(The Center Square) – A new study found Michigan ranks one of the lowest states nationally for self-employment tax participation.

Self-employment tax covers Social Security and Medicare contributions for self-employed individuals, including sole proprietors and independent contractors.

Michigan had 578,920 self-employment tax filers out of 4,872,330 total returns. The average self-remitted tax was $4,699.51 per return, according to the study.

“Every year, millions of Americans send money directly to the IRS through estimated payments, payments filed with their returns, and self-employment tax obligations. These are not taxes withheld by an employer; they are dollars individuals calculate and remit on their own,” the report said. “Michigan stands out as a state where this self-remitted tax burden is notably light, ranking among the ten lowest states in the share of filers paying self-employment tax.”

The new 50-state analysis found that just 11.88% of Michigan filers pay self-employment tax, ranking it the 9th lowest nationally.

Only eight states rank lower, led by West Virginia at 9.36%, Wisconsin at 10.56% and Pennsylvania at 11.11%.

Michigan also trailed neighboring states like Illinois, where participation was 12.78%, and Minnesota, at 12.47%. The national average was 13.68%.

“While the state’s manufacturing-driven W-2 workforce keeps the voluntary tax burden relatively light, nearly 579,000 filers still pay self-employment tax,” said Jonathan Sooriash, CEO at J David Tax Law.

Small businesses paid about 92% of self-employment taxes nationwide from 2017 through 2023. In 2023, out of an estimated $81.1 billion in total self-employment tax revenue, small businesses contributed about $74.7 billion. This is according to the U.S. Small Business Administration's Office of Advocacy.

Although Michigan ranked poorly in self-employment tax participation, the metric does not directly measure the number of entrepreneurs or new businesses in the state, as tax participation does not necessarily reflect the total number of self-employed workers.

The study was conducted by J David Tax Law and examined the latest IRS tax data.