rate of 3.11%, or about $3,826.

Those families would save significant money if the income tax were eliminated – just not as much as Johnson has suggested.

What gets cut

Michigan's 4.25% income tax generated about $13.5 billion in revenue for the state last fiscal year. Eliminating that funding would mean a sea change for the way Michigan funds its government.

The education tax, which charges homeowners $6 for every $1,000 of taxable value on their homes per year, helps fund schools across the state. Both Nesbitt and Johnson have also called for eliminating the State Education Tax.

The ballot alternative

While the campaign's messaging focused on billionaires, the reality was that the largest group targeted by the proposal would be small business owners whose companies are structured as pass-through entities.

Because these businesses report their income on the owner's individual tax return, many entrepreneurs would have been subject to a tax increase regardless of how much money they bring home at the end of the year.

School funding debate

Meanwhile, a group aiming to raise income taxes on the wealthy to pay for schools has suspended its campaign.

The Invest in MI Kids group aimed to get a 5% tax on individuals making over $500,000 a year and couples making over $1 million a year on the 2026 ballot.

Rachelle Crow-Hercher, president of the Invest in MI Kids steering committee, said in a statement that ending the campaign was not an easy decision.

"However, we owe it to our volunteers to be realistic about what is achievable to qualify for the ballot this year, and we unfortunately do not see a path forward to getting the signatures we need to make the ballot in 2026."

The group had received nearly 250,000 signatures but would have needed 446,198 signatures within 180 days to make the 2026 general election ballot.

The tax would have applied to fewer than 60,000 of the state's 4.9 million filers in 2021 and would have raised about $1.7 billion.

That is less than a 10% increase of the state's $20.6 billion K-12 budget.

What comes next

Invest in MI Kids plans to campaign again in 2027 and aim for the 2028 ballot.

"Our work is far from over. We know that our schools and our communities are going to facing serious cuts in the next couple of years," Crow-Hercher said.

"Our work is far from over. We know that our schools and our communities are going to be facing serious cuts in the next couple of years," she said.

The broader debate

The Michigan income tax is one of the few progressive taxes in the state, meaning higher earners pay more. Eliminating it would fundamentally change how Michigan funds its government.

Both candidates and critics acknowledge the trade-offs. The income tax funds education, prisons, welfare and roads – services that West Michigan families and businesses depend on.

The conversation continues as Michigan heads into an increasingly crowded 2026 gubernatorial race with significant policy differences at stake.