LANSING, Mich. (May 24, 2022) — Today, Sen. Paul Wojno (D-Warren) and Rep. Alex Garza (D-Taylor) introduced bills that would amend the State Income Tax Act of 1967 to phase out the tax on retirement and pension benefits over the next five years.
Specifically, their legislation, Senate Bill 1046 and House Bill 6117, would begin phasing back in the retirement tax benefits that were repealed so that by tax year 2025, Michigan retirees would once again have the full retirement tax benefits they were promised when they were still working.
The bills drew praise from Gov. Gretchen Whitmer.
“Michigan’s retirees deserve to keep their hard-earned dollars,” Governor Gretchen Whitmer said. “Phasing out the retirement tax would put an average of $1,000 back in the pockets of 500,000 families, helping them pay the bills and put food on the table. People who worked hard their whole lives and had the rug ripped out from under them when the retirement tax was enacted by the last administration deserve better. I am grateful to Senator Wojno and Representative Garza for taking the initiative and joining my call to repeal the retirement tax. Let’s get this done so we can put money in people’s pockets and help them thrive.”
In 2011, former Gov. Rick Snyder and Republicans in the Legislature modified the state’s tax code by instituting a new tax on pension income based on a retiree’s birth year, in part to pay for a massive $1.65 billion tax cut for businesses. Those born before 1946 were unaffected, but those born between 1946 and 1952 were able to deduct the first $20,000 of retirement income for single taxpayers and $40,000 for married couples filing jointly, prior to age 67. Those born after 1952, however, are currently not able to deduct any retirement income until they turn 67, when they can claim the $20,000 per individual and $40,000 for those married couples filing jointly.
Democrats have long sought to fully repeal this legislation.
“Seniors have suffered under this policy long enough,” Sen. Wojno said. “Restoring the deduction for retirement benefits in stages means all Michigan residents will be treated equally, regardless of when they were born, and allow taxpayers aged 67 and older the option to either deduct retirement benefits or claim the deduction against all income available.”
The legislation would again exempt public pensions and restore deductions for private retirement income, including private‐sector pensions, withdrawals from individual retirement accounts (IRAs), and the portion of a 401k account that is subject to an employer match.
“Our Michigan seniors have worked hard for their retirement savings, and this extra taxation is an unnecessary burden,” Rep. Garza said. “When the retirement tax was enacted, workers and retirees were not able to properly plan for their retirement and were forced to pay this unexpected and unfair tax. Repealing this tax will make for a much fairer tax system and boost local economies through increasing retirees’ participation in the economy, while making Michigan more competitive and attractive to seniors.”
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