Time to double-check your paycheck! (You could be paying later.)

As the federal tax changes (that we opposed) took effect, I had friends and family start talking about how their paychecks changed. Some even received e-mails from their human resources department explaining that their paychecks may look larger due to the tax cuts. Before you go on a shopping spree, though, make sure you check that you’re having enough taxes withheld.

When the Internal Revenue Service released the new tax withholding tables in January, payroll companies, bookkeepers and human resources departments made those changes in their payroll systems. The withholding Tax Formtables incorporated some of the changes made in the federal tax bill, including the new standard deduction, elimination of the personal exemptions and the new tax brackets. And because of this, many workers saw large changes in their paychecks, but this was based on wages only.

The new withholding tables could result in you seeing a big surprise next April—either a much larger refund than expected or, worse, that you owe money. So to avoid those surprises, you might want to fill out a new W-4 form to adjust your withholding.

The problem is that this form can be complicated to fill out, especially if you don’t know all of the tax rules. The general rule is that the fewer allowances you enter, the more taxes are withheld throughout the year. The bigger the number of allowances means fewer taxes are withheld and will result in a smaller refund or perhaps a tax bill or penalty. But how do you know what to put down?

Thankfully, the IRS has a new withholding calculator that can help you determine whether you are over- or under-withholding.

Taxpayers who may want to double-check their paycheck include:

  • Two income families, people with two or more jobs throughout the year, or people who only work for part of the year;
  • Taxpayers with children who may qualify for the Child Tax Credit;
  • People who itemized in 2017 (who may no longer be able to itemize); and
  • High-income earners, people who have businesses, or other taxpayers who will have more complicated returns.

Some people like getting a large tax refund every year. Others like seeing bigger paychecks, even if they may mean a higher tax bill come April. Personally, my goal is to result in a refund (or payment) as close to $0 as possible. I admit that I’m not always that successful, but using the calculator helps get me closer.

Also, if you haven’t done your taxes for 2017 yet, be sure to check out our Money Back in Michigan tax credit guide.













(A COMMENT ON TAX FAIRNESS: While your paychecks may be going up now and you may be thinking that the federal tax plan is not so bad, remember that you could be seeing a tax hike by 2027 in order to pay for significant permanent corporate tax cuts. Also know that the tax plan changes that are giving some of you a few hundred dollars back this year are saving millionaires around $60,000 annually. The tax plan’s benefits are not all bad…yet—they’re just not at all fair.)

–Rachel Richards

An income tax cut won’t boost the economy

Cutting taxes won’t create jobs or grow the economy. Michigan is already facing budget cuts because there is not enough money to fund schools, public safety and other important services that we value. Reducing the income tax would create an even bigger hole in the budget, leading to more cuts and making it harder to create a strong workforce ready for the 21st century, according to a new fact sheet from the League. (more…)

Tax policies gone wild

Shortsighted tax policy decisions by Michigan lawmakers have created a budget shortfall of $325 million in the current fiscal year, despite growth in the state’s economy.

Because Michigan must balance its budget every year, cuts will be made in the state’s General Fund, the major source of funds for health and human services, higher education and public safety – before the end of September. The 2016 budget, scheduled to be released by the governor on Feb. 11, has an additional revenue shortfall of $532 million. (more…)

Diving deeper into the river of opportunity

At the League, economic opportunity is our mission so it was heartening to hear Gov. Rick Snyder talk about the ‘river of opportunity’ in his fifth State of the State address Tuesday. There is an assumption in that analogy, however, that deserves a closer look.

The governor spoke about his background growing up in a 900-square-foot home in Battle Creek in a supportive family. He said despite his family’s modest income, he was still able to be part of the river of opportunity. He spoke of the Michiganians who are not part – separated by poverty, absent parents or other barriers — and he talked about his desire to move them into that river of opportunity. (more…)

Income Tax Cuts: Financially Irresponsible and No Economic Benefits

Proposals to roll back the personal income tax in Michigan will not create jobs or grow our economy and will disproportionately benefit the wealthiest taxpayers the most. It is also fiscally irresponsible to reduce taxes when the state is facing a budget shortfall due to lower than expected revenues.

In fact, most of the benefits of a cut in the state’s personal income tax from 4.25% to 3.9% would flow to Michigan’s wealthiest taxpayers, according to an analysis by the Institute of Taxation and Economic Policy, a Washington, D.C.-based research group that uses a sophisticated model of the tax system.

At a time when inequality and poverty are already high, the rollback would offer:

  • low-income taxpayers (average income of $10,600) enough to buy a bakery-made cherry pie ($12 on average for the bottom 20% of earners).
  • middle-income taxpayers (average income of $45,700) enough to buy a used dough mixer ($88 on average for the middle 20%).
  • those at the very top of the income scale (average income of $971,600) enough for a round trip for two to Paris, where they could visit all of the sights and have enough left over to enjoy French pastry at a café ($2,618 on average for the top 1%).

In addition, nearly one in four (23%) of Michigan households would receive no tax cut at all—including more than half of the state’s poorest taxpayers (the bottom 20% of earners who make $18,000 a year or less).

By contrast, $3 of every $5 in tax cuts (60%) would flow to Michigan’s wealthiest 20% of taxpayers who earn $89,000 a year or more, with the top 1% of earners—those making $362,000 and up—alone taking home a sizeable 17% of the tax cut benefits.

Across-the-board income tax cuts will not boost Michigan’s economy but would contribute to rising income inequality, and further drain resources from public schools, community colleges, universities, healthcare and public safety—the very services that fuel economic growth.

As the state faces a revenue shortfall in the current fiscal year, and potentially the following fiscal year, reducing state revenue would lead to cuts to schools, communities and other public services that drive economic growth.


Taxing Internet sales as a matter of fairness

Nowadays, with a growing number of people shopping online, it makes sense to collect sales taxes on the items purchased – if the item was bought at a store nearby, we would have to pay the sales tax.

So, what’s the difference? The difference is that over the past year an estimated $482.4 million worth of sales and use taxes from remote sales will go uncollected by the state. The majority (60%) of that is due to e-commerce. (more…)

Oh Michigan!

From the First Tuesday newsletter
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‘O’ stands for October — and it also stands for Opportunity.

With just a few short weeks before the Nov. 4 election, now is your best chance as a concerned Michigan citizen to make a difference. (more…)

Holy smoke Batman! We can reduce poverty

Like Batman and Robin, raising the state Earned Income Tax Credit and minimum wage are best when working together, a new report concludes.

The two strategies are better than one, according to State Income Taxes and Minimum Wages Work Best Together, by the Center on Budget and Policy Priorities. (more…)

Flood waters: a taxing problem

From the League’s First Tuesday newsletter
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My family and I were unfortunate enough to experience the recent flooding in Southeast Michigan. Despite the fact that we lost appliances, some precious photos and an assortment of stuff we had accumulated over the past 37 years, we will be OK. We had insurance and were able to get a company to clean and sanitize our basement very quickly. And we will not need to go into our retirement funds to make our losses whole. (more…)

A stronger Michigan economy is within reach

Yes we can grow Michigan’s economy, create good jobs and expand opportunities for all Michiganians with the right public policy decisions. A new report by Erica Williams at the Center on Budget and Policy Priorities outlines how policymakers can make that happen.

Williams explains that states need to invest adequately in education, healthcare, transportation and workforce development. And in order to do that, they need to make decisions about how to raise and spend revenues with an eye toward the future. (more…)

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