Legislative Round-Up: Michigan Supreme Court Greenlights Gov. Snyder's Pension Tax

A divided Michigan Supreme Court voted to impose a 4.35 percent personal income tax on seniors' pensions Friday.

According to the Detroit Free Press, the new tax on pensions was expected to raise about $225 million in the first three quarters of 2012 and $343 million in the state's 2012-13 fiscal year. However, those numbers will be reduced by about $60 million in 2012 and $90 million in 2013 after the court struck down a provision that would have phased out the use of personal tax exemptions for wealthier taxpayers (those earning $75,000 and above for a single person, and $150,000 and above for couples.)

Taxing pensions was one of the cornerstones of Gov. Rick Snyder's overhaul of the state tax system that was approved by state lawmakers earlier this year.

"I’m pleased by the ruling from the Michigan Supreme Court that the removal of the income tax exemption for public pensions is constitutional. We appreciate the court’s willingness and work to review this critical issue on an expedited basis," Snyder said in a press release. "Our administration has been unwavering in its position that the removal of the public pension income tax exemption was the right and prudent thing to do. It will provide for the long-term structural stability of the state’s budget while minimizing the impact on current retirees and seniors. This will help get Michigan’s fiscal house in order and economy back on track."

Zack Pohl, a spokesman for We Are The People, a coalition of stu­dents, seniors, work­ers and fam­i­lies in Michigan advocating for the middle class, said the court's decision is disappointing.

"This flawed ruling gives a green light to Gov. Snyder to raise taxes on Michigan seniors during the worst economy since the Great Depression. Less money in the pocket of Michigan seniors will mean less money to spend at local business on food, groceries and prescription drugs," he said. "It’s clear Lansing politicians and our partisan Supreme Court are more interested in protecting rich CEOs and big corporations than Michigan’s  middle class families.

"To get our economy back on track, we need our elected officials to stop the partisan power struggles and start working together to create good jobs that pay a fair wage.”