Here's an idea for funding repairs to Michigan's roads and bridges: increase the income tax. The current rate is 4.25%. Increasing it to 5.0% will generate about $1.45 billion, which is about what they say is needed.
Here's how I arrived at that $1.45 billion figure. Total revenue from the income tax in 2013 was $8.211 billion. (Source: Annual Report of State Treasurer, page 19) Divide that by 17 and you get $.483 billion, the amount raised by each ¼ of one percent (4.25 divided by 17 is .25). Multiply $.483 billion by 3 (the 3 quarters of a percent needed to raise the income rate to 5.0%) and you get $1.449 billion.
Here are the advantages of raising the income tax to pay for roads:
Since the effective tax rate is always less than the nominal rate, no one will feel the full .75% increase. In 2011, when the nominal rate was 4.35%, the average effective rate for filers with income over $50,000 was 2.55%. The highest effective rate was 3.42%, and that was for the group with incomes $300,001-400,000 (page 48 of the 2011 individual income tax analysis). And even if the full .75% increase was felt by someone with, for example, an AGI of $100,000, it would amount to less than $750.
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