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Michigan wants to end tax break for seniors

Retirees up in arms over governor's proposal to tax pensions in order to cut taxes on business.

By MSN Money Partner Mar 17, 2011 5:27PM

This article is by Kathy Barks Hoffman of The Associated Press.

 

Republican Gov. Rick Snyder is drawing recall threats and angry protests over his attempt to do what no Michigan governor has tried in more than 40 years: Tax the pension and 401(k) incomes of millions of retirees.

 

The move has brought demonstrators to the Capitol and has thousands of seniors reminding the new governor that they could make re-election difficult for him and lawmakers who go along. Democrats oppose the move, and even some GOP lawmakers are casting about for an alternative to avoid raising taxes on a powerful interest group.

 

Snyder remains undeterred. The multimillionaire former Gateway computer executive says Michigan -- which has some of the nation's most generous senior tax breaks -- can't afford the $900 million it loses because of them, and that retirees need to pay their share rather than pushing the burden onto younger residents.

 

Arnold Eick, a 73-year-old former General Motors manager, says he needs those tax breaks to stay afloat. Like many retirees, he's incensed that he and the working poor who would lose a tax credit are being asked to pay more so Snyder can reduce business taxes.

 

"I just can't understand how anybody can be that unfair, that evil, to take from the poor and give to the rich," Eick said.

 

Michigan currently charges no income tax on public pensions and exempts up to $45,120 worth of income from private pensions, 401(k)s and IRAs for an individual retiree, with limits of twice that for a retired couple. Treasury figures show about a fifth of the tax returns filed each year include pension income.

 

Eick says his out-of-pocket health expenses hit $27,000 over a three-year period because GM took away health care for salaried retirees. If the pension exemption also ends, the Flushing resident estimates he and his wife may owe $3,000 in annual income tax -- something he says could make meeting his mortgage payment impossible.

 

"We're going to have to leave our home," he said while carrying a sign promising retribution. "I'm old but I can recall two things," it said. "1. Tax refunds. 2. You."

 

Snyder campaigned last year on a promise to replace the complex and unpopular Michigan Business Tax with a 6% corporate income tax, a move that would eliminate $1.7 billion in revenue. But he didn't reveal until last month that he wanted to pay for it by requiring more money from individual taxpayers.

 

The governor has put the business tax cut and pension tax increase into one bill so lawmakers cannot choose between them. But many Republicans see Snyder's plan as violating their pledge not to raise taxes, and some lawmakers are talking about shrinking the size of the business tax cut so they don't have to totally eliminate senior tax breaks.

 

"I like the governor's business tax, but I don't think seniors should have to pay for it," said GOP Sen. Jack Brandenburg, from a traditionally anti-tax district north of Detroit. "If he puts this in with this business tax (cut), I will not vote for it. . . . It's going to go down."

 

Snyder says the business tax cuts are needed to help the struggling state add jobs. He argues that Michigan should never have exempted public pensions in the 1960s or eliminated taxes on other retirement income since then. He also wants to eliminate a $2,300-per-person tax break for those 65 and over and reduce the credit seniors get for property tax payments.

 

Retiree James Baker sees it as an example of efforts by Republican governors like Wisconsin's Scott Walker to attack the middle class and help the businesses that donated to their campaigns. And like many in that state, he's ready to rise up and demand that Michigan's governor back down.

 

"It's an issue he's using to shift taxes away from businesses," said Baker, 58, who retired in 2009 after working 31 years as a state environmental analyst and who would pay roughly $1,350 in taxes on his annual $32,000 pension. "I do think he's on the same page as Governor Walker."

 

Mike Martin, a 60-year-old recently retired Treasury worker from Kalamazoo, says he could see taxing a portion of his $39,000 pension -- but not if the money is going to go toward cutting corporate taxes by 86 percent.

 

Snyder says his plan doesn't hurt low-income retirees. Social Security payments would be exempt from the state's 4.25% income tax, and retired couples with $40,000 or less in income wouldn't pay any income tax on their retirement income. Those making more would see their income taxes range from several hundred dollars for those making over $40,000 to several thousand dollars for those with retirement income nearer $100,000.

 

"The worry that I hear people expressing is that Grandma will have to really skimp while the attorney in the $1,500 suit will get a tax cut. ... I think that's misleading," said Michigan State University economics professor Charles Ballard. "Under the current law, you could have a senior citizen couple with retirement income well over $100,000 and they pay not a penny of income tax. Whereas the 38-year-old single mom trying to make it as a nurse's aide has a tiny fraction of that and yet she pays income tax."

 

Snyder says it's unfair to ask other taxpayers to shoulder the cost of services the growing number of seniors need while they pay nothing.

 

"I think it's a real fair question to say, shouldn't they pay the same amount you and I pay?" he told The Associated Press.

 

Michigan isn't the only state rethinking senior tax breaks. In Illinois, the Democratic president of the Senate suggested that the state consider taxing the pensions or 401(k) income of wealthier retirees. And Democratic Gov. Neil Abercrombie of Hawaii proposed taxing the pensions of individuals with an adjusted gross income of more than $37,500 and couples receiving more than $75,000. Unhappy seniors persuaded a legislative committee to more than double the limits.

 

Taking on politically powerful retirees can be a tricky business, said Elizabeth McNichol of the Washington-based Center on Budget and Policy Priorities.

 

"I don't think it's the worst idea in the world to better target senior tax cuts," she says. "But it needs to be done carefully."

 

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

 

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96Comments
Mar 17, 2011 8:56PM
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The rich are bleeding this country dry. Giving tax breaks to companies that export jobs to other countries is the final straw. Why not cut the salaries of the top earners in state government?

Why not cut the salaries of the judges and members of the legislature and senate?

How about a 20% salary cut for all state government employees earning more that $100,000.00 a year?

The middle class and retirees are tapped out; go somewhere else to find more tax money!

Mar 18, 2011 10:05AM
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Is how the republican agenda works, the working stiffs get taxed so the big boys can pay no taxes.
Mar 17, 2011 8:15PM
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Hey soon to be ex-Governor Snyder: you are about to lose one of the only good things going on in Michigan's economy right now, the fact that it is on the top 10 as far as attractive states for retirees. Let's face it. You're in the heart of the rustbelt, you have negative growth in all sectors and Michigan and especially Detroit have such a bad public image, that if you marginalize the retirees, your state will be Loser-ville all around. I can't think of ANY time I ever heard of ANYONE saying that they wanted to visit Michigan, let alone live there. Let the massive exodus of retirees begin. Time to am-scray to much greener, warmer and more attractive pastures. Get out and let this crap blow up in Snyder's face.
Mar 18, 2011 7:40AM
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Does everyone forget seniors have paid high taxes through their work history?  So the young generation is crying.  I assume it is because they don't want to pay taxes and buy the latest gizmo with their money.  The boomers are the generation that paved the way for all of you to be so dang spoiled.  You're so spoiled that you forget where all your opportunities came from in the first place.  I'm sick and tired of the narcissistic attitude.  How many of you have called your parents lately?  The call comes in when you need something, like a place to live when you screw up.

 

Grow up and take responsibility. 

 

 I do blame this attitude on the parents because poor little Johnny can't go without or have his little feelings hurt.  That would be devastating.  The end result is a weak lemming type population.  I always told our kids, don't worry, someday you will be in the power seats.  So true.

Mar 17, 2011 6:53PM
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Being retired & on SS( without COLA for the past 2 years), I can only say that our governments local,state or federal are the true terrorists in this ONCE GREAT COUNTRY. 

At this point they would be better off putting a tax on every roll of toilet paper sold & put an end to this tax issue once & forever.  It would be a constant reminder to ALL of us who we have put in office..

What has happened in the state of Wisc & the Middle East is going to look like a nursery school.

 

Mar 19, 2011 12:15AM
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The only thing good about some of the young people's post is knowing that one day, they will be our age with the young will be saying nasty things about them. We paid higher taxes and did better than people are doing today. So you children pout and blame others while you try to get out of paying taxes but don't blame us because the Corporate Prostitutes (Republicans) are robbing the working American.

 

Seems like only yesterday we were teenagers and it will seem like tomorrow when YOU wake a  SENIOR. Remember what goes around, comes around,LOL.

Mar 19, 2011 1:30PM
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I'm not from Michigan but retired.
If you receive Social Security it's because you have worked paid into it and earned it. The seniors get taxed on their Social Security  have to pay a secondary medical insurance and then prescription drugs just to stay alive and that's not even counting all the normal monthly bills.
 I really haven't noticed many tax breaks for us. I would say most live from pay day to pay day and that's with a pension. (Middle Class)
The baby boomers are on Social Security  now and that is the majority of the population so it is taking a toll on the younger workers... If the government hadn't borrowed from the Social Security System  there would have been plenty of money in the system.
The government needs to check out ssi not only do some people  receive ssi but food stamps I know of at least four people on ssi all in their 20s able bodied slow in the head can be taught a trade, lazy and just sit play on the play station and wait for their next check, c'mon there is something wrong with this picture. They recieve ssi because they never paid any taxes or enough taxes to qualify for ss or ssdi. I'm totally POed about that.
If I know of four I bet each one of you know at least two. The state needs to train and provide jobs for these people some will be able to work after training at a normal job then will pay taxes. My brother has down syndrome and has worked for the Salvation Army sense he was 18 and is now 50. I just can't imagine how he can work and these four able  bodied people sit back and collect from tax payers because they refused to go to school and are slow.
I do know others on ssi that deserve it and need it I am talking about the ones who don't.

Mar 20, 2011 1:00PM
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These politicians were elected by the people now effected.  The people are finally starting to wake up.  It only took hitting them in their own pocket books.  We need more of America to wake up and smell the coffee so we can get this country back on track.  I am tired of businesses & rich getting all the breaks while the little people get the shaft.
Mar 17, 2011 7:30PM
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The ONLY WAY to fix this is for ALL of us to get together and RECALL this Governor.  That way, we give a message that will be remembered by HIM and all politicians that want to have office here.
Mar 21, 2011 4:00PM
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I am 62 years old and am still looking to work (currently unemployed for the past 2 years) for at least another 5 or 6 years, if possible, may be longer. Over the past 40 years, my employers and I have contributed almost $300K into SS. As we all know, the government takes money (via tax) out of every single paycheck that we, in America, make, and they charge an equal amount to the employer. My wife and I have also saved a fair amount for our retirement in 401K's and IRA's (no pensions). I, for one, am absolutely tired and fed up with government, any government (Fed, State, Local), trying to take one more penny from us because they have screwed up their books, lied, cheated, and/or stolen, but are now broke. And, let's not forget our wonderful senators and congressmen, who have continually spent their time (and our money) making themselves and their friends as wealthy as possible.

If I remember my history correctly (and I do), our Forefathers fought the British and their king George III because we did not have a say so in how our heavily taxed funds were spent. It was taxation without representation. Just because I vote every year (or more) for my supposed electable officials does not mean that I am being fairly and honestly represented. I cannot see the difference between my situation today and that of my ancestors of 225 years ago.

 

 

 

Mar 17, 2011 8:28PM
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Open-mouthed What tax? They always take away 20% every time I withdraw from my 401K it is part of income and fully taxable.
Mar 18, 2011 5:23AM
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Looks like Snyder only wants to be in office one term.  If this is pushed through I'm taking my vote elsewhere.

Mar 18, 2011 11:44PM
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Funny how everyone wants to blame the retirees living in their states for the sad state they find themselves in, especially blame the public retirees. They did their time paid into their pension, it's not their fault the states invested badly or are giving away their tax base to businesses who are taking the jobs oversees.

 

I'm at least 14 years away from retirement and I pay into mine, a mandatory 8%, I'm planning for that day. Don't be pissed if you are already overspent or haven't put any money away for retirement. You work, you do you time you deserve the cruises and trips to the buffet, it's not on someone else's dime you damn well earned it. Stop you damn whining because Bush screwed things up.

Mar 20, 2011 8:00AM
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Business in the U.S. pays little in taxes (A) far below what is paid by individuals in the U.S. as income taxes. With the tax loopholes many of these companies pay nothing, zero, in taxes. The only reason these companies go overseas is the dirt cheap labor and to avoid the different administrative laws such as OSHA, EPA, etc. Granted, when reporting profits the full profit of the business is reported, have to keep that stock price up so the huge bonuses can be passed out.

 

 

(A) Congressional Budget Office The Budget and Economic Outlook: Fiscal Years 2010 to 2020

 

These tax benefits given to U.S. corporations do not take into account the many firms now headquartered in the Bahamas and other locations to avoid American taxes. What have our politicians done about these companies avoiding American taxes? Answer: Very little!

 

Our politicians have given and allowed these tax breaks, and have also spent 4.5 trillion dollars of trust fund surplus monies. We have a staggering shortfall looking forward but our politicians are giving tax breaks and saying yes to whatever is asked of them. Not to mention, the generous tax exclusions for those coming from the private sector to work for the government. An enticement is how it is characterized by our government. Some of our government officials coming from the private sector have paid no taxes on tens of millions of dollars.

 

If these companies do not want to be a part of the U.S.? Great, none of we taxpayers should buy any of their products.

Mar 21, 2011 12:52PM
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Why not tax welfare?  They go on cruises and cash in at Casino's.  35% is now collecting it and have never paid taxes, it's time they start.
Mar 18, 2011 9:07AM
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To "Tom in the midwest":

Nice self-serving attitude you've got there.  I'm 41 and have been conservative all my life but I never turned my back on anyone.  You're clearly out of touch with how little social security pays and how much your parents pay in health care costs.  Gee, why am I not surprised?  You obviously have no idea what your parents have to endure financially as you are out of touch with their lives.

Yeah, kids are a "choice."  Too bad your parents didn't do us all a favor and make the "choice" to abort you.  I'll not support tax increases at the expense of those who have actually "earned" a break, unlike yourself.  Now get back to work so their social security checks aren't late.

Mar 19, 2011 7:51PM
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Lt Scrounge, you're posting shows your complete lack of any kind of intelligience on your part, especially when it comes to big business.  Business didnt move out of state because "the companies can't afford to pay the taxes and stay in business, they go out of business".  The move out of state to make even more money.  Its not a matter of "Hey Fred, you know ,this tax rate is going to put us in the red, we have to move" its more like "Hey Fred, you know we can move our operations to China and pay labor $1 a day to do the work for us and see our profits increase 1000 fold.  Big business is NOT your friend.  Big business does NOT give a good damn about people.  Big business ONLY cares about their bottom line and how to increase it.  Who makes more money in a corporation?  That one single CEO or President or all the workers combined?  Typically you'll find that the wage of a single CEO is more than the combined wages of the entire company.  This kind of **** is getting really old really quick for people and it is going to come to a boiling point, I think sooner rather than later.   
Mar 19, 2011 2:00PM
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Poor Dr. Moon, you been watching who? Glenn Beck, or listening to Rush. Both a source of information, but the tainted information is gathered only when it supports the ultra right view. Thank goodness it is clear that most Americans do not support giving the millionaires and big business tax cuts while everyone else pays more. The teachers, seniors are all pointed out as leeches. What about the politicians, big business owners who have tax loopholes so they pay nothing in taxes.
Mar 19, 2011 2:26AM
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Every day the war on the Middle class grows! When we become like a third world country

we will act like one and revolt! That Walker guy will be remembered for the one who lit the match that burnt it all down!

Mar 18, 2011 11:32PM
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Yup ! Come to Texas, hire all the illegals you can and let them work for all the companies in Texas that hires for low Wages/No health-care/No 401-K/ No benefits at all. Yup - I just love living like a **** in Texas. But my problem is I don't have 20 or more family members, willing to live in one house and work for all of these good old low wage jobs that Texas has to offer.

And yes - I live Texas now, Have for 25 years and lived in poverty in Texas for all of those years.

Competing for work and watching the wages for skill trades drop like a rock, with all of those illegals work so cheap, that some have their own people who are citizens - Say it's time to stop all of the illegal immigration

 

Yup I love living like a ****

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