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Gov. Snyder tax increase on retirees pensions,
cuts to state shared revenue for public schools,
cities and counties and more, led to protests
at the Lansing, Michigan capitol building on
Michigan’s Supreme Court will hear arguments on whether Gov. Rick Snyder‘s new tax on public and private pension income violates the State Constitution, on September 7th.
Retirees’ grievances on the pension tax is defined in a area of the Michigan Constitution of 1963, which states in part that “accrued financial benefits” of each public pension and retirement system “shall not be diminished or impaired”.
Gov. Snyder’s recently passed budget included $1.5 billion dollars worth of business tax cuts for C and S Corporations by eliminating the former Michigan Business Tax.
Opponents of Snyder’s plan argue that Michigan Constitutional language public pensions is defined to interpret that pensions earned can’t be taxed, since taxes diminish their value. In contrast, proponents of increasing taxes on state retirees state that the Constitutional provision means that state retirement funds and earned pensions can’t be borrowed against or bargained away.
The latter point of view, presents a confusing legal argument. Earned pension aren’t subject to unionized bargaining agreements and, in the case of privatized pensions, earnings accrued after retirement are based written agreements between retired employees and former employers.
January 1st, 2011, Michigan retirees are scheduled to be impacted by new tax on public and private pensions unless the Supreme Court overrules. The measure placed into law by the Republican super-majority in the state Legislature and signed into law by Gov. Rick Snyder on May 25.
The United Auto Workers union, representing thousands of state employees, said the new tax amounts to a breach of contract.
“The state of Michigan … regularly assured its employees … that their pension benefit included a tax exemption,” the UAW said.
Gov. Snyder’s retiree pension tax law creates three categories of pensioners, continuing the exemption for those born before 1946, limiting the exemption for those born in 1946 through 1952, and eliminating the exemption for those born after 1952 until they reach age 67, when a partial exemption is restored. It is estimated that 1 million Michigan retirees will be impacted by the law.
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