Michigan is currently one of only four states in the nation that exempt most or all pension income from state income tax
MARQUETTE -- Under Governor Snyder’s proposal, pensions would be taxed a flat 4.25 percent but social security income would remain tax free.
Thursday we told you for the average senior couple with the typical amount of social security income, approximately $24,000 dollars, and the average homestead property tax credit, approximately $548 dollars, they will not owe any state income taxes if they have a total income below $41,000 dollars.
This is because the personal exemption credit and homestead property tax credit will offset the taxes owed to the state.
Governor Snyder’s proposal to remove the exemption that keeps public and private pensions tax-free would generate $900 million dollars for the state annually.
A figure NMU Political Science Professor, David Haynes, believes would be challenging to generate elsewhere.
"Someone either has to pay more taxes or you have to cut programming or both,” Haynes said. “That's the crisis here."
Still, many residents are upset that Governor Snyder is even considering taxing pensions.
"I guess most people feel that they're, you know, they're trying to make Michigan a pro-business state which is fine, but they're taxing individuals to help business," Jim Heikkinen, President of U.P. Tax & Accounting said.
Governor Snyder says Michigan’s budget shortfall has to be made up somewhere and everybody has to contribute. But he's running into resistance, even in his own party.
“The Senate Republicans have come forward and said, let's find some place in the middle here, let's tax pensions income in the future and maybe raise the cap of it,” Haynes said. “But let’s talk about it in the future."
One important note here, Governor Snyder’s proposal would not tax military pensions.
The legislation is being considered by the State House and Senate.
Governor Snyder hopes to see it passed by May 31.
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