MICHIGAN'S NEW BUDGET: Taxing pensions...

Our governor, Rick Snyder, ran and won the office by running as a non-politician, business man and nerd that would get Michigan out of its economic morass. He said it would be painful but he would do what the previous governor (Democrat) would not do; cut spending and balance the budget.

Yesterday, some of his proposed cuts leaked out and my news channel (WXYZ-TV) Channel 7 jumped with both feet on a proposal they would think would cause a firestorm of protests; taxing pensions.

After a lifetime of watching the same news channel I am determined to switch because Channel 7 has become like FOX NEWS, injecting emotion into issues just to get a rise out of the viewers which they think, will increase ratings. They are now asking viewers to write in on a variety of topics that they continuously pose from Tiger spitting on the golf course to what do you think of paying a tax on your pension; this must be the new, interactive news. What happened to just reporting the news and saving opinions for the editorial segment?

Anyway, I am here to defend Gov. Snyder’s proposal to tax pensions in Michigan and I will use boring FACTS to make my case.

1.                    All retirees get Social Security payments which are based on their employment history, etc. and these payments are NOT taxed.

2.                   Many retirees do not get pensions which are usually for union workers and white collar workers of large corporations who receive pensions AND their Social Security payments and in many cases, medical benefits even though they already have Medicare (stupid excess).

3.                   Pensions are now passé because they are unsustainable in today’s business economy (especially public employee pensions). Employees now have 401(k)s to which they contribute pre-tax dollars and employers can also contribute matching funds as in profit sharing.

4.                  Out of 41 states that levy an income tax, only Michigan, Alabama, Mississippi and Pennsylvania (interesting grouping), exempt, to an extent,  public and private pension income from taxation; yes, pension payments are considered income. Michigan exempts all public pensions and up to $90,000 (joint) of private pensions.

5.                   Snyder has emphasized that he will not allow public union workers to get more or better benefits than workers in private employment, hence ALL pensions will be taxed.

6.                  Those receiving pensions avail themselves of state and local services that are available and therefore they should pay for them, just like everybody else does.

7.                   States that have no income tax and therefore have nothing to do with pensions are: Alaska, New Hampshire, Tennessee, Florida, South Dakota, Washington State, Nevada, Texas and Wyoming. Only Alaska and New Hampshire have no sales tax.

8.                  Michigan, because its economy depended on the auto manufacturing business so an extent, was hit harder economically than many if not most states and therefore a more drastic economic plan is mandated.

9.                  Do not confuse retirees that receive ONLY Social Security benefits with those that receive Social Security benefits plus a pension with benefits.

10.                The state of Michigan can no longer afford the largesse of exempting pensions from taxation and must join the many states that tax pensions.

One danger point about taxing pensions is the real possibility that retirees who live in Michigan during the summer and travel to their winter homes in Florida or Texas in the winter, may decide to establish permanent residence in those states with no income tax at all. Since these snow birds do not pay any taxes on their pensions currently, this would not impact the State of Michigan financially. If they decide to sell their homes in Michigan, the state and local governments would lose any property taxes that have been levied and collected in the past…I don’t think many will do that.

I decry WXYZ-TV and any news media for trying to inflame viewers with provocative reporting that does not analyze the entire issue in a professional manner and place that single issue into the big picture of the state’s economy as a whole or wait till the governor presents and explains his entire budget.

Related articles

• APNewsBreak: Mich. gov. calls for sweeping cuts (seattletimes.nwsource.com)
• Mich. gov.'s budget plan cuts spending, tax breaks - Washington Post (news.google.com)
• Public sector pensions: workers face brutal reality check (telegraph.co.uk)
• Tax-Friendly States for Retirees (pinkbananaworld.com)