Legislative Service Bureau Publications of Interest to SERA Members

Protect Our Jobs

Tax Changes for 2012

The Michigan Department of Treasury has provided an overview of the tax changes for 2012 for individuals, retirees, and corporations. A description of a new Withholding Certificate is included. See the Treasury website.

Withholding — The tax changes require pension administrators to withhold income tax from all eligible pensions beginning January 1, 2012. The Office of Retirement Services has notified state employee retirees that it will not withhold the 4.35% income tax on pensions from those born before 1946 unless the retiree signs up for withholding. For all other pensioners born after 1945, ORS will withhold 4.35% from the first dollar based on the state retiree’s federal withholding exemptions unless the state retiree signs up for a different withholding amount. For the latest information about how to change your withholding see the ORS Frequently Asked Questions.

History of Passage of Michigan’s New Pension Tax with Links to Important Documents

In early February 2011, Governor Rick Snyder announced an overhaul of the Michigan income and business tax in Michigan. The tax reform featured abolishment of the Michigan Business tax, establishment of a flat 6% Corporate Income Tax, and imposition of an income tax on pensions as well as other changes to the individual income tax.

HB 4361 of 2011 amending the Income Tax Act was introduced March 1, 2011. It proposed elimination of all tax exemptions for private and public pensions as well as repealing exemptions for investment income for seniors. The bill also proposed elimination of the senior special exemption of $2,300 and modified the Homestead Property Tax Credit for seniors. Additionally numerous other personal tax credits, exemptions, and deductions were eliminated for all taxpayers. A few weeks later HB 4480 of 2011 was introduced modifying the State Employees’ Retirement Act to be consistent with the changes proposed in HB 4361.

Read the full article. (pdf file)

Are Michigan Public Employees Over Compensated by Professor Jeffrey Keefe, Economic Policy Institute, February 3, 2011

This paper investigates whether Michigan public employees are overpaid at the expense of Michigan taxpayers. The research is timely. Conservatives in some policy circles have long claimed that public workers earn substantially higher salaries and an even greater magnitude of benefits than private sector workers (Hohman 2010). Some elected officials are promoting public employee pay freezes and major benefits reductions as the antidote to the alleged overpayment problem and the key to reducing Michigan’s budget deficit. Newly inaugurated Gov. Rick Snyder has said that public employee compensation at the state, local, and school levels must be judged in comparison with private sector employee pay (Egan 2011). This paper makes that comparison.

The research shows that state and local government employees (which includes school employees) in Michigan are not overpaid. Comparisons controlling for education, experience, organizational size, gender, race, ethnicity, citizenship, and disability reveal that public employees of state and local governments earn less than comparable private sector employees. On an annual basis, full-time state and local employee government employees in Michigan are undercompensated by approximately 5.3% compared with similar private sector workers. Read more here: SERA Presentation to the Public Employees Health Care Reforms Committee (PDF file).