Michigan made major structural changes in its tax system this year, as a Republican controlled legislature (both chambers) and a Republican governor ended Michigan’s much-criticized Michigan Business tax (which replaced the rabidly despised Single Business Tax), and increased some other taxes. I haven’t really paid as much attention as I should (nor even remotely as much as I actually want to), and so I had really badly misunderstood them. I think much of the media reported the issues poorly, and so some nincompoop like me who’s only half-listening ends up with a seriously distorted perception of what’s going on.
Specifically, there are two basic issues that were poorly reported in the media that I was poorly paying attention to.
Understanding: The state was now taxing all pensions except for a few exempt ones.
Reality (or so I now understand): The state is taxing pensions of individuals 66 and younger. In other words, only the pensions of early retirees prior to reaching the age at which they are eligible for full Social Security. There’s a big difference between perception and reality there–they’re not taxing your 80 year old grandma’s Social Security checks. (Although one source I read says that was Snyder’s intention, but state legislators had no intention of angering that dedicated voting bloc.)
Understanding: The state had eliminated taxes on businesses.
Reality (I think): The state eliminated the Michigan Business Tax, but “C” corporations will pay a 6% income tax and other businesses will pay individual income taxes (apparently they previously payed individual income taxes plus the Michigan Business Tax).
I’m not remotely a tax policy guy, so I can’t make any intelligent, or even pseudo-intelligent, comments on the wisdom of these policies. And there are more changes that I have yet to learn about. But these two changes are nowhere near as radical as I had thought them to be (and as I’m pretty sure some opponents have made them out to be).