Progress made on tax reform plan
Retirees who are 67 and older to see no changes to pensions
FOR IMMEDIATE RELEASE
April 12, 2011
Contact: Sara Wurfel
LANSING, Mich. - Gov. Rick Snyder, Lt. Gov. Brian Calley, Senate Majority Leader Randy Richardville and House Speaker Jase Bolger today outlined the progress being made on the tax reform plan. Overhauling Michigan's unwieldy tax structure is necessary to stimulate the economy and declare that Michigan is open for business.
The leaders noted that they heard the concerns of Michigan citizens about aspects of the tax reform plan-in particular the tax on pensions-and have revised it to offer further income protections to seniors age 67 and older.
"The positive progress being made on this critical issue bodes well for Michigan," Snyder said. "The original reform plan was a starting point for discussion and I am pleased that the dialogue has been so productive. In our discussions, we determined it is important to leave retirement pensions as they are for our citizens age 67 and older. We are able to move forward with a revised plan that still adheres to the principles I laid out with my budget and tax initiatives, will create jobs and protect the safety net for Michigan families."
Upon passage of this plan, Michigan will have the 14th best income tax -- and the 8th most generous treatment of retirement income - among states with income taxes.
"This agreement is the first part of an alternative plan to reinvent Michigan," Richardville said. "Senate Republicans worked hard to create a more attractive business environment in our state and to ensure that senior citizens were exempt from any additional tax burden."
"The budget crisis in this state is a direct result of the jobs crisis. To help job seekers, we must make Michigan a more competitive state to provide a job," said Bolger. "After taking input from citizens across the state and working with the governor and Senate, we have an improved proposal for consideration to put Michigan on the path to economic prosperity. This new proposal exists because we took the time to listen to the families in our districts and we will continue to listen."
"This plan protects current seniors, provides for the reinvention of Michigan, makes Michigan competitive again and provides for an environment conducive to job growth," Calley said.
The plan continues the elimination of the jobs-killing Michigan Business Tax and ends the double taxation on small businesses. Michigan will have the 16th best state and local business tax climate-up from 30th currently, according to a Council on State Taxation model.
The new Individual Income Tax plan will provide for long-term structural stability in the state's budget while minimizing the impact on current senior citizens.
Highlights of the plan include:
- Seniors 67 and over as of Dec. 31, 2012, will not lose their exemptions on pensions and other retirement income.
- For retirees over 67 years of age as of Dec. 31, 2012, if their pension isn't taxed now-it won't be taxed under this plan.
- Those 67 years and older will not be subject to the proposed retirement income changes.
- Social Security income and military pensions will not be taxed.
- People 60 - 66 years of age as of Dec. 31, 2012, will receive an exemption for all Social Security income as well as a retirement income exemption of $20,000 for single filers or $40,000 for joint filers.
- People 59 years of age and under as of Dec. 31, 2012, will be part of the new program. When members of this group turn 67 years old they will receive an exemption of $20,000 for single filers or $40,000 for joint filers against all types of income. This is regardless of income source. It can be taken instead of the Social Security and personal exemptions if it would result in more generous tax treatment to the individual.
To provide this level of protection to seniors over the age of 67, about $150 million in additional spending cuts are needed. In addition, scheduled reduction in the individual income tax rate from 4.35 percent to 4.25 percent will now take place on Jan. 1, 2013, and remain at that level.
Homestead Property Tax CreditThe revised plan further protects low-income homeowners and renters.
- The Homestead Property Tax Credit will go from 60 percent to 100 percent for people with household incomes between $0 - $20,000.
- Low-income seniors with household incomes between $0-$20,000 remain at 100 percent.
- For household incomes between $20,001 - $30,000, the Homestead Property Tax Credit will be phased down from 100 percent to 60 percent.
- For household incomes greater than $30,000, the Homestead Property Tax Credit would be 60 percent.
- The credit for people with disabilities would remain at 100 percent.
- The maximum credit would remain at $1,200 and would be phased out for income between $41,000 - $50,000.
EDITORS NOTE: Chart explaining pension plan details attached.
Related Documents> Pension Tax Details - 200596 bytes