2023 Senate Resolution 10

Whereas, A bill has been offered in the United States House of Representatives, H.R. 25 of 2023, to impose a national sales tax. This proposal would impose, beginning in 2025, a sales tax at an effective rate of 30 percent of the pre-tax price of the taxable good or service, making necessary goods and services more expensive for working people in Michigan and across the nation who already struggle to make ends meet; and

Whereas, The United States federal government currently assesses a progressive income tax. Under its design, tax rates increase as income rises, focusing the tax burden on the wealthiest taxpayers most capable of paying. According to the Tax Foundation, in 2019 the top one percent of earners paid a 25.6 percent average individual income tax rate, while the bottom 50 percent of earners paid an average rate of 3.5 percent; and

Whereas, This national sales tax proposal would replace the federal income tax, which would have significantly regressive consequences. A 2004 Brookings Institution analysis concluded that such a 30 percent national sales tax would see taxes rise for households in the bottom 90 percent of the income distribution, while households in the top 1 percent would receive an average tax cut of over $75,000. This shift would tip the scales further in favor of the most wealthy to the detriment of the working class in Michigan and across the nation; and

Whereas, While the proposed legislation ostensibly addresses this problem by offering a “prebate,” or up-front cash grant equal to the amount of sales tax that Americans must pay to maintain a minimum standard of living, research shows this would ultimately hurt the middle class. When the President’s Advisory Panel on Federal Tax Reform studied the subject in 2005, it recommended against adopting a national sales tax with a “prebate” because middle-income Americans would pay a larger share of the federal tax burden; and

Whereas, Another significant issue with the proposed reform is that eliminating the federal income tax would force states like Michigan to substantially change their tax laws. The Michigan Income Tax Act defines “taxable income” by reference to the term’s definition under the federal Internal Revenue Code, with additional adjustments and deductions offered. Eliminating the federal income tax would require Michigan to either abandon its own income tax or spend resources defining concepts currently contained in federal law and creating state-level systems for income reporting. Such a monumental upheaval of tax law in Michigan would require the expenditure of significant resources by both the government and taxpayers; now, therefore, be it

Resolved by the Senate, That we urge the United States House of Representatives not to take up H.R. 25 of 2023 or otherwise impose a flat-rate national sales tax; and be it further

Resolved, That copies of this resolution be transmitted to the Speaker of the United States House of Representatives, and the members of the Michigan congressional delegation.