Michigan proposal to tax the rich, fund schools raises questions with business groups

A group of Michigan educational and labor organizations launched a ballot initiative to let Michigan voters decide if they want to place higher taxes on wealthy Michiganders to fund public K-12 schools last week and business groups are questioning how beneficial the change would be for the state.

Michigan’s 4.25% income tax rate has billionaires and teachers paying the same rate, Michigan Education Justice Coalition, one of the education groups behind the ballot initiative to add a 5% income tax hike for individuals with incomes over $500,000 and couples earning over $1 million said  Thursday.

One of the key questions business groups will be considering when evaluating the proposed additional increases in income tax rates is how any change would impact Michigan’s competitiveness as a place to live and do business, Joshua Lunger, vice president of Government Affairs for the Grand Rapids Chamber, told Michigan Advance on Friday.

The chamber will be reviewing the ballot initiative before taking any official position on it, but right away, Lunger said a lot of states that are growing have no income tax or are trying to reduce their income tax rates, so it’s important to evaluate what the unique impact on Michigan would be.

That’s what the chamber did when it opposed the 2010 temporary income tax increase for Grand Rapids residents and then supported maintaining the tax increase with the condition that the city funded road repairs, Lunger said.

“It really comes down to, what is it being used for? What’s the potential impact? And both positive and negative, are there any other unintended consequences?” Lunger said.

Michigan’s public school system has historically been underfunded with Michigan State University researchers finding that the state’s funding for K-12 schools dropped further than any other state in the two decades before the COVID-19 pandemic.

During the pandemic, Michigan students experienced some of the worst learning losses in the country, a 2025 report from EdTrust-Midwest, a Michigan-based, education advocacy nonprofit group, found. The report also noted Michigan ranked among the worst states in the country for funding the educational success of low-income students, who are testing lower in Michigan than national averages on 3rd grade reading tests and 7th grade math tests.

Michigan’s reading scores for younger students are some of the worst in the country, a pain point with decisionmakers in Lansing when discussing state budgets and spending decisions. But another focus area is Michigan’s stagnating population growth and the necessity to entice businesses to come to Michigan and for Michiganders to remain in the state’s workforce.

In order for Michigan to get on track to grow, the state should be incentivizing economic success, not further taxing it, Jase Bolger, president and CEO of the West Michigan Policy Forum said in a statement in response to the ballot initiative Friday morning. 

Instead of throwing money at Michigan’s educational system that is failing to address the needs of students, Bolger said parents should be provided more information about the status of their child’s learning and if they’re meeting expectations. 

“Way too many kids in Michigan can’t read, but it’s clear these adults can’t do simple math. Today in Michigan, the more you make the more you pay. But worse is that this proposal would drive Michigan further in the wrong direction,” Bolger said. “While states that are growing are overwhelmingly cutting taxes on work, or don’t tax work at all, this would double down on Michigan’s lagging policies that have led to the fastest growing unemployment rate in the country.”