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Individual Income Tax 2005 MICHIGAN’S INDIVIDUAL INCOME TAX 2005 Michigan Department of Treasury Bureau of Tax and Economic Policy Tax Analysis Division August 2007 MICHIGAN’S INDIVIDUAL INCOME TAX 2005 Tax Analysis Division August 2007 This report was prepared by Denise T. Heidt under the direction of Howard Heideman, Director of Tax Analysis Division, Bureau of Tax and Economic Policy. Scott Darragh and Eric Krupka of Tax Analysis Division provided assistance. Diane Burton of Tax Analysis Division provided editorial and secretarial assistance. TABLE OF CONTENTS Page I. EXECUTIVE SUMMARY ................................................................................................... 1 Returns and Revenue ..................................................................................................... 1 Interstate Comparisons................................................................................................... 1 Property Tax Credit........................................................................................................ 1 Home Heating Credit ..................................................................................................... 2 Adoption Credit ............................................................................................................. 2 Tribal Credit................................................................................................................... 2 City Income Tax Credit ................................................................................................. 2 Public Contribution Credit............................................................................................. 2 Community Foundation Credit ...................................................................................... 2 Homeless Shelter/Food Bank Credit.............................................................................. 2 College Tuition Credit ................................................................................................... 3 Historic Preservation Credit........................................................................................... 3 Vehicle Donation Credit ................................................................................................ 3 Use Tax Payments.......................................................................................................... 3 Tax Law Changes .......................................................................................................... 3 II. INTRODUCTION................................................................................................................ 4 III. HISTORY OF THE MICHIGAN INDIVIDUAL INCOME TAX .................................... 5 USE TAX PAYMENTS ................................................................................................ 7 IV. INCIDENCE OF THE INDIVIDUAL INCOME TAX ..................................................... 9 V. INCOME TAX CREDITS................................................................................................... 18 REFUNDABLE CREDITS ........................................................................................... 18 Homestead Property Tax Credit..................................................................................... 18 Home Heating Credit ..................................................................................................... 20 Adoption Credit ............................................................................................................. 21 Tribal Credit................................................................................................................... 21 NON-REFUNDABLE CREDITS ................................................................................. 22 City Income Tax Credit ................................................................................................. 22 Public Contribution Credit............................................................................................. 23 Community Foundation Credit ...................................................................................... 23 Homeless Shelter/Food Bank Credit.............................................................................. 24 College Tuition and Fees Credit .................................................................................... 24 Historic Preservation Credit........................................................................................... 24 Credit for Income Paid to Another State........................................................................ 24 Credit for Vehicle Donation........................................................................................... 25 ii VI. DESIGNATED CONTRIBUTIONS.................................................................................. 26 Military Family Relief Fund .......................................................................................... 26 Children’s Trust Fund.................................................................................................... 26 State Campaign Fund..................................................................................................... 26 VII. INTERSTATE COMPARISONS ..................................................................................... 28 VIII. GEOGRAPHIC PATTERN OF TAX AND CREDITS .................................................. 31 IX. FEDERAL INCOME TAX INTERACTION .................................................................... 32 Summary of Federal Tax Law Changes......................................................................... 32 2005................................................................................................................................ 32 2006................................................................................................................................ 34 2007 and Beyond ........................................................................................................... 35 X. MICHIGAN PUBLIC ACTS – INCOME TAX.................................................................. 36 2005................................................................................................................................ 36 2006................................................................................................................................ 36 XI. EXHIBITS 21 THROUGH 36............................................................................................ 38 XII. APPENDIX A .................................................................................................................... 60 FEDERAL TAX LAW CHANGES (from 1987 through 2004) ................................... 61 1987................................................................................................................................ 61 1994................................................................................................................................ 61 1995................................................................................................................................ 62 1996................................................................................................................................ 62 1997................................................................................................................................ 62 1998................................................................................................................................ 62 2001................................................................................................................................ 63 2002................................................................................................................................ 63 2003................................................................................................................................ 64 2004................................................................................................................................ 66 MICHIGAN PERSONAL INCOME TAX LEGISLATIVE HISTORY ...................... 68 1967................................................................................................................................ 68 1968................................................................................................................................ 68 1969................................................................................................................................ 68 1970................................................................................................................................ 69 1971................................................................................................................................ 69 1972................................................................................................................................ 69 iii 1973................................................................................................................................ 70 1974................................................................................................................................ 70 1975................................................................................................................................ 71 1976...............................................................................................................................
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