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‘Pension’ Tax Repeal Pushed Through Committee

March 5, 2019

House Tax Policy Committee members narrowly rejected an amendment to protect the School Aid Fund (SAF) from losing money before voting 14-1 to move a repeal of the a so-called “pension tax” to the Ways and Means Committee.

Rep. Donna Lasinski (D-Scio Twp.) offered the amendment to shield the SAF. Treasury spokesperson Steve Bieda estimated the retirement tax repeal will cost the budget $384 million in Fiscal Year (FY) 2020, $68 million of which would come from the SAF, and $349 million in FY 2021, with $75 million coming from the SAF.

Jennifer Smith, of the Michigan Association of School Boards, spoke against the HB 4006, sponsored by Rep. Joseph Bellino (R-Monroe), for that reason.

“All the laws that were signed last year that made changes to the revenue stream to the School Aid Fund totaled $195 million that will be diverted to other sources,” she said. “While that policy being debated today . . . may be good policy, it is detrimental to the School Aid Fund and as we continue to shift funds away from that.”

Republicans opposed the amendment with the exception of Rep. Andrea K. Schroeder (R-Independence Twp.), who voted yes, and Rep. Jack O’Malley (R-Lake Ann), who passed, resulting in a 7-7-1 vote. The amendment failed.

Rep. Tenisha Yancey (D-Detroit) offered an amendment to send the bill to Appropriations rather than Ways and Means, which failed on a party-line vote.

On the question of recommending HB 4006, the committee voted 14-1 with only Rep. Isaac Robinson (D-Detroit) dissenting.

Tax Policy Chair Lynn Afendoulis (R-Grand Rapids) put the bill on a fast track. It had its first hearing just yesterday.

Rep. James Lower (R-Cedar Lake) said there had been good discussion of the bill in the Tax Policy Committee, but he thought there should be further tweaks in Ways and Means. And Bellino said he is open to such adjustments.

One proposed adjustment, suggested by Charlie Owens, of the National Federation of Independent Businesses, was that public and private retirement income be treated the same.

Bellino’s plan is to allow all government-funded pension income to be taken out tax free, which was law until 2011.

Public pensions would be exempt from taxation and other retirement income would have higher deductibles for state income taxes. Social Security income would continue to be exempt. It would also would eliminate the three-tiered retirement tax structure — which now has different rules for taxpayers depending on what year they were born.

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