Michigan education advocates propose a controversial graduated income tax initiative aimed at raising $1.7 billion annually for public schools, while business leaders warn of potential economic consequences.
The “Invest in MI Kids” ballot proposal seeks to implement a 5 percent surcharge on income exceeding $500,000 for single filers and $1 million for joint filers, beginning in 2027.
The initiative emerges as state lawmakers continue to grapple with passing a school aid budget, following the Michigan House’s failure to approve the measure 17 days ago.
Education Funding Goals and Support
“Our math shows that every year this could raise up to $1.7 billion for schools,” says Imani Foster, Communications and Research Deputy Director at 482 Forward, part of the coalition backing the proposal.
Foster claims schools are underfunded between $ 4 to $5 billion.
“So, it’s a big gap to fix, and it won’t just take one or two years to fix it, but we’re knowing that this will raise money for all of the schools across the state, especially at a time where federal funding and quite possibly even state funding are not really set in stone right now for schools,” she said.
The initiative aims to address critical education needs, including:
- Reducing classroom sizes
- Recruiting and retaining teachers
- Enhancing career and technical education programs
Business Community Pushback
Small business leaders express significant concerns about the proposal’s impact on Michigan’s economic landscape.
Milan Gandhi, Vice-President of Southfield-based Med-Share, emphasizes that many small businesses operate as pass-through entities, such as LLCs or partnerships, making them particularly vulnerable to the proposed tax structure.
“The problem is that small businesses are almost exclusively organized as what are called pass-through entities. They’re not corporations,” Gandhi said.
His company, which employs over 100 people in mobile diagnostic medical imaging, illustrates how business profits often go toward operational costs rather than personal income.
Economic Impact Concerns
Brian Calley, president and chief executive officer of the Small Business Association of Michigan, strongly opposes the measure.
“It’s a very, very bad idea, bad for small business, which means that it’s bad for the economy,” he said.
Critics argue the proposal could:
- Discourage new business development in Michigan
- Prompt entrepreneurs to relocate to other states
- Impact business reinvestment capabilities
State Education Leadership Weighs In
State Superintendent Michael F. Rice, Ph.D., emphasizes the need for educational equity.
In a statement, he wrote:
“All students in the state of Michigan deserve to have an equitable opportunity to learn and grow into thriving citizens. Until all students can be taught by a highly qualified teacher, educated in buildings with class sizes that are conducive to learning, have better ratios of counselors, social workers, psychologists, and nurses in their districts, and have resources that reflect the 21st century, we must call for the necessary increases in funding to make this happen.”
Next Steps
Following a successful challenge to the initial ballot language, supporters are revising their proposal. The initiative is expected to receive approval for petition circulation, potentially appearing on the November 2026 ballot.
