Michigan’s Retirement Tax Repeal: Governor Whitmer Pushes Agenda

Michigan Governor Gretchen Whitmer (D) wants to repeal retirement taxes. What’s coming for the state’s senior citizens? We'll explain everything.

Rachel Curry - Author

Aug. 1 2022, Published 2:41 p.m. ET

Michigan Governor Gretchen Whitmer (D)
Source: Getty

Michigan Governor Gretchen Whitmer (D)

Democratic Michigan Governor Gretchen Whitmer is pushing her tax plan against the state’s Republican-led legislature. Whitmer is proposing one-time inflation relief checks to families, working poor tax cuts, and trimmed tax rates for senior citizens. As for the latter, Michigan citizens are looking into her retirement tax repeal plan.

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Whitmer wants to repeal a previously instated retirement tax while Republicans prefer the idea of slimming the income tax rate by 0.25 percent. Here’s where Whitmer’s arguments lie and what a Michigan retirement tax repeal could mean for the state.

Michigan has a history of taxing pensions, social security, and more.

Michigan-based pensioners born in 1946 or later may be subject to a tax on a portion of their pension distributions. The tax rate for non-deducted pensions for this demographic is 4.25 percent. However, many individuals and joint filers can deduct some or all pension payouts from their adjusted gross income (AGI).

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For example, pension-earning individuals born in 1946 can deduct up to $66,531 in total pension revenue from their AGI. Those born from then until 1952 can deduct a total of $20,000 (or $35,000 for government workers). Taxpayers born after 1952 can make the same deductions once they reach an age of 67 years old.

Michigan doesn't tax social security payments. Senior citizens can subtract social security retirement income from their AGI.

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Governor Whitmer has a plan to repeal retirement taxes for Michigan citizens.

Whitmer wants to repeal the retirement tax that the state voted into law in 2011. According to her plan, the repeal would “save half a million households with pensions an average of $1,000 a year.” The plan adds, “That’s hundreds for prescriptions, rent, utilities, car payments, or gifts for grandkids.”

Whitmer fought against the 2011 law while serving in the state legislature. Now, she’s keeping at it with hopes of repealing the law by 2024. If put into place, the plan would exempt public pensions and reinstate deductions for:

  • Private retirement income

  • Private-sector pensions

  • Individual retirement account (IRA) withdrawals

  • Employer-matched 401(k) deposits

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Whitmer wrote in a letter, “After working for a lifetime, Michiganders deserve to retire and keep their hard-earned dollars.”

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Will the retirement tax repeal pan out?

Whitmer will have to work hard to gain the trust of the Republican legislature after vetoing numerous tax cut plans they passed. Whitmer called them “unsustainable” despite the Republican party working to find ways to attract new residents and businesses (like the aforementioned 0.25-percent income tax cut).

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Still, many constituents are on Whitmer’s side. According to retiree and senior advocate Georgia Crawford-Cambell, “Michigan has the fastest growing senior population in the nation and we need more disposable income to live in our communities.”

Altogether, Whitmer’s plan (including $500 inflation relief checks to working families, working poor tax cuts, and the retirement tax repeal) would trim taxes by $757 million annually. On the GOP side, the legislature wants to trim taxes by approximately $2.76 billion.

Given it’s an election year, Whitmer will want to work quickly to pass her agenda.


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