Tagged: pension tax

Democrats in Lansing plan to use this week’s tax-filing deadline to re-open the debate about last year’s tax overhaul at the state Capitol.

Democrats think the tax issue will help them in elections this year. Seniors born after 1946 have their pensions taxed for the first time. Deductions and tax breaks for many charitable donations will be gone when state taxpayers file next year. At the same time, taxes were lowered for many businesses.

Democrats intend to remind voters of that as they try to win an additional nine seats in November to take control of the state House. They say more than a dozen swing districts will be the target of fierce campaigning on the issue of taxes.

Republicans says there are elements of the tax overhaul that were unpopular, but necessary to streamline and simplify tax filing and to make Michigan a more business-friendly state.

LANSING, Mich. (AP) - Organizations representing retiree groups say they want the Michigan Legislature to repeal an unpopular tax on pensions, or lawmakers will pay the political price in the 2012 election.

The AARP and groups representing public employee retirees called for a repeal Friday before the new tax plan takes effect in January.

The groups say they haven't ruled out filing suit in federal court to try and block the changes, but they are focused on getting lawmakers to take action.

It's highly doubtful the Republican-led Legislature would consider repealing the income tax that will be instituted on some forms of retirement income. The Michigan Supreme Court ruled last month that key aspects of the pension tax law approved this year are legal.

When the Legislature returns to the state Capitol next week, there will be another item added to its to-do list. That is: coming up with millions of dollars to fill a budget gap created by the state Supreme Court decision on Michigan’s new pension tax. The court upheld the tax on pensions, but said denying a tax break to some higher-earners effectively created a graduated income tax.

A graduated income tax is not allowed under the state constitution. That part of the decision also blew a $60 million hole in the state budget. Sixty million dollars is a small part of a general fund budget that exceeds $8 billion.

But it is an amount the governor and the Legislature will need to make up to meet their obligation under the state constitution to have a balanced budget. One possibility would be to use a projected surplus from last year’s budget to fill the gap. That number becomes official in January. But it appears the surplus will be somewhere near $400 million.

Lawmakers are already fighting over what to do with that money. Democrats say it should be used to restore some budget cuts to schools. Republicans say it should go into the state’s “rainy day” savings fund, or to pay down debt.

The Michigan Supreme Court says a new law taxing public pensions does not violate the state Constitution. 

The advisory opinion released today is a major victory for Governor Rick Snyder, who signed the sweeping tax changes earlier this year. Employee unions were opposed to the new law.

State officials expect the law will generate as much as $330 million dollars in revenue in 2013.

The court did say a portion of the law doesn't pass muster. The court ruled the tax could not be administered as a graduated income tax, which is illegal under the state constitution. And that means Governor Rick Snyder will have to go back and find more revenue or more cuts to make sure the state budget remains balanced.

However, the Supreme Court says that does not stop the rest of the tax overhaul from taking effect.

The court divided along party lines, with the four Republican justices making up the majority.  

The decision means the new tax on pensions will take effect January first largely as it was designed by Governor Rick Snyder and the Legislature. However, they will have to come up with a plan to make up some of the money they were counting on to balance the budget.

The Michigan Supreme Court will soon issue an opinion on whether the new law taxing pensions is constitutional.

If they say it is, it’s full speed ahead for the governor’s plan. If they decided that taxing pensions is not constitutional, it’ll knock a huge hole in the budget. That means the state will have to get more revenue -- which means raising taxes.

That, or roll back the business tax cuts or slash aid to education and other programs more severely than ever.

And while I don’t pretend to know exactly what would happen, I can tell you this, after talking to the governor last week. He isn’t about to roll back the tax cuts, and he doesn’t want to raise taxes.

Scores of seniors upset the state will tax some of their public pensions for the first time are expected to pack the courtroom when the Michigan Supreme Court hears oral arguments on the law.

The hearing begins Wednesday morning in the Hall of Justice.

The case is a major test of sweeping tax changes put in place earlier this year by Republican Gov. Rick Snyder.

He wants a Supreme Court advisory opinion that would effectively pre-empt any court challenge on the law filed by opponents such as public employee unions, who say the state constitution protects their pensions from being taxed.

Starting Jan. 1, pensions and some retirement income that previously was partially exempt would be taxed as regular income for those born after 1945.