In The Name Of ‘Fairness’ If Pensions Should Not Be Taxed In Michigan Should 401K’s Also Not Be Taxed
First a little information on pensions and taxation in Michigan. Before House Bill 4361 was passed in 2011 and signed by Governor Snyder, all public pensions in Michigan were untaxed and private pension income up to $90,240 was exempt from Michigan’s state income tax. House Bill 4361, did set up the following brackets:
- People born before 1946 were fully exempted from paying state income tax
- For people born between 1946 and 1952, tax-free exemptions were reduced
- People born after 1952 pensions were subject to full taxation as income.
The question when it comes to taxation is always who should have skin in the game when it comes to financing our state and who should not? Prior to January 1, 2012, all public pensions were exempt from paying state income tax and private pensions were exempt up to $90,240 for joint filers.
That all changed back in 2011 when Michigan passed a law that taxed all pensions in the state of Michigan. Many if not all people with pensions were not happy about that. Now Governor Whitmer wants to go back to the days of Michiganders with pensions no longer have to pay taxes on those funds to the state government.
According to the governor’s office, her plan would save approximately half a million households an estimated $1,000 each year. There are talks about not only exempting public pensions but also “restore deductions for private retirement income, including private-sector pensions, withdrawals from individual retirement accounts (IRAs), and the portion of a 401k account that is subject to an employer match”.
According to a report in MLive Whitmer said “this budget is a reflection of addressing the wrong that was done 10 years ago”. The proposed plan from the governor’s office would phase in the reduction of taxes paid on pensions. In the first-year taxable income on pension would be reduced by 25%, eventually reaching 100% exemption by 2025.
Governor Whitmer tells us her plan to repeal Michigan’s pension tax is about fairness for retirees and seniors. I can accept that Governor Whitmer and believe that you truly believe it is about fairness for retirees and seniors. Except you have one huge problem with your statement and that is you believe it is about fairness for retirees and seniors but not for all retirees and seniors. You are not calling for a 100% exemption from Michigan income tax on all retirement accounts such as 401K’s, 403B’s and IRA’s.
Why would only Michiganders who have pensions as a retirement account not have to pay Michigan income tax yet the vast majority of us who do not have a public or private pension not be given that same gift? That does not sound fair to me, does it to you?
Governor Whiter, If you are for pensioners not having to pay Michigan income tax, I would think in the name and spirit of fairness you must also advocate for all Michiganders including those who have funded their own “pensions” in the form of 401k's, 403b's or IRA’s not having to pay Michigan income tax. I
Would you agree Governor Whitmer?
To all elected Democrats in the state of Michigan, would you agree?
Anyone, who believes pensions should not be taxed, would you also agree?
When you use the word “fairness” you cannot say one person gets the tax break and the other does not simply because of where their retirement income came from. One’s retirement vehicle is paid by the taxpayer or the employer the other is mostly funded by the employee.
I did get a laugh when I heard that Governor Whitmer said:
We have to be thoughtful and conservative when it comes to spending taxpayer dollars
Sure you do, is that what you and your colleagues call increasing your spending by 7.2% for this fiscal year.