Some public finance experts worry that the unpredictability of President Donald Trump’s tariff policy will dampen consumer spending, putting state revenue generated by sales tax at risk.
Michigan’s 6% sales and use tax applies to all retail sales in the state, with some exemptions, like groceries. The revenue generated by that tax goes toward things like schools, parks, public safety, roads, and infrastructure.
With tariff policies in frequent flux, consumer sentiment is dropping. A preliminary report for April 2025 from the University of Michigan’s survey of consumers reported that consumer sentiment fell for the fourth straight month, declining 11% since March 2025.
“Now that consumer sentiment… is plummeting, will Michiganders continue to support our [state and local] budgets through spending?” Kevin Bain, a senior strategist at Public Sector Consultants, said.
Michigan does have multiple sources of government revenue, Bain explained, including income taxes, property taxes, and taxes on tobacco and alcohol.
“If consumer spending goes down really low, that doesn't necessarily mean all government revenues are going to go down,” he said.
Even so, Bain expressed concern for cities like Detroit, which have particularly tight budgets. He previously worked in the city of Detroit’s finance department. The city recently passed a budget that includes more than $250 million from state revenue sharing, which is funded, in part, by sales tax revenue.
“I think we should be concerned if sales tax revenues do decline, what happens to that $250 million that Detroit's relying on to provide public safety, parks, and just pay their employees?” Bain said.
If the current tariff policies continue, Bain said legislators will have to consider whether changes in tax policy may be needed to ensure public resources are adequately funded.
“What would make me nervous is if we implement a tax policy expecting not to have tariffs, and then we do have them. Or if we enact a tax that's dependent on tariffs, and they get canceled in two months,” Bain said. “A wait-and-see approach isn't very exciting, but I think it's proven.”
Hear our full conversation with Kevin Bain on the Stateside podcast.
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