Michigan Treasury reports $700M growth in net individual income tax revenues for 2025

The Consensus Revenue Estimating Conference held on May 15, 2025, by the Michigan Legislature provided critical insights into the state's financial outlook, particularly regarding individual income tax revenues and overall economic growth. The discussions highlighted a projected decline in revenue, with a year-to-date decrease of 0.6%, translating to an estimated loss of approximately $80 million.

A significant focus of the meeting was on the implications of the upcoming tax season, particularly the April 15 deadline for individual income tax filings. This period typically accounts for 3% to 6% of annual tax revenues, making it a crucial time for revenue forecasting. Notably, the conference revealed unexpected trends in tax refunds, which were higher than anticipated. Factors contributing to this increase included larger-than-expected homestead property tax credits and the Earned Income Tax Credit (EITC), resulting in an additional $120 million in refunds.

The meeting also addressed the impact of changes in retirement income taxation. Many retirees did not adjust their withholding rates, leading to a surge in withholding revenues that exceeded forecasts. This discrepancy resulted in a significant number of refunds being issued, affecting the distribution of funds between the general fund and the school aid fund.

Despite these challenges, the overall outlook for income tax withholding remains positive, with expectations of a 6% growth in 2025. This growth is bolstered by strong performance in annual and quarterly payments, reflecting solid business income and investment profits. However, the forecast remains cautious, with uncertainties surrounding future business income and stock market performance.

The conference concluded with a consensus that while there is anticipated growth in net individual income tax revenues, the projections are lower than previous forecasts. Estimates suggest an increase of $700 million from fiscal year 2024 to 2025, but this is tempered by a more modest outlook for subsequent years.

In summary, the Consensus Revenue Estimating Conference underscored the complexities of Michigan's financial landscape, revealing both challenges and opportunities as the state navigates its budgetary priorities in the coming fiscal year. The discussions set the stage for further evaluations as the budget is finalized, emphasizing the need for ongoing monitoring of economic indicators and tax revenue trends.