Governor Gretchen Whitmer signed legislation on Tuesday that is expected to deliver a combined $1 billion tax cut for Michiganders.
The “Lowering MI Cost” repeals Michigan’s tax on pensions, putting an expected $1,000 back in the pockets of 500,000 households, and also raises the Working Families Tax Credit, delivering an average combined tax refund of $3,150 to 700,000 households.
“Right now, families are facing the pinch and having tough conversations about how to make ends meet,” Whitmer said. “Today, I am proud to sign a $1 billion tax cut for seniors and working families.”
She added, “Getting this done will help people pay the bills, put food on the table, and afford essentials like groceries and school supplies. It will ensure seniors can keep more of what they’ve earned over a lifetime of hard work and put money back in the pockets of 700,000 working families. I will continue to work with our legislative partners to build on this progress, grow our economy, and lower costs for every Michigander.”
The pension tax was written into Michigan’s tax code in 2011 under former Gov. Rick Snyder. Before that, Michigan was one of just a few states that did not tax pensions.
In a statement, Senate Majority Leader Winnie Brinks, a Grand Rapids Democrat, commended the new legislation.
“Today, we’re undoing the unfair, decade-long budget experiment that required some of our most vulnerable to sacrifice even more,” Brinks said. “Our new majority for the people means putting the real needs of real Michiganders first, and hundreds and thousands of retirees and families earning the least will have a bit of financial breathing room under the Lowering MI Costs Plan. Our legislation is rooted in deeply held core values of the new leadership and our caucuses; values like honesty, pragmatism, and making sure every resident has a shot at financial security and all of the good things that come with it.”
Sponsored by State Representative Angela Witwer (D-Delta Township), House Bill 4001 amends the Income Tax Act to phase out the retirement tax on both public and private pensions over four years. It also quintuples the Michigan Working Families Tax Credit match of the federal Earned Income Tax Credit to 30%, up from 6%.
According to the Whitmer administration, the new Michigan Working Families Tax Credit will impact nearly 1 million children.
The AARP also applauded the legislation.
“More than a decade ago, this shameful pension tax broke a promise to retirees and forced those on fixed incomes to change their retirement plans when the rules of the game unexpectedly were rewritten,” said AARP Michigan State Director Paula D. Cunningham. “But today, after a 12-year fight and a final push that swamped state legislators with more than 13,300 emails from AARP members, this wrong has been righted, providing relief for half a million current retirees and waves of retirees yet to come. AARP applauds the governor and those legislators who elevated the repeal of this tax as a top priority and voted yes.”
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