Why It’s Important to Pay Close Attention

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).

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About J@m3z Aitch

J@m3z Aitch is a two-bit college professor who'd rather be canoeing.
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3 Responses to Why It’s Important to Pay Close Attention

  1. Michael Heath says:

    I thought the change in business taxes was clearly and consistently reported.

    However I didn’t know about the ceiling on pension-age until your blog post here. Now I’m not sure whether I should blame my sometimes skimming newspaper stories or my news sources (for state news mostly Traverse City Record Eagle newspaper).

  2. James Hanley says:

    I thought the change in business taxes was clearly and consistently reported.

    Well, I admit I wasn’t paying close attention, so I can’t say with certainty that it wasn’t. I feel better now, though, upon learning that you didn’t know that pensions detail, either. In general you always seem to be considerably more well-informed about state politics than I. Of course down here I’m as likely to read the Toledo Blade as the Freep, and Michigan isn’t really my state and I don’t really anticipate spending the rest of my life here (nor do my kids seem inclined to), so my incentives are less than yours.

  3. James Hanley says:

    Michael,

    You may be interested in this memorandum from the House Fiscal Agency on the effects of the different changes in the tax structure.

    I got the link from Center for Michigan, which I think is a decent non-partisan organization.

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