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Michigan pension tax repeal bill makes it to Senate floor

The Michigan State Capitol building is seen on October 8, 2020 in Lansing, Michigan. A Michigan law from 1931 would make abortion a felony in the state if the Roe v. Wade decision is overturned.
Rey Del Rio
Getty Images

A bill sent to the Michigan Senate Wednesday, January 25, would phase out taxes on public pension benefits and provide certain deductions for private retirees.

The plan gives pensioners the choice to opt into a tax structure that existed before the system changed in 2011.

Democratic Senator Kevin Hertel sponsors the bill. He says he’s open to providing more tax breaks for private retired workers down the line.

“The most immediate thing that we have to do here is repeal the tax that was put in place in 2011," Hertel said. "I think we have seen this is negatively impacting people across our communities. And so that is the most critical thing we have to do today.”

Hertel says some more changes could come that would make the plan immediate rather than phasing in the tax cuts.

The bill would also provide those receiving private pension benefits with the chance to deduct around $42,000 for a single return, or double that for a joint return.

Democratic Senator Mary Cavanagh chairs the Finance, Insurance, and Consumer Protection Committee. She says the state' revenues keep rising, so she’s not concerned about the potential fiscal impact of the tax cuts.

"Michigan is increasing on what we’re seeing every year," Cavanagh said. "But also we’re putting money into the rainy day fund to be prepared for any recession we might see."

Republican Senate Minority Leader Aric Nesbitt says the plan is too complicated.

"Some individuals get a little piece," Nesbitt said. "Other ones get full relief depending on whether you worked in the public sector, private sector, where the savings come from. But a 75-year-old who has no retirement income and is still working at Meijer or Kohl’s or somewhere else is going to see zero benefit."

House Republicans have proposed their own bill to provide an across the board tax cut depending on age.

There's talk that the bill could change before it passes out of the Senate, to provide immediate tax breaks rather than a gradual introduction.