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Governor Signs Overhaul of MI Tax System, Ends 'Retirement Tax'

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Thursday, March 9, 2023   

Gov. Gretchen Whitmer has signed a new law that rolls back Michigan's "Retirement Tax" that was implemented more than a decade ago.

The new law, which amends the Income Tax Act, will mean a $1 billion tax break to seniors and working families.

The measure will phase out the retirement tax over four years, saving hundreds of thousands of Michigan households an average of $1,000 a year.

Paula Cunningham, state director of Michigan AARP, said the measure will reverse a policy that many seniors considered a hardship.

"You look at your Social Security, you look at your pension, you look at your income every month and you depend on that for your livelihood as you retire," said Cunningham. "And to later learn after the fact that that money was not going to come in, because you're balancing the budget and taking money away from older adults, never seems right."

The bill, HB 4001, passed on a straight party-line vote in the Senate, and a single Republican joined the Democrats in the House vote.

The former tax policy was created in 2011 by a GOP-controlled legislature as part of a corporate tax cut.

Whitmer and Democratic leaders also sought to approve $180 "inflation relief checks" to every Michigan tax filer, but could not muster the votes to include it in the package.

Cunningham said AARP and other senior advocates fought for the change for several years, but could not get it through until Democrats gained control of the Legislature and the governor's office.

"That means about 700,000 Michiganders will see more money coming into their retirement income," said Cunningham. "That might mean a gas tank or two, might mean another trip for someone. It could mean more groceries or it may not mean a lot to some folks, but to 700,000 people who will make a big difference."

The bill also expands Michigan's Earned Income Tax Credit from 6% to 30% of the federal tax credit. Lawmakers estimate that will save low-income Michigan families about $750 a year.

Disclosure: AARP Michigan contributes to our fund for reporting on Health Issues, Livable Wages/Working Families, Senior Issues. If you would like to help support news in the public interest, click here.


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