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Politics & Government

Fairness of pension tax will be decided by Michigan Supreme Court

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The Michigan Hall of Justice - where the Michigan Supreme Court sits. Justices will decide on the fairness of the new tax on pensions.

The Michigan Supreme Court has agreed to let unions and business groups weigh in before the justices rule on whether the state’s new tax on pension income is legal.

The court will hear arguments in the case next week.

Governor Rick Snyder asked the court to cut short any legal challenges with a preemptive ruling.

The governor wants an opinion from the court before the end of the month.

His budget relies on $343 million dollars from taxing pensions, and he wants to avoid months or years of legal wrangling on the question.

The governor asked the court to decide whether the pension tax breaks a promise by the state to retirees and public employees; and whether income limits in the law amount to a graduated income tax – which is prohibited by the state constitution.

The Supreme Court has agreed to accept briefs from retiree associations and unions that oppose the pension tax, as well as business groups that say the tax is fair.

The Michigan Education Association, the UAW, and the AARP are among the groups that filed briefs opposing the tax. They say the pension tax breaks a promise to retirees and public employees, and it violates the state constitution.

Business groups, including the Michigan Bankers Association, and the Small Business Association of Michigan, are backing Governor Rick Snyder. They say the pension tax is fair because it treats all income equally in the tax code.

If the pension tax is upheld, pension income will be subject to the state income tax starting January 1, 2012.

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