Michigan Gov. Snyder Defends Pension Tax

Kalamazoo, Michigan

Michigan Gov. Rick Snyder’s tax on pension benefits, levied in 2011, has become a legitimate campaign issue over the last few days. Snyder took to the radio this morning to defend the policy and cast the tax in a different light. Reported by Detroit News:

Democrats have made Snyder’s changes to the way pensions are taxed a major issue in the election campaign, calling it a tax on seniors — a characterization the governor challenged Friday during the live radio show.

“That’s a misstatement when it says seniors,” Snyder told radio show host Rick Pluta. “It was really about essentially removing the exclusion on pension income.”

In 2011, Snyder first proposed ending all income tax exemptions on pension income. Previously, only retirees with large pensions from private employers were subject to the income tax.


The governor noted a new exemption of up to $40,000 was carved into the tax code for all forms of income for senior citizens.

“Now it’s fair between people who had retirement income and people who had working income,” Snyder said.

Under the changes Snyder signed into law, all pension income is subject to the 4.25 percent income tax for residents born after 1952.

“It’s still one of the top 10 most generous schemes in the country,” Snyder said of Michigan’s tax on retirement income.

Snyder reiterated his longstanding argument that making more pension income subject to the income tax was a matter of fairness to other workers.

“If you say retirement income isn’t taxed, you’re shifting your taxes to your kids to say ‘we want you to carry us,’ and that’s not a fair answer,” Snyder said.

The pension tax is especially controversial because Snyder simultaneously cut taxes for businesses by $1.8 billion.

Snyder countered that, although he cut taxes for businesses, he also “wiped out” tax credits for those businesses.

Pension Tax Could Loom Large in Race for Michigan Governorship

Detroit, Michigan

Pensions aren’t the biggest issue in Michigan’s race for governor. But with incumbent Rick Snyder in a dead heat with challenger Mark Schauer, Snyder’s 2011 pension tax increase could prove to be a major factor in the way the race eventually plays out.

From Money News:

Polls have shown Snyder, 56, in a dead heat with Democratic challenger Mark Schauer, 52, a former state legislator and congressman who’s hammering Snyder for hurting pensioners while cutting business taxes by $1.4 billion.

“I’m very sorry I voted for Mr. Snyder,” said Rosalind Weber, 67, a retired state worker from Ionia who calls herself an independent. “I won’t vote for him again. I didn’t like what he did with the taxes.”

Snyder bucked a decades-old trend among states of reducing taxes on retirees. While other issues are stirring the race, Michigan’s 7.7 percent July unemployment rate remained above a 6.2 percent U.S. average, the pension tax is driving a Democratic drumbeat for change in Lansing, where Republicans control all three branches of government.

Until Snyder’s changes took effect, Michigan had exempted most pension payments from the income tax, now at 4.25 percent. He created a three-tier system for retirees born before 1946, after 1952 and those in between. Members of the youngest group were hit hardest; instead of being allowed to exempt $47,309 in retirement income, they’re now taxed fully until age 67. Then, they get a $20,000 exemption.

Michigan’s House Fiscal Agency estimates that the tax cost retirees around $350 million in 2013 alone. And, as everyone knows, seniors vote. We’ll see how the race plays out, but the pension tax increase is sure to be an issue moving forward.