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Michigan Study Refutes "Poor People Pay No Taxes" Claim

Percent of state and local taxes graphic    credit: milhs
Percent of state and local taxes graphic credit: milhs
September 10, 2012

LANSING, Mich. - The subject of who pays taxes comes up a lot in this year's election campaign rhetoric, and sometimes stereotypes stick. For example, Michiganders who have heard it said that "half the Americans pay no taxes" may conclude that poor people don't pay taxes.

Gilda Jacobs, president of the Michigan League for Human Services, says that's not true. A new report by her organization, called "Got Skin in the Game?" finds that low-income Michiganders do pay at least their fair share of state and local taxes.

"Low- to middle-income people are actually paying a greater percentage of their income in taxes than higher-wealth residents in Michigan."

Some families with very low incomes don't have to pay federal income taxes, but the study says that three-fourths find themselves moving out of poverty within a year. After that year, most people make more money and pay more taxes. And Jacobs says low-income Michiganders pay other taxes too, no matter how little they make. Everyone, including those who are out of work, pays sales and excise taxes, which provide more than a third of Michigan's revenue.

The report also points out that many large corporations hadn't paid any federal taxes at all and some small business owners under-report their income, to the tune of $122 billion every year.

Jacobs says everyone who buys things in Michigan contributes through the sales tax.

"A third of the taxes that are collected in Michigan come from sales and excise tax. So any time somebody goes and buys a pair of shoes for their kids, buys a pair of jeans, they are all contributing to the sales tax in our state."

Jacobs says that, nationwide, more than $100 billion in unpaid taxes slips through loopholes and under-reporting.

"More than half large corporations don't pay corporate income tax in a given year. And often sole proprietors report less than half their income to the IRS. So there are a lot of people making money who aren't even reporting their income."

The Michigan League for Human Services estimates that when Michigan's newest round of tax changes is fully implemented in fiscal year 2013, business income tax revenues will be cut by 83 percent while individual taxes will go up by 23 percent, with lowest-income Michiganders getting hit the hardest.

The report is at: www.milhs.org.

Mary Anne Meyers, Public News Service - MI