Michigan Families Join Senate Democrats to Discuss Devastating Impact of Governor Snyder's Tax Increases

Republican Tax Hikes Hitting 51% of Michigan Residents, Many for the First Time this

Senate Democratic Leader Gretchen Whitmer (D-East Lansing) and members of the Senate Democratic Caucus were joined today by tax experts and working families to discuss the devastating effects of the recent tax increases passed by the Republican-led Legislature and signed by Governor Snyder. With the implementation of the Pension Tax, cuts to tax credits such as the Homestead Property Tax Credit and the Michigan Earned Income Tax Credit and the elimination of the child, senior and other deductions, many Michigan families and seniors have been struck hard by a major increase in their taxes.

“These Republican tax ‘changes' constitute the largest tax increase on individuals in Michigan history, and my Democratic colleagues and I unequivocally opposed Snyder's tax increases when they were brought up in the Senate,” said Senate Democratic Leader Gretchen Whitmer. “Just as we expected, families and seniors statewide are in utter disbelief at the massive burden that has been imposed on them for the sake of giving billions in handouts to big business. We will keep up the fight for Michigan's families and seniors, and will work every day to repeal these misguided tax hikes.”

The individual tax changes made by Republican lawmakers favor the wealthy and inordinately affect Michigan residents with the lowest incomes, with those with annual salaries in the top one percent ($334,000 and above annually) only seeing their taxes go up by $7 while those in the bottom 20 percent (less than $17,000 a year) will pay more than $100 extra. Statistics from the Michigan League for Public Policy show that Michigan Republicans' new tax changes cut business income taxes by 83 percent and increase individual taxes by 23 percent. According to The Institute on Taxation and Economic Policy, 51 percent of all Michigan taxpayers will pay more in individual income taxes under Governor Snyder's tax policies than they have in years past. This increased burden on individuals was enacted by Republicans in order to offset a $1.8 billion business tax handout that has failed to grow Michigan's economy or create needed jobs for workers. Among the more damaging tax increases enacted by Governor Snyder and Republican legislators over the last two years were as follows:

  • The Senate Fiscal Agency reports that Michigan retirees had $294.5 million in new taxes withheld from their retirement pensions in 2012, the first year it has been in effect. According to the Michigan Department of Treasury, some seniors have had as much as $100 withheld from their pensions each month.

  • The Michigan Earned Income Tax Credit has been cut from 20% of the federal EITC to 6%. This means the average Michigan EITC credit will drop 70%, from $439 to $132. This will force an estimated 9,000 children in Michigan back into poverty.

  • The $2,300 special exemption for seniors, the $600-per child exemption for children 18 and under, and the special exemption for unemployment compensation greater than 50% of adjusted gross income (AGI) have all been eliminated.

  • The Homestead Property Tax Credit is not available for homes with taxable value of more than $135,000, and is reduced for anyone whose annual household resources are above $41,000. Homeowners and renters used to qualify for the credit if their household income was no more than $82,650.

“In preparing taxes for Lansing community members, the results of new tax increases taking effect this year have been drastic,” said Megan Kursik, a volunteer income tax preparer with the Asset Independence Coalition. “Unfortunately, our seniors are among those being hit the hardest. These individuals are living on fixed incomes and now finding their taxes going up with the Pension Tax and their deductions going down with the cut to the Homestead Property Tax Credit and the elimination of the $2,300 senior exemption.”

As a result of Republican tax increases, a single parent with two children and $22,000 in annual income who would have qualified for a $444 refund in 2011 will now receive only $80. A married couple with two kids making $100,000 in income will now pay $459 more than they did in tax year 2011. A retired couple born after 1952 with $53,000 in total income would have previously received a $1,200 Homestead Property Tax credit on their Michigan income taxes. This year, they will receive nothing, raising their state income taxes from $1,930 to $3,130. An average retired autoworker born after 1952 with an annual pension of $32,000 will have to pay $1,400 a year in new, unanticipated taxes under the Pension Tax.

“There is nothing like being kicked when you're already down,” said Pamela Kreiner, a mother of two who lives in Lansing. “I was in shock when I saw how little I was getting back from my state tax return this year and how severe the tax deductions had been cut. It was one more hit to my budget that I wasn’t expecting and that I will now have to figure out how to pay for. We have one of the worst unemployment rates in the country, we are all feeling the pain on a daily basis of going without, and it is in this time that Governor Snyder and the Michigan Republicans passed these severe tax increases. This directly impacts working parents such as myself.”