Seniors 67 and older keep pension tax exemptions; younger retirees will pay under Snyder plan

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Some senior citizens will be spared now that Gov. Rick Snyder has revised his original $900 million pension tax proposal.

The proposal cuts the original revenue generated from taxing pensions by two-thirds. The proposed revisions will take effect Jan. 1, 2012. Seniors under 67 will be taxed.

“He obviously has decided to change things because of resistance from representatives and senators,” said Bill Ballenger, editor of Inside Michigan Politics and former Griffin Endowed Chair. “They are wanting him to go easier on the ones that are most vulnerable in our society.”

The changes will include a three-tiered system that will phase in those seniors that will be taxed. The plan states those born before 1946 would not have their pensions or social security taxed.

Those born between Jan. 1, 1946, and Dec. 31, 1952, would receive a pension tax exemption of $20,000 for singles and $40,000 for joint filers. They would receive a similar exemption upon turning 67.  Social Security would also be exempt.

“People between the ages of 60 and 66 will have a little break,” Ballenger said. “People under the age of 60 will feel the brunt of it.”

Seniors born after 1952 will find their pensions taxed at 4.35 percent. The rate will then lower to 4.25 percent on Jan. 1, 2013.

“It’s making some folks happy,” Cotter said. “But it’s also about the bottom line of balancing the budget. Taxing pensions is just one more option on the table.”

Cotter said the new plans are all part of compromising and that it is very possible Snyder may construct another proposal.

Ballenger said Michigan is one of few states left that do not tax pensions.

“It remains to be seen if this will help,” Ballenger said.

The plan still will eliminate the $350 million Earned Income Tax Credit and would limit eligibility for Homestead Property Tax Credit.

Under current law, people with an income of $82,650 can claim the Homestead Property Tax Credit, but Snyder wants to lower the threshold to $50,000.

Macomb senior Tanisha Johns said it seems like Snyder has had some problems balancing the budget and keeping Michigan residents happy.

“I guess that it’s a better plan than before,” she said. “But they’re still going to have issues with people not being able to afford a lot.  Poverty levels will continue to grow.”