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Whitmer discusses pension tax phase out, plans for new year

The Democrats House majority is a temporary even split with Republicans as the state waits for special elections to fill vacant seats

The governor and other state officials met in Lansing Tuesday to discuss the impact of a Michigan law rolling back state taxes on pensions taking effect.

Technically, the law won’t take effect until February 13. But the phase-out begins with this year’s tax filings for the 2023 tax year.

Speaking to AARP members in Lansing, state Senate Appropriations Committee Chair Sarah Anthony (D-Lansing) said that would save around 500,000 residents an average of $1,000.

“Retirees will be eligible for their retirement and pension benefits from taxes in 2026. And many Michiganders will be able to see relief as early as this year when paying taxes that are due in April of 2024,” Anthony said.

Government pensions had been exempted from state taxes before the law changed in 2011. Private retirement income had been exempted up to certain amounts.

State House Appropriations Committee Chair Angela Witwer (D-Delta Twp) said her constituents have frequently asked her about undoing those changes.

“I would be knocking doors, walking down the street and a guy would walk out of a trailer, and yell down the street to me, ‘Have you done anything about that retirement tax yet?’ They would share their stories of things they were struggling with. It was the number one priority for me in my district,” Witwer said.

Legislative Republicans have criticized the phase-out as only benefiting older Michiganders with pension plans but not helping those who are still working. They have proposed an across-the-board tax cut for older adults in the past.

Tuesday’s discussion came a day ahead of lawmakers returning to Lansing to meet for the first time since adjourning in mid-November.

Democrats entered last year with a majority in both chambers of the Legislature. Now, their House majority is instead a temporary even split with Republicans as the state waits for special elections to fill vacant seats.

But Democrats will maintain control over both chambers of the Legislature, thanks to rules approved for the House at the beginning of the session.

Democratic Governor Gretchen Whitmer said she still expects to see early action on priorities like economic development and prescription drug affordability.

“This temporary time where we’ve got a couple special elections that are going to play out quickly here and we’ll be back up to full speed in the house, I think is an opportunity to double down on places where we can find some common ground,” Whitmer said.

House Republicans have sought a shared power agreement while the chamber is evenly split, something Democrats have resisted.

Nonetheless, Whitmer may find some of the common ground she’s searching for in a few areas.

For example, she said she’s looking to see research and development tax credit legislation hit her desk.

“We are competing against other states and other countries, and Michigan’s got to be able to put our best foot forward, whether it’s having a great workforce, a great business climate, synergies around energy and electricity and good paying jobs, so I think there’s going to be some common ground,” Whitmer told reporters Tuesday.

A bipartisan package to that end has already made it out of the House. Besides that, Republicans say they hope to see legislation focusing on areas like school safety, local road funding, and an economic strategy to help bring more people into Michigan and counteract flagging population growth.

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