Question about the Pension Taxes on Michigan Residents

[Mikeg]

Mike, that's true of all state taxation revenue -- isn't it. My last question still stands. So why the benefit for retirees from government and not other retirees. Why are they a favored class? If you want the $343 million to stay in taxpayers hands, why not just reduce all tax rates for all retirees to achieve that savings. Do you think non-government retirees don't deserve the same break? If so, why?

Government and private pensioners who were younger than 67 in 2012 are now both taxed based on the same set of exemption levels. Only the government pensioners who were 67 and older in 2012 retained their full exemption - unfairly in my opinion, especially for legislation that was touted as supposedly necessary to rectify an unfairness to younger workers.

I'm hard-pressed to think of any MI income tax exemptions like this that are predicated on the taxpayer's date of birth, particularly for something like pension income which in this day and age does not necessarily begin at the same age for everyone. If fairness was truly the name of the game, the change in exemptions would have affected only those who had not yet started collecting pension income so they could make their decision to retire with advance knowledge.

I believe there are more acceptable ways to resolve "unfairness" in the tax code than one chosen which takes more taxes from targeted age groups to fund the high cost of government.

[Wesley Mouch]

I believe there are more acceptable ways to resolve "unfairness" in the tax code than one chosen which takes more taxes from targeted age groups to fund the high cost of government.

Yes. The tax code already exempts [[for all practical purposes) those who don't make much money. At the average income of $19,000 for Detroit GRS retirees, I don't think they'll pay much tax anyway.

I'm OK with the retiree who is getting $100,000 being taxed just like everyone else.

A blanket exemption was unnecessary and just pork of another era.

[Locke09]

Yes. The tax code already exempts [[for all practical purposes) those who don't make much money. At the average income of $19,000 for Detroit GRS retirees, I don't think they'll pay much tax anyway.

I'm OK with the retiree who is getting $100,000 being taxed just like everyone else.

A blanket exemption was unnecessary and just pork of another era.

I would have been ok with all retirees making over a certain amount, regardless of age, paying income tax as well. But in their rush they didn't take time to forge something that would have made more sense and been more fair. Now it is a convoluted age/social security amount/pension amount mess.

A simple formula where the first X dollars is exempt and everything else is taxed would not have caused nearly the stir that was caused. Another alternative that would have been palatable was to exempt those already retired and tax any new retirees.

[Wesley Mouch]

I would have been ok with all retirees making over a certain amount, regardless of age, paying income tax as well. But in their rush they didn't take time to forge something that would have made more sense and been more fair. Now it is a convoluted age/social security amount/pension amount mess.

A simple formula where the first X dollars is exempt and everything else is taxed would not have caused nearly the stir that was caused. Another alternative that would have been palatable was to exempt those already retired and tax any new retirees.

Locke, the tax code is the right tool here. Consider this case: A retiree sets up a successful consulting practice and makes $2 million a year in consulting fees from his cousin Robert who works in government. Why should some of his pension be exempt from income tax?

You need to consider all income -- and that's just what the tax code already does.

[Locke09]

Consider this case: A retiree sets up a successful consulting practice and makes $2 million a year in consulting fees from his cousin Robert who works in government. Why should some of his pension be exempt from income tax?

As long as he pays taxes on his 2 million, I'm good with him getting an exemption on the first $20,000 of his pension. That is more fair than taxing the people who have already retired and are on a fixed income and had no opportunity to plan ahead for the loss of their exemption. That's where 99% of the people are going to fall, so if 1% gets an extra minor benefit as a result, I think that is fair.

Besides, the tax code doesn't stop him from getting his personal exemptions just because he's making a lot of money. This exemption would be the same. I think the regular tax code isn't the best fit because these people are stuck on a fixed income and we have basically reduced the value of that income forever. so, a non-age-related exemption or grandfathering would have been fair[[er).