For all the bold ideas Rick Snyder has offered, it is easy to forget that Michigan’s governor is a newcomer to politics. Snyder got a valuable lesson last week when it comes to his new profession: It doesn’t matter how good your ideas are, you have to get the deal done.
The governor had to face political reality, bending on his controversial proposal to tax retirees’ pension income. A deal that Snyder announced with Republican leaders in the House and Senate potentially will give retirees a break.
If you are 67 as of Jan. 1, you’d pay no Michigan income tax on retirement income; if you are already retired but 60 to 66 years old, you’d pay less than Snyder once proposed.
Groups like AARP Michigan are none too pleased, but this represents a serious concession. If this deal passes the Legislature, it will spare most current retirees the full brunt of the new tax. At the same time, it will represent a tax shift that ultimately will be good for Michigan’s younger residents.
The principle behind Snyder’s pension proposal — behind his entire budget, really — is that no group or interest should avoid paying its share. To balance the state budget, he is asking for sacrifices from seniors, all income classes, schools and, yes, even businesses, many of which would lose out on lucrative tax breaks.
The governor has suggested — quite modestly, when you look at it from a distance — that retirees pay tax at the same rate as those who are working. That is the case in most states. Throw out exemptions for Social Security checks or military pensions, and a 60-something would still have it better than his or her 30-something child who is earning a paycheck and probably raising a family.
However, lawmakers made it clear this particular idea was like marching off a cliff. Seniors have spoken more loudly than most groups since Snyder offered his budget plan, and they have a strong argument: It’s not fair to raise their tax bill when they have no other source of income to pay it.
When you consider, too, that seniors vote more reliably than any other age group, the political calculus screamed for a compromise. Sparing older retirees from a new tax is just that, one that will force the governor to make up $600 million elsewhere. Lawmakers who vote for this plan can only hope they have done enough to hold off angry voters.
If this deal becomes law, it will be a significant change to Michigan’s tax policy. Seniors will do more to pay for state government, while younger residents and businesses will give up less in taxes.
The governor is giving up a little, sparing current retirees some hardship, but still making a powerful impact.
— THE JACKSON CITIZEN PATRIOT