Updates About Economy

Governor Gretchen Whitmer has signed an executive directive requiring state offices to assess the impact of federal tariffs on Michigan’s economy. Executive Directive 2025-5 instructs that by August 30, the following departments are to review data that may shed light on the impact of new tariffs in Michigan: Department of Agriculture and Rural Development; Department of Environment, Great Lakes, and Energy; Department of Natural Resources; Department of Technology, Management, and Budget; Department of Transportation; and the Michigan State Housing Development Authority.

Here in Michigan, the impact of tariffs is poised to be much higher than in many other states due to our manufacturing and agriculture-heavy economy. Already, the state has experienced rising costs and disrupted supply chains. Whitmer has expressed concerns about the negative effects these tariffs will have on Michigan families and businesses. The directive was issued one day before President Trump’s August 1 tariff deadline.

Governor Gretchen Whitmer announced recently that Sandisk, the semiconductor company previously eyeing Michigan’s Mundy Township megasite, has pulled out of the project due to national economic uncertainty. The company, which had applied for CHIPS Act funding, decided not to move forward with building any U.S. plants, citing concerns over tariffs and stalled federal support. Whitmer emphasized Michigan’s continued commitment to attracting advanced manufacturing investment, despite growing headwinds at the federal level. The Mundy site remains available for future development.

Read previous coverage on Michigan’s semiconductor industry here: GOVERNOR WHITMER OUTLINES BOLD VISION FOR MICHIGAN’S SEMICONDUCTOR FUTURE

The House Fiscal Agency’s June 2025 Revenue Report brought positive short-term news, with major tax revenues and lottery earnings totaling $3.3 billion—an 8.3% increase from June 2024 and $64 million above the May 2025 Consensus Revenue Estimating Conference (CREC) projections. General Fund revenues were bolstered by stronger-than-expected individual income and corporate tax collections, contributing to a $71.8 million surplus above forecasts. Individual income tax revenue alone totaled $1.5 billion (up 15.5% year-over-year), and corporate income tax revenue exceeded estimates by more than $30 million. However, revenues dedicated to the School Aid Fund missed projections by $17 million, with an additional $9.2 million redirected to other earmarked funds.

Looking ahead, however, the recently enacted federal One Big Beautiful Bill Act of 2025 (OBBBA) may substantially alter Michigan’s fiscal landscape over the next decade. The act introduces sweeping federal tax changes that are expected to reduce Michigan’s business tax base and, consequently, state revenue. The House Fiscal Agency now anticipates Michigan could lose $677 million in FY 2025-26, $613 million in FY 2026-27, and $444 million in FY 2027-28 due to provisions such as expensing for research and experimental costs, Section 179 expansion, and limitations on business interest deductions. While some of these losses will taper off by FY 2030-31, Michigan is expected to forgo billions in revenue over the long term unless it decouples from the affected federal tax provisions.

As lawmakers head into the next phase of FY 2026 budget negotiations, they will need to balance the strong performance of current revenues with the looming structural changes driven by OBBBA. These federal changes, combined with upcoming reductions in Medicaid and SNAP cost-sharing adjustments, will likely place additional pressure on the state’s General Fund in the years to come.

Review previous revenue estimates and CREC reports here.