MI-SERA

Capitol News

February 5, 2023

By Mary Pollock

The first month of the Democratic trifecta in Michigan moved with lightning speed to display its priorities and ability to exercise its prerogatives. Capturing my focused attention was the gubernatorial and legislative announced intentions to move retiree income tax relief as their first priority bills. SERA submitted three suggestions for improvement in the Democrat-sponsored bills; two of them were adopted by the State Senate and will likely make it to the Governor’s desk! More detail on that dramatic story below.

FIRST MONTH ACTION

Executive Branch — Governor Whitmer’s administration priorities can be found from her campaign promises, Inauguration Speech on January 1, her State of the State address on January 25, and her February 8 Executive Budget Proposal, the latter of which is not yet released at this writing.

State of the State Address – The Governor’s SOTS Address spoke to these main themes:

Lowering costs to Michiganders by rolling back the retirement tax, boosting the Working Families Tax Credit, and offering free pre-K for all.
Economic development to bring jobs to Michigan and make communities more attractive places to live and work.
Expand tutoring, after-school programs, and extra instructional time in the classroom for Michigan students.
More effort to reduce crime and gun violence by investing more in law enforcement training, oversight, and mental health resources. She supported commonsense reforms like universal background checks for gun purchasers, safe storage laws, and extreme protection orders.
Protect fundamental freedoms by repealing Michigan’s 1931 abortion ban and amending Michigan’s civil rights law to include protections for LGBTQ+ community.

Legislative Branch — On January 11, 2023, the focus was on swearing in of the 102nd Legislature, election of officers of both chambers (although each caucus had elected their leaders earlier), adoption of Joint and each chamber’s Rules, and appointment of the Clerk for each chamber. The Democratic Speaker of the House Rep. Joe Tate (D-Detroit) and Majority Leader in the Senate Sen. Winnie Brinks (D-Grand Rapids) announced their respective chamber’s reorganized committee structure, new committee chairs, and new committee members. Leadership in both chambers announced 110 session days scheduled for 2023 compared to the actual 86 days in 2022.

First-day Bill Introductions — Each chamber’s majority party captured the early-numbered bills on their first day in office to emphasize their priority issues. For the Senate:

Senate Bill (SB) 1 Retirement/Pension Benefits sponsored by Sen. Kevin Hertel (D-St. Claire Shores). Revises limitations and restrictions on deductions of certain retirement or pension benefits and revenue distribution to state school aid fund.
SB 2 Abortion Ban Repeal sponsored by Sen. Erika Geiss (D-Taylor). Repeals provision related to publication of cures for conceptive preventatives
SB 3 Income Tax Credit sponsored by Sen. Kristen McDonald Rivet (D-Bay City). Increases earned income tax credit (EITC) to 30 percent of federal EITC, no phase-in period.
SB 4 ELCRA sponsored by Sen. Jeremy Moss (D-Southfield). Includes sexual orientation and gender identity or expression as categories protected under the Elliott-Larsen civil rights act.
SB 5 Collective Bargaining sponsored by Sen. Darrin Camilleri (D-Brownstown Township). Allows requirement for agency fee for nonunion members in bargaining agreements and as condition of employment in public sector.
SB 6 Prevailing Wages sponsored by Sen. Veronica Klinefelt (D-Eastpointe). Reenacts prevailing wage.

For the House:

House Bill (HB) 4001 Retirement/Pension Benefits sponsored by Rep. Angela Witwer (D-Delta Township). Revises limitations and restrictions on deductions of certain retirement or pension benefits and revenue distribution to state school aid fund.
HB 4002 Income Tax Credit sponsored by Rep. Nate Shannon (S-Sterling Heights). Restores earned income tax credit.
HB 4003 ELCRA sponsored by Rep. Jason Hoskins (D-Southfield). Includes sexual orientation and gender identity or expression as categories protected under the Elliott-Larsen civil rights act.
HB 4004 Collective Bargaining sponsored by Rep. Regina Weiss (D-Oak Park). Allows requirement for agency fee for nonunion members in bargaining agreements and as condition of employment in public sector.
HB 4005 Collective Bargaining sponsored by Rep. Regina Weiss (D-Oak Park). Revises collective bargaining rights to restore former provisions.
HB 4006 Abortion Ban Repeal sponsored by Rep. Laurie Pohutsky (D-Livonia). Repeals penalty for administering with intent to procure miscarriage.
HB 4007 Prevailing Wage sponsored by Rep. Brenda Carter (D-Pontiac). Reenact prevailing wage.

Two newly elected House Democrats have already decided to run for their local mayoral vacancies in November 2023. Both are expected to win, putting the House’s 56 -54 Democratic voting majority in jeopardy later this year until special election primary and general elections can be held in those two districts.

PENSION TAX RELIEF UPDATE

2011 Income Tax Changes — In the 2011 tax overhaul, seniors and taxable retirees paid $528 million more in state taxes in 2012 alone according to the Senate Fiscal Agency at the time. With about 35 percent inflation since 2011, seniors and taxable retirees are now contributing roughly $713 million a year to the state’s coffers. In 2012, they contributed 36 percent of the increased taxes on individuals yet seniors were only 13 percent of Michigan’s population. At the same time, tax burdens on businesses decreased $1.8 billion.

This tax shift was accomplished partially by eliminating or changing three senior and/or retiree tax preferences starting in 2012:

A Homestead Property Tax Credit (HPTC) of up to $1,200 for those 65 and older was eliminated. Instead, the HPTC became a graduated income-based HPTC regardless of age.
Every taxpayer 65 or older got an additional income tax exemption of $2,300 in 2011 dollars but lost that in 2012 and thereafter.
In 2012, retired taxpayers became subject to differing income tax schemes based on their year of birth: those born before 1946, those born in 1946 through 1952, and those born after 1952.

Those born before 1946 lost their extra senior exemption and senior HPTC if 65 or older but they were able to keep their other income tax treatment without change. Public pensions were totally exempt from taxation. Both public and private pensioners were eligible for the age-65+ senior subtraction on interest, dividends, and capital gains for the first $10,058 for a single filer and $20,115 for married and filing jointly taxpayer, indexed to inflation. Private pensions and retirement income were eligible for an exemption up to $45,120 for single filers and $90,240 for joint filers, indexed to inflation.
The two younger retiree groups lost not only the special senior exemption when turning 65, the special senior HPTC treatment after turning 65, their public pension exemption, and the senior citizen subtraction for interest, dividends, and capital gains. Instead, most in these two age groups were subject to a limited exemption from income tax for the first $20,000 of any kind of retirement income for single filers and $40,000 of any kind of retirement income for those married and filing jointly. This tax then changed somewhat after the taxpayer reached age 62. After 2012, exemptions were approved for special retiree groups: Railroad retirees, Michigan National Guard retirees, and those receiving military compensation and pensions. Those with pensions from governmental agencies not covered by Social Security at age 62 got a $35,000 exemption for single filers and $55,000 for joint filers or $70,000 if both spouses worked for an agency not participating in Social Security.

SB 1 and HB 4001

Michigan Senate Adopts Two of SERA’s Recommendations — After ten years of proposals by both Democrats and some Republicans to eliminate or modify the pension tax, it was no surprise that pension tax relief bills were honored as the first bills introduced in both chambers when the new Democratic majority took over on January 11, 2023.

Senate Finance Committee Hearing — At the first meeting of the new Senate Finance, Insurance, and Consumer Protection Committee on January 25, Senate Bill 1 was the sole substantive agenda item. SERA supported the bill in written testimony by saying SB 1 as introduced was a good start toward easing the tax burden on public and private sector retirees for those born after 1945, but it did not go far enough. We reminded the Committee members about the cost to seniors and retirees of the 2011 income tax overhaul and proposed some improvements in the bill, two of which turned out to be the sole amendments included in the floor substitute bill passed by the full Senate the next day, January 26.

First, we suggested that the bill be effective immediately for tax year 2023 and not phased in gradually over four years as proposed in SB 1 as introduced. Other organizations such as AARP of Michigan also supported this change.

Second, we were the only ones to point out that the amounts for retirement income exemptions in SB 1 carried over the exemption amounts from the 2011 statute and should be increased to reflect inflation since 2011.

Third, we suggested a return of the extra senior exemption for those 65 and older at the $5,000 level, indexed to Consumer Price Index for the Elderly thereafter.

In the adopted substitute of SB 1 (quoting the Senate Fiscal Agency Analysis of the bill), “Beginning with the 2023 tax year, in determining taxable income, a taxpayer could elect to apply the current limitations or restrictions on taxation of pension or retirement income, or instead could elect to deduct his or her eligible retirement and pension benefits received from a Federal or State public retirement system, Social Security benefits, and a maximum of $56,961 for a single return and $113,922 for a joint return for the 2022 tax year (these amounts are adjusted for inflation thereafter), for retirement benefits from another retirement or pension system or a retirement annuity policy without any limitations or restrictions for year of birth or age.” Public pensions would not be taxed, regardless of year of birth or age.

There was a spirited but failing effort by Senate Republicans to amend the bill on the floor to eliminate or lower the personal income tax rate for every taxpayer, expand the exemptions under SB 1 for all seniors and provide a $500 child credit for families. Several Republicans criticized the Democrats’ proposal as giving preferential treatment to people with public pensions and gave no relief to seniors who are still working and not dipping into pensions or other retirement savings.

The SB 1 substitute with our suggested changes was adopted 23 — 15. GOP Senators John Damoose (R-Harbor Springs), Mark Huizenga (R-Walker), and Michael Webber (R-Rochester Hills) joined all 20 Democrats in passing the bill.

House Action — On the afternoon of January 25, the House majority decided to suspend the Rules and discharge HB 4001 without a hearing in House Tax Policy Committee and take an immediate floor vote on its HB 4001. As in the Senate, House Republican efforts to amend the bill to its liking were rejected. HB 4001 passed with no amendments. Eleven GOP House members joined all 56 House Democrats to adopt the bill 67-41 with two Republicans absent. It did not contain SERA’s SB 1 floor amendments and so is quite different than SB 1. The two bills need to be reconciled before sending it to the Governor. A conference committee was appointed to do just that.

February 3 Announcement — Late on February 3, the Governor, Speaker of the House Joe Tate, and Senate Leader Winnie Brinks announced the Lowering MI Costs Plan. According to the press release, the Plan would repeal the retirement tax to save 500,000 households an average of $1,000 a year, increase the Working Families Tax Credit to put an average of $3,150 back into the pockets of 700,000 Michiganders, and deliver inflation relief checks to all Michigan taxpayers.

OTHER NEWS

Supplemental Signed — The first new law added $1.1 billion to Michigan’s current budget, largely made possible by federal COVID-19 relief money. The largest chunk, $200 million, is expected to keep a paper mill open in the Upper Peninsula. There’s also $75 million to demolish vacant buildings, $75 million to help small businesses hurt by the pandemic, and $50 million for affordable housing. It also included an amount to cover operational costs for the Michigan Independent Citizens Redistricting Commission as it awaits resolution of lawsuits challenging its redistricting plan.

New Primary Date — The second bill signed into law set Michigan’s Presidential primary for February 27, 2024, instead of March 14. Michigan would be the fifth Presidential primary. But there’s a catch: it can only go into effect 90 days after the Legislature adjourns for the year. Lawmakers would have to adjourn by November 29 instead of their usual late December.

Civil Service News — The Michigan Civil Service Commission is proposing Rule changes in accordance with the new federal Pregnant Workers Fairness Act. The Legislature has approved a waiver to allow the state to increase the wages of certain state classified employees immediately rather than waiting until the start of the next fiscal year. Recruitment and retention difficulties are cited as reasons for the pay increases.

Editor’s note: Mary Pollock is the Lansing SERA Chapter and SERA Coordinating Council’s Legislative Representative. She may be contacted at michigansera@comcast.net.

Michigan SERA Recent News, a compilation of links to articles of interest to state employees, is no longer produced.

Return to top of page


Capitol News	Home About SERA Join SERA Now SERA Plus Benefits Meeting Dates Chair Talk Capitol News Retirement Matters Insurance Information SERA Council Directories Michigan Government Links Testimony Letters and Press Releases Resources Links
February 5, 2023 By Mary Pollock The first month of the Democratic trifecta in Michigan moved with lightning speed to display its priorities and ability to exercise its prerogatives. Capturing my focused attention was the gubernatorial and legislative announced intentions to move retiree income tax relief as their first priority bills. SERA submitted three suggestions for improvement in the Democrat-sponsored bills; two of them were adopted by the State Senate and will likely make it to the Governor’s desk! More detail on that dramatic story below. FIRST MONTH ACTION Executive Branch — Governor Whitmer’s administration priorities can be found from her campaign promises, Inauguration Speech on January 1, her State of the State address on January 25, and her February 8 Executive Budget Proposal, the latter of which is not yet released at this writing. State of the State Address – The Governor’s SOTS Address spoke to these main themes: Lowering costs to Michiganders by rolling back the retirement tax, boosting the Working Families Tax Credit, and offering free pre-K for all. Economic development to bring jobs to Michigan and make communities more attractive places to live and work. Expand tutoring, after-school programs, and extra instructional time in the classroom for Michigan students. More effort to reduce crime and gun violence by investing more in law enforcement training, oversight, and mental health resources. She supported commonsense reforms like universal background checks for gun purchasers, safe storage laws, and extreme protection orders. Protect fundamental freedoms by repealing Michigan’s 1931 abortion ban and amending Michigan’s civil rights law to include protections for LGBTQ+ community. Legislative Branch — On January 11, 2023, the focus was on swearing in of the 102nd Legislature, election of officers of both chambers (although each caucus had elected their leaders earlier), adoption of Joint and each chamber’s Rules, and appointment of the Clerk for each chamber. The Democratic Speaker of the House Rep. Joe Tate (D-Detroit) and Majority Leader in the Senate Sen. Winnie Brinks (D-Grand Rapids) announced their respective chamber’s reorganized committee structure, new committee chairs, and new committee members. Leadership in both chambers announced 110 session days scheduled for 2023 compared to the actual 86 days in 2022. First-day Bill Introductions — Each chamber’s majority party captured the early-numbered bills on their first day in office to emphasize their priority issues. For the Senate: Senate Bill (SB) 1 Retirement/Pension Benefits sponsored by Sen. Kevin Hertel (D-St. Claire Shores). Revises limitations and restrictions on deductions of certain retirement or pension benefits and revenue distribution to state school aid fund. SB 2 Abortion Ban Repeal sponsored by Sen. Erika Geiss (D-Taylor). Repeals provision related to publication of cures for conceptive preventatives SB 3 Income Tax Credit sponsored by Sen. Kristen McDonald Rivet (D-Bay City). Increases earned income tax credit (EITC) to 30 percent of federal EITC, no phase-in period. SB 4 ELCRA sponsored by Sen. Jeremy Moss (D-Southfield). Includes sexual orientation and gender identity or expression as categories protected under the Elliott-Larsen civil rights act. SB 5 Collective Bargaining sponsored by Sen. Darrin Camilleri (D-Brownstown Township). Allows requirement for agency fee for nonunion members in bargaining agreements and as condition of employment in public sector. SB 6 Prevailing Wages sponsored by Sen. Veronica Klinefelt (D-Eastpointe). Reenacts prevailing wage. For the House: House Bill (HB) 4001 Retirement/Pension Benefits sponsored by Rep. Angela Witwer (D-Delta Township). Revises limitations and restrictions on deductions of certain retirement or pension benefits and revenue distribution to state school aid fund. HB 4002 Income Tax Credit sponsored by Rep. Nate Shannon (S-Sterling Heights). Restores earned income tax credit. HB 4003 ELCRA sponsored by Rep. Jason Hoskins (D-Southfield). Includes sexual orientation and gender identity or expression as categories protected under the Elliott-Larsen civil rights act. HB 4004 Collective Bargaining sponsored by Rep. Regina Weiss (D-Oak Park). Allows requirement for agency fee for nonunion members in bargaining agreements and as condition of employment in public sector. HB 4005 Collective Bargaining sponsored by Rep. Regina Weiss (D-Oak Park). Revises collective bargaining rights to restore former provisions. HB 4006 Abortion Ban Repeal sponsored by Rep. Laurie Pohutsky (D-Livonia). Repeals penalty for administering with intent to procure miscarriage. HB 4007 Prevailing Wage sponsored by Rep. Brenda Carter (D-Pontiac). Reenact prevailing wage. Two newly elected House Democrats have already decided to run for their local mayoral vacancies in November 2023. Both are expected to win, putting the House’s 56 -54 Democratic voting majority in jeopardy later this year until special election primary and general elections can be held in those two districts. PENSION TAX RELIEF UPDATE 2011 Income Tax Changes — In the 2011 tax overhaul, seniors and taxable retirees paid $528 million more in state taxes in 2012 alone according to the Senate Fiscal Agency at the time. With about 35 percent inflation since 2011, seniors and taxable retirees are now contributing roughly $713 million a year to the state’s coffers. In 2012, they contributed 36 percent of the increased taxes on individuals yet seniors were only 13 percent of Michigan’s population. At the same time, tax burdens on businesses decreased $1.8 billion. This tax shift was accomplished partially by eliminating or changing three senior and/or retiree tax preferences starting in 2012: A Homestead Property Tax Credit (HPTC) of up to $1,200 for those 65 and older was eliminated. Instead, the HPTC became a graduated income-based HPTC regardless of age. Every taxpayer 65 or older got an additional income tax exemption of $2,300 in 2011 dollars but lost that in 2012 and thereafter. In 2012, retired taxpayers became subject to differing income tax schemes based on their year of birth: those born before 1946, those born in 1946 through 1952, and those born after 1952. Those born before 1946 lost their extra senior exemption and senior HPTC if 65 or older but they were able to keep their other income tax treatment without change. Public pensions were totally exempt from taxation. Both public and private pensioners were eligible for the age-65+ senior subtraction on interest, dividends, and capital gains for the first $10,058 for a single filer and $20,115 for married and filing jointly taxpayer, indexed to inflation. Private pensions and retirement income were eligible for an exemption up to $45,120 for single filers and $90,240 for joint filers, indexed to inflation. The two younger retiree groups lost not only the special senior exemption when turning 65, the special senior HPTC treatment after turning 65, their public pension exemption, and the senior citizen subtraction for interest, dividends, and capital gains. Instead, most in these two age groups were subject to a limited exemption from income tax for the first $20,000 of any kind of retirement income for single filers and $40,000 of any kind of retirement income for those married and filing jointly. This tax then changed somewhat after the taxpayer reached age 62. After 2012, exemptions were approved for special retiree groups: Railroad retirees, Michigan National Guard retirees, and those receiving military compensation and pensions. Those with pensions from governmental agencies not covered by Social Security at age 62 got a $35,000 exemption for single filers and $55,000 for joint filers or $70,000 if both spouses worked for an agency not participating in Social Security. SB 1 and HB 4001 Michigan Senate Adopts Two of SERA’s Recommendations — After ten years of proposals by both Democrats and some Republicans to eliminate or modify the pension tax, it was no surprise that pension tax relief bills were honored as the first bills introduced in both chambers when the new Democratic majority took over on January 11, 2023. Senate Finance Committee Hearing — At the first meeting of the new Senate Finance, Insurance, and Consumer Protection Committee on January 25, Senate Bill 1 was the sole substantive agenda item. SERA supported the bill in written testimony by saying SB 1 as introduced was a good start toward easing the tax burden on public and private sector retirees for those born after 1945, but it did not go far enough. We reminded the Committee members about the cost to seniors and retirees of the 2011 income tax overhaul and proposed some improvements in the bill, two of which turned out to be the sole amendments included in the floor substitute bill passed by the full Senate the next day, January 26. First, we suggested that the bill be effective immediately for tax year 2023 and not phased in gradually over four years as proposed in SB 1 as introduced. Other organizations such as AARP of Michigan also supported this change. Second, we were the only ones to point out that the amounts for retirement income exemptions in SB 1 carried over the exemption amounts from the 2011 statute and should be increased to reflect inflation since 2011. Third, we suggested a return of the extra senior exemption for those 65 and older at the $5,000 level, indexed to Consumer Price Index for the Elderly thereafter. In the adopted substitute of SB 1 (quoting the Senate Fiscal Agency Analysis of the bill), “Beginning with the 2023 tax year, in determining taxable income, a taxpayer could elect to apply the current limitations or restrictions on taxation of pension or retirement income, or instead could elect to deduct his or her eligible retirement and pension benefits received from a Federal or State public retirement system, Social Security benefits, and a maximum of $56,961 for a single return and $113,922 for a joint return for the 2022 tax year (these amounts are adjusted for inflation thereafter), for retirement benefits from another retirement or pension system or a retirement annuity policy without any limitations or restrictions for year of birth or age.” Public pensions would not be taxed, regardless of year of birth or age. There was a spirited but failing effort by Senate Republicans to amend the bill on the floor to eliminate or lower the personal income tax rate for every taxpayer, expand the exemptions under SB 1 for all seniors and provide a $500 child credit for families. Several Republicans criticized the Democrats’ proposal as giving preferential treatment to people with public pensions and gave no relief to seniors who are still working and not dipping into pensions or other retirement savings. The SB 1 substitute with our suggested changes was adopted 23 — 15. GOP Senators John Damoose (R-Harbor Springs), Mark Huizenga (R-Walker), and Michael Webber (R-Rochester Hills) joined all 20 Democrats in passing the bill. House Action — On the afternoon of January 25, the House majority decided to suspend the Rules and discharge HB 4001 without a hearing in House Tax Policy Committee and take an immediate floor vote on its HB 4001. As in the Senate, House Republican efforts to amend the bill to its liking were rejected. HB 4001 passed with no amendments. Eleven GOP House members joined all 56 House Democrats to adopt the bill 67-41 with two Republicans absent. It did not contain SERA’s SB 1 floor amendments and so is quite different than SB 1. The two bills need to be reconciled before sending it to the Governor. A conference committee was appointed to do just that. February 3 Announcement — Late on February 3, the Governor, Speaker of the House Joe Tate, and Senate Leader Winnie Brinks announced the Lowering MI Costs Plan. According to the press release, the Plan would repeal the retirement tax to save 500,000 households an average of $1,000 a year, increase the Working Families Tax Credit to put an average of $3,150 back into the pockets of 700,000 Michiganders, and deliver inflation relief checks to all Michigan taxpayers. OTHER NEWS Supplemental Signed — The first new law added $1.1 billion to Michigan’s current budget, largely made possible by federal COVID-19 relief money. The largest chunk, $200 million, is expected to keep a paper mill open in the Upper Peninsula. There’s also $75 million to demolish vacant buildings, $75 million to help small businesses hurt by the pandemic, and $50 million for affordable housing. It also included an amount to cover operational costs for the Michigan Independent Citizens Redistricting Commission as it awaits resolution of lawsuits challenging its redistricting plan. New Primary Date — The second bill signed into law set Michigan’s Presidential primary for February 27, 2024, instead of March 14. Michigan would be the fifth Presidential primary. But there’s a catch: it can only go into effect 90 days after the Legislature adjourns for the year. Lawmakers would have to adjourn by November 29 instead of their usual late December. Civil Service News — The Michigan Civil Service Commission is proposing Rule changes in accordance with the new federal Pregnant Workers Fairness Act. The Legislature has approved a waiver to allow the state to increase the wages of certain state classified employees immediately rather than waiting until the start of the next fiscal year. Recruitment and retention difficulties are cited as reasons for the pay increases. Editor’s note: Mary Pollock is the Lansing SERA Chapter and SERA Coordinating Council’s Legislative Representative. She may be contacted at michigansera@comcast.net. Michigan SERA Recent News, a compilation of links to articles of interest to state employees, is no longer produced. Return to top of page
©2021 Michigan State Employee Retirees Association Council (MI-SERA) Contact SERA Webmaster