Detroit City Wire

The Michigan Legislature has passed the state budget for fiscal year 2025-26, implementing measures that have drawn criticism from the business community. Business organizations, including the Detroit Regional Chamber, have voiced strong opposition to provisions in the budget they say will negatively impact Michigan’s competitiveness.

One of the central concerns is the decision to decouple Michigan’s tax law from federal tax reforms. According to a coalition of leading business groups, this move will result in businesses facing more than $2 billion in additional state taxes over the next five years. The change prevents companies from fully benefiting from recent federal tax cuts aimed at promoting research and development and equipment investments.

The coalition argues that aligning with federal tax policy had previously given Michigan an edge. Now, with higher taxes and increased administrative complexity, Michigan businesses may find themselves at a disadvantage compared to firms in other states where it remains less costly to invest and operate.

Business leaders also point out that these changes come amid broader economic challenges. They cite ongoing uncertainty caused by tariffs and supply chain issues as well as relatively high unemployment rates and lower educational outcomes compared to peer states.

In addition to tax increases, several key economic programs have been reduced or eliminated due to revenue changes resulting from what is known as the One Big Beautiful Bill Act. The Business Attraction and Community Revitalization fund was cut by over $40 million, while strategic incentive funds linked to the Strategic Outreach and Attraction Reserve (SOAR) Fund were eliminated. The Going PRO Talent Fund saw a net reduction of $22.9 million with remaining funds moved to one-time appropriations, raising concerns about stability for workforce training initiatives.

Workforce education programs supporting talent pipelines and teacher recruitment also faced cuts.

Despite these reductions for business-related programs, some areas received increased investment. The target foundation allowance for schools rose by 4.6%—over $400 per pupil—to reach $10,050 per student; cyber charter school funding was brought up to match this level as well. Career and Technical Education (CTE) funding saw both an ongoing increase of $2.2 million and a new one-time allocation of $70 million for expanding CTE pathways statewide.

Other education-related spending includes a new $65 million grant program aimed at reducing class sizes in grades K-3, changes allowing districts greater flexibility in using at-risk funds for smaller classes, as well as significant investments in literacy supports totaling $122 million across various initiatives.

The budget also maintained FAFSA completion support at $10 million and increased Advanced Placement (AP) incentive funding by $1.4 million over last year’s level.

On infrastructure and public safety fronts, new revenue was allocated toward major priorities: approximately $1.5 billion was directed into road and bridge construction through a Transportation Funding Package; public safety grants totaled nearly $95 million between local government revenue sharing grants and targeted constituency grants for prosecutors and firefighters; K-12 education benefited further from both foundation allowance increases and a 25% rise in support for at-risk pupils.

While these investments address key government priorities such as infrastructure improvements, public safety enhancements, and educational funding boosts, business advocates maintain that increasing taxes on companies undermines their ability to innovate or attract future investment opportunities within Michigan.

"The business community has made it clear: while a balanced budget is necessary, imposing a massive tax increase on Michigan businesses to fund essential government operations undercuts their ability to innovate and compete and is a strategic failure that makes Michigan less attractive for future investment."