In a recent
appearance on the Frank Beckmann radio show where I discussed Gov. Rick Snyder's
proposed business tax cut and reforms, the issue of taxing pension income
arose. A number of retired government employees phoned in strenuously objecting
to any income tax on their pensions.
listeners may not have realized is that Michigan currently provides a 100
percent income tax exemption for government retirement benefits, but the
exemption is capped for benefits earned by retirees who worked in the private
is unfair is recognized even by some liberal Democratic politicians such as
former state Sen. Mickey Switalski, who introduced a bill last year to extend
the 100 percent income tax exemption to pension benefits from private
employers as well as government ones.
will be much easier if the state enacts policies that bring about $5.7
billion in potential savings that Mackinac Center research suggests are possible
by indexing government employee fringe benefits to private-sector averages.
Specifically, state, local, university and K-12 employees receive benefits
every year worth $5.7 billion more than those averaged by employees the private
sector — and that's a conservative estimate.
imbalance would save enough to eliminate a projected $1.8 billion
spending-over-revenue state budget gap, repeal the $2.2 billion Michigan business tax and surcharge, spend an additional $1.7 billion fixing roads, save
for a rainy day or ... extend to private sector retirees the same tax breaks
enjoyed by those who were employed by governments. All without cutting a single
government program or laying off a single employee.
that there isn't room for slimming government programs and payrolls. A 2003
Mackinac Center study identified 200 recommendations for saving $2 billion.
Subsequent research has found many more that every year could save taxpayers
additional hundreds of millions.
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