WASHINGTON, D.C. — Michigan lost ground on a widely watched national scorecard of state tax systems. The Tax Foundation 2027 State Tax Competitiveness Index puts Michigan 25th overall, down nine places from 16th a year earlier.
The biggest slide came on individual income taxes, where Michigan fell 12 spots, from 18th to 30th. The state also slipped two places on corporate taxes to 26th and two on property taxes to 29th, while it rose one spot on sales taxes to 9th and one on unemployment insurance taxes to 27th.
The think tank tied most of the drop to choices Lansing made in the past year. Michigan did not adopt the more generous federal expensing rules in the One Big Beautiful Bill Act, it added a new state exemption for tips and overtime pay, and it keeps a relatively low Section 179 limit for business equipment write-offs.
The rankings measure tax law as of July 1, 2026, so anything passed after that date is not counted.
Michigan still has strengths in the index. Its flat 4.25% income tax and fairly large personal exemption help, its 6% sales tax has no local add-ons, and it does not tax estates, inheritances or gifts. The corporate income tax is a flat 6%, near the national average, and small businesses get a $180,000 exemption on personal property tax.
Neighbors remain tough competition. Each of Indiana, Ohio and Pennsylvania charges a smaller state income tax rate, at 2.95%, 2.75% and 3.07% respectively, though all four states let local governments levy their own income taxes. Michigan ranked 14th as recently as 2020 under the current method.
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