March 11, 2018
After the Governor’s proposed budget was released in early February, the House and Senate appropriations committees began their hearings for the FY 2019 budget. Of course legislative policy committees continued their work on selected issues.
INCOME TAX CHANGES
The federal tax law changes passed last December eliminated the $4,000 per person personal exemptions in favor of significantly increasing the federal standard deduction. Since Michigan’s income tax law carried over federal personal exemptions to the state income tax, there would be a $1.5 billion increase in Michigan taxpayer liability (approximately $680 per person) without some change in the state income tax statute.
The Governor suggested a $4500 personal exemption by 2021; the Michigan Senate and House proposed $5,000 and $4,800 personal exemptions respectively. Moreover, the House wanted to see faster elimination of the driver responsibility fees and amnesty for those with outstanding fines and charges which affects some 300,000 Michigan drivers owing $637 million in unpaid fees.
In late February, the legislature and Governor came to agreement on these issues. Discarded in the negotiations were the proposed $100 senior tax credit in HB 5422 and the proposed child tax credit in SB 749.
Bottom line — The new revisions to our Income Tax Act will increase the personal exemption from the previous $4,000 in 2017 tax year to $4,050 for the 2018 tax year, $4,400 for the 2019 tax year, $4,750 for the 2020 tax year, and $4,900 for the 2021 tax year. It will require the inflation-based adjusted amount of the exemption to be increased by an additional $600, beginning with the 2022 tax year. The legislation means taxpayers will pay $25 less each for themselves, spouses and dependents than they would have in 2021 had the exemption increased to only $4,300. A family of four would pay $100 less in taxes. The Governor signed the two Senate tax bills, SB 748 and 750, on February 28.
On March 1 he signed the driver responsibility bills: HB 5040, HB 5041, HB 5043, HB 5044, HB 5046, HB 5079, SB 613, and SB 625. Fees for those with certain traffic citations will end October 1, 2018, a year early, under the legislation that also provides amnesty to those with driver responsibility fee debts. Effective March 1, 2018, those whose license was suspended due to unpaid driver responsibility fees would not have to pay the $125 license reinstatement fee.
PENSION TAX UPDATE
Yet another pension tax repeal bill was introduced last month. This one is HB 5663 sponsored by State Rep. Robert Kosowski (D-Westland) who is running for a seat in the Michigan Senate.
This makes a total of 14 measures suggesting modification or repeal of the pension tax, only one of which has become law, HB 4396 (similar to HB 4055 and SB 266). It amended the Income Tax Act to provide an increased tax deduction for retirement income to individuals who (1) were born after 1952; (2) retired as of January 1, 2013; and (3) receive retirement or pension benefits from employment with a governmental agency that was not covered by Social Security and was signed on November 2, 2017.
The other 11 bills haven’t even gotten hearings. During debate in the Senate on the income tax exemption bills, an attempt to add a pension tax repeal garnered 17 of the 20 votes needed for passage,, including 7 Republicans. Until the anti-pension tax repeal legislators and Governor are termed-out or booted, we are not going to get pension tax repeal in Michigan.
OTHER BILL UPDATES
Property Tax Relief — HB 4905 to expand some property tax relief to those who have to live away from their principal residence due to health concerns has passed the House, the Senate Finance Committee, and is awaiting full Senate consideration at this writing. The bill, if enacted and signed into law, would allow a property owner who previously occupied the property as his or her principal residence but now resided in any other location for the purposes of convalescence to retain a principal residence exemption (PRE) if the owner manifested an intent to return. And the bill would delete the requirement that property be unoccupied if the owner is to continue receiving the PRE while he or she resides in a nursing home or assisted living facility.
Annuities — No movement this month on HB 5231, which would amend the State Employees’ Retirement Act to require that one or more annuity provider(s) must be chosen through a competitive bid process and then offered to state employees and retirees. Currently state employees wanting to purchase an annuity can approach any financial services company to purchase an annuity. 401(k) record keeper Voya could provide financial advice and annuity options to state employees if approached by a customer to do so.
The Michigan Department of Treasury is officially neutral on the bill but studying it; privately it is critical. Michigan SERA favors the concept of offering more competition if the regulatory scheme protects state employees, and is therefore studying the proposal further. The bill has been reported out of the House Financial Liability Reform Committee and is awaiting House floor consideration. Reportedly a substitute bill will be introduced on the House floor addressing some problems identified by various parties in the hearings and thereafter.
Disinheriting an Adult Child — HB 4410 would allow a person to exclude an adult child in their will or trust from receiving any of the proceeds of the estate. The bill would clarify that by including the language specified in the bill in a will, the parent could make sure the child would not be able to make a claim for a share of the exempt property such as jewelry, cars, household furniture, or appliances that is protected from creditors. The amount that may be protected is established in statute and currently is about $15,000. The bill passed the House on February 14 and is now in Senate Judiciary Committee for hearing.
Free Credit Freezes — If the Governor signs HB 5094 on his desk at this writing, Michigan residents will have a right to free credit freezes. Both the House and Senate overwhelmingly passed a bill that would amend Michigan’s Security Freeze Act to prohibit a consumer credit reporting agency from charging any fee for placing, temporarily lifting, or removing a security freeze for a Michigan consumer. Currently consumer credit reporting agencies can charge up to $10 for each transaction unless identity theft is reported to the police. While a freeze is in place, the consumer reporting agency may not release the consumer’s credit report or any information from it without the consumer’s permission. A consumer may have his or her security freeze temporarily lifted, and a consumer reporting agency must remove the freeze at the request of the consumer or his or her authorized representative.
State Pension Funds Divest Gun Stocks — In late February after the Parkland, Florida shooting in which 17 students and teachers died, Michigan’s retirement system sold off $2 million worth of stock in Olin Corp, a chemical company that manufactured ammunition for Winchester, a major gun manufacturer. Treasury says it now owns no firearms-related stocks.
The language for two new ballot proposals were approved by the Michigan State Board of Canvassers on February 13, making the total of 12 petition drives sought, and a half dozen or so active at this time.
Voting Rights Amendment — Ballot effort Promote The Vote would amend Article II, Section 4 of Michigan’s Constitution to revise a number of the state’s voting practices to make voting more accessible, convenient, secure, and counted. It would:
The measure is initiated by Michigan chapters of the League of Women Voters, the American Civil Liberties Union, and the National Association for the Advancement of Colored People. The effort has received endorsements from Detroit Mayor Mike Duggan, former Wayne County Clerk Teola Hunter and former U.S. Sen. Carl Levin. It will need about 316,000 valid signatures to qualify for the ballot by early July.
The State Employee Retirees Association Coordinating Council Executive Committee endorsed the Promote The Vote ballot drive at its meeting on February 2. SERA chapters are encouraged to have PTV representatives speak to their chapters; members are encouraged to volunteer for collecting signatures.
30 PERCENT RENEWABLE ENERGY — The other new ballot proposal, firstname.lastname@example.org, giving your name, email address, and chapter name.
Editor’s note: Mary Pollock is the Lansing SERA Chapter and SERA Council’s Legislative Representative. She may be contacted at 1200 Prescott Drive, East Lansing, MI 48823-2446; Phone 517-351-7292; E-mail email@example.com.
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