UPDATE: Readers of the initial version of this column, which was
posted on macombdaily.com, wrongly thought that the figures supplied here
also apply to those who retire early, especially those who
retire in their 50s. They do not. However, the vast majority
of the private sector has no such opportunity.
As we leave the realm of public policy for raw politics, Gov. Rick Snyder and his Democratic opponent, Mark Schauer, have staked out their positions for a 9-month, one-on-one gubernatorial election campaign.
Schauer, a former congressman, portrays the incumbent as a right-wing Republican who recklessly slashed spending programs and taxes to the benefit of big business and the detriment of everyone else.
Snyder tried to undercut that message in his State of the State Address by proposing just enough restoration of spending for universities, K-12 schools and municipal revenue sharing that could allow him to make the case that Michigan is on the road to a comeback.
But the governor also sparked an internal GOP feud when he chose to return some of the state’s $1 billion surplus through an expansion of the Homestead Property Tax Credit for middle-class homeowners instead of cutting the income tax rate.
Rather than reward upper-income people with an income tax break, Snyder said, the plan to expand the homestead credit to 1.3 million property taxpayers “clearly benefits the people in the lower- and middle-income levels,” he said.
Schauer couldn’t have said it any better.
In addition, the governor wisely resisted the call among Democrats and many Republicans to repeal the new tax on pensions and other retirement income, a move which would have nearly eaten up the entire surplus.
Eliminating “Snyder’s senior tax” obviously serves as a key plank in the Democrats’ 2014 platform, as evidenced by the group of retiree protesters the Dems organized at Snyder’s first two stops on his re-election tour. But the effort smells of the usual pandering for the senior citizen vote.
Just as the Republicans tout sweeping distortions about Obamacare, the Democrats have spent the past three years blatantly mischaracterizing the pension tax.
The tax, which took effect in 2012, is portrayed as a tax on all pensions. In fact, most retirees pay little or nothing under the new levy.
Current seniors, those born before 1946 are exempt from the tax changes. A second category, born between 1946 and 1952, will only pay taxes on the amount of their public or private pension that exceeds $40,000 for a couple, or $20,000 for an individual. In other words, a very small category.
The rest of us will benefit from the $40,000/$20,000 exemption when we turn 67. That threshold applies to 401(k) withdrawals, IRAs, interest and dividends.
The phased-in, three-tiered system is far different from the disingenuous Democratic claims of a “tax on seniors.” Keep in mind that the average private pension falls below $20,000.
It should also be pointed out that a couple in that 1946-52 sector with a handsome $50,000 pension, assuming they can claim a few deductions and credits, pays only about $30 a month under the new system.
As Snyder has repeatedly said, the pension tax is about fairness. Maintaining Michigan’s generous pension tax breaks of the past inevitably puts a heavier burden on young workers. In addition, a “pensioner” means many different things in today’s economy.
Why should a couple of spry 68-year-olds who still work, earning $30,000 a year, plus a tax-free pension of $30,000, pay taxes on only half of their income when a couple of 60-year-olds with health problems, limping toward retirement on $30,000 in wages, pay taxes on all of their income?
What’s more, critics of the pension tax conveniently forget the circumstances under which it was implemented. Snyder took office in 2011 just as Michigan’s “lost decade” was coming to a close. The state posted massive budget deficits and the Snyder administration was pondering several ways to gain revenues and reduce spending.
One obvious target quickly emerged: Michigan, which ranked last or near-last in a host of economic categories, maintained one of the most generous tax deals in the nation for retirees. Seniors paid no income tax on government pensions and tax-free status was granted to all private pensions, except for those at the top end of the scale.
While nearly every other state was taxing pensions, it made no sense for a state in severe fiscal distress to preserve those kinds of tax breaks. The Snyder plan, while protecting low- and middle-income seniors, generated an impressive $930 million to help balance the budget and avoid more spending cuts.
That’s good public policy. But it doesn’t make for juicy, raw-meat politics.
At the Democratic protests last week, one retired teacher who worked 40 years as an educator claimed that he is losing $1,400 a year because his public pension is no longer exempt from the state income tax. If that number is accurate, he is receiving a pension of about $75,000 a year for him and his wife, or $55,000 if he is single. And his complaint is that instead of paying no taxes he now pays $117 a month.
Is that the kind of senior citizen the Democratic Party and Schauer want to champion in this campaign? The Democrats – the party of fairness, the party that stands up for the little guy – demands tax-free status for a pensioner who makes $75,000 a year in retirement.
Try explaining that to a single mom who works two jobs and pays taxes on both of her meager paychecks.
Sounds to me like the working poor and middle class in the Democratic Party should be asking their leadership why they don’t come out in support of the pension tax.
"Pandering" to actual rank and file taxpayers/voters? I submit that when it comes to taxes, it is not "pandering" but being held accountable under our Constitutionally proscribed system of government. Threat of removal from office at the ballot box is the only check on our leaders. It is an odd feature of our republic that, clearly, the majority of citizens do not benefit proportionately to what they pay into the system which they support with their productivity and, in the instance of a state of war, the lives of their sons and daughters. What has arisen (and did since the founding of the Republic), by necessity, is a system of propaganda, mass media, mass culture, and pseudo intellectualism to prop the entire charade up and otherwise known as the "news cycle." These manipulations are ubiquitous and range between what you read in the local paper, national news, and even the international media. For example, "Al-Queda affiliated," is the modern day equivalent to the "Hun." So-called think tanks write and publish thinly disguised policy position papers which feign scholarship, in elegant and persuasive prose, at the behest of special interests, In reality most of your news is generated by the government, the rest by special interests; except the story about the dog that was left in Florida by a family on vacation and found his way home. That is a mere distraction, however, from what really matters.
One example is the promulgated truism that a bachelor's degree is required to: 1) succeed in the "new economy," and 2) that a region or state becomes more attractive to employers if an educated talent pool is made available. This reasoning is supported by selectively culled data, with no critical analysis, or peer review. Worse yet, this material is proffered by members of academia who have an obvious vested interest in the outcomes of their so-called research. Just spend more, and you will see the results. Ask yourself about the efficacy of the results after the hundreds of billions of dollars spent on the war on drugs, the war on poverty, and the "war" du jour, the war on terror, to name a few. Furthermore, consider the trillions of dollars spent on health care in this country with questionable results below those of say, Czechoslovakia. Only when the system reaches the critical tipping point, do policy makers deviate from the "received view." Yet, citizens have been so inundated with the mantra that the "US has the best health care system in the world," that they mindlessly repeat it. The think tanks (on behalf of the business special interests at the public trough) and the Colleges and Universities (on behalf of the public sector unions that want their "fair share" of the public largess) pump out copious amounts of materials to move and then stagnate public opinion on their issue. We have been conditioned to believe what we believe, and starved for mainstream information to test the premises. Once you understand that citizens are treated as mice in BF Skinner's behavior modification models, you can begin to see the problem. The historian Plutarch warned long ago of what happens when there is no brake on the power of great wealth to subvert the electorate. “The abuse of buying and selling votes,” he wrote of Rome, “crept in and money began to play an important part in determining elections. Later on, this process of corruption spread in the law courts and to the army, and finally, when even the sword became enslaved by the power of gold, the republic was subjected to the rule of emperors.” Oswald Spengler wrote, The Decline of the West, which he opined that the "Free" press does not spread free opinion—it generates opinion. Money drives the process according to Spengler. And I agree. The land of the free and the home of the brave?
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