February 6, 2022
Despite the adversities created by a snow event in Lansing and the pandemic, there was still a lot of news this month.
PENSION TAX REPEAL
Pension and retirement tax elimination has been in the news again because Governor Gretchen Whitmer’s State of the State address on January 26 included a prominent endorsement of retirement income tax repeal. In 2019, she coupled pension tax repeal with an increase in the corporate income tax, a non-starter with the Republican legislative majority. Retirement tax repeal would save 500,000 households (of about four million) an average of $1,000 a year according to the Governor’s office.
But elimination or modification of the retirement tax depends on several factors: the willingness of the Governor and majority of legislators to prioritize it in budget negotiations, and having the revenue to afford it.
Priorities — In an election year like 2022, tax cuts are popular. Gov. Whitmer has not only proposed eliminating the pension tax but proposed boosting the State’s Earned Income Tax Credit (EITC) for low-income working households from 6 percent of the federal EITC to 20 percent. Republicans are pushing for more expansive tax cuts. The Senate Finance Committee reported a bill to the Senate floor (Senate Bill (SB) 768) to decrease income and corporate income taxes to 3.9 percent, give a child tax credit, and further exempt business personal property from local taxation.
The non-partisan Senate Fiscal Agency estimates that the SB 768 reduction of the State income tax from 4.25 percent to 3.9 percent will cost the General Fund $1 billion annually. A proposal to reduce the corporate income tax rate from 6 percent to 3.9 percent would reduce the General Fund more than $460 million annually. Expanding the EITC from 6 percent to 20 percent reduces annual General Fund revenue by around $250 million. These three proposals alone would cut annual revenue collections by $1.7 billion.
$370 Million — The best public estimate of the cost of a form of repeal of the pension tax comes from a House Fiscal Agency Analysis for House Bill (HB) 4002, a bill sponsored by State Rep. Joe Bellino (R-Monroe). HB 4002 had an initial hearing in April 2021 for which a fiscal analysis was done. If enacted, the bill would reduce individual income tax revenue on a full fiscal year basis by about $370 million, and that amount would be expected to grow by about $10 million per year as new retirees become eligible and retirement accounts continue to grow.
$92 Million — A more modest modification of the pension tax is in SB 467 sponsored by State Senator Jim Runestad (R-White Lake) that would give those born after 1945 a $25,000 deduction indexed to inflation after 2022. Its cost estimate is $92 million.
Revenue — The Consensus Revenue Estimating Conference (CREC) on January 14 forecasts an increase of $1.72 billion in State revenue over the May 2021 estimate for Fiscal Year 2022 and $1.4 billion more for Fiscal Year 2023. Together with federal stimulus money, the State is currently expected to carry a surplus of over $7 billion into Fiscal Year 2023 from the State’s General Fund and School Aid Fund. Much of this revenue is one-time in nature and should be used for one-time investments that keep the State budget in balance for the long term. Additionally, there are restrictions on how most of the federal money can be used including a prohibition on using it for tax cuts like elimination of retirement taxes. As with any economic and revenue forecast, there are potential risks to the estimates, including further COVID-19 outbreaks, unexpected changes in the national economy, and international economic issues.
Contact Your State Legislators — If you want a retirement tax repeal or reduction, you are going to have to tell your State legislators loud and clear. Find their contact information at https://legislature.mi.gov.
REMOVE CAP ON OUR COLA
With an inflation rate of 7.5 percent in the Midwest, State employee pensioners need some help. Increasing the cost-of-living factor for State employee retirees is contained in SB 775 sponsored by State Senator Curtis Hertel (D-East Lansing). Not only has the pension tax burdened State employee retirees born after 1945, but our annual pension supplement has been capped at $300 a year for 25 years! That $300 in 1987 is now worth only $129 due to inflation. It affects about two-thirds of all State employee retirees.
SB 775 was introduced December 7, 2021, after several months of work by SERA advocates. Co-sponsors are State Senators Tom Barrett (R-Grand Ledge), Adam Hollier (D-Detroit), Erika Geiss (D-Taylor), Sean McCann (D-Kalamazoo), Paul Wojno (D-Warren), Winnie Brinks (D-Grand Rapids), Ed McBroom (R-Vulcan), Betty Jean Alexander (D-Detroit), Stephanie Chang (D-Detroit), and Rosemary Bayer (D-Beverly Hills). It has been referred to the Senate Appropriations Committee chaired by State Senator Jim Stamas (R-Midland).
Please contact your State Senator and urge a hearing and passage of SB 775. SB 775 needs to be one of the priorities for the State’s budget. Contact information is available at https://senate.michigan.gov.
Three legal challenges to the political maps drawn by the Michigan Independent Citizens Redistricting Commission have occurred since their adoption on December 28, 2001.
Detroit Caucus Challenge — On January 6, 2022, several current and former African-American lawmakers, activists, and residents from Detroit filed a lawsuit challenging the maps with the Michigan Supreme Court alleging constitutional and Voting Rights Act violations. In Detroit Caucus, et al v. MICRC (MSC Docket No. 163926), the plaintiffs claim that the Black vote in the city of Detroit was diluted in the new maps and represents a bipartisan racial gerrymander.
Oral argument was held January 26, 2022. On February 3, the State’s high court dismissed the case in a 4-3 decision, in which the majority said the maps — as drawn with fewer and in some cases no majority-minority districts — had not violated the Michigan Constitution’s requirement to comply with the U.S. Voting Rights Act.
Republican Challenge — On January 20, 2022, a group of Republican voters and current and past Republican officials filed a lawsuit against the Secretary of State and the Commission in the Western District of Michigan federal court arguing that the congressional map fails to properly apportion districts and does not follow “neutral, and traditionally accepted, redistricting criteria.” In Banerian, et al v. Benson, et al (USWDM Docket No. 22-00054), the plaintiffs calculate that the total deviation between district populations is 0.14 percent and argue that this population deviance does not further any legitimate State interest. (The Commission was advised by their attorney that there could be up to a plus or minus 0.25 percent population deviation compared to the expected district size.)
The lawsuit also argues that the Commission did not follow neutral redistricting criteria and instead sacrificed compactness and “unnecessarily fragment[ed] counties, townships, and municipalities… without any legitimate or rational State interest.” (The Michigan Constitution’s sixth of seven redistricting criteria is “Districts shall reflect consideration of county, city, and township boundaries.”) The lawsuit asks the court to block the current map from being used in future elections and order the creation of new Congressional district maps for Michigan.
Third Challenge — On February 1, 2022, the League of Women Voters of Michigan, a coalition of voting and civil rights advocates and voters, filed a lawsuit in the Michigan Supreme Court challenging the State’s new voting districts for the Michigan House of Representatives. The lawsuit against the Michigan Independent Citizens Redistricting Commission argues that the State House map is unfair from a partisan perspective. According to the Michigan Constitution, partisan fairness is listed as the fourth of the seven criteria that commissioners are required to use when crafting maps, behind ensuring maps have equal population while complying with the federal Voting Rights Act and other federal laws; districts being geographically contiguous; and reflecting communities of interest. However, the plaintiffs allege that the enacted State House map — “Hickory” — gives a partisan advantage to the Republican Party that their own consultants identified. The plaintiffs asked the court to block the current State House map and order the Commission to create a new House plan.
Meanwhile candidates have a filing deadline of April 19.
Over a dozen petitions have been submitted to the Bureau of Elections and Board of State Canvassers for approval to gather voter signatures this election cycle, perhaps a record. There are two circulating petitions that the SERA Coordinating Council has voted to oppose and urge you not to sign them: the misnamed Secure MI Vote and Unlock Michigan 2 proposed initiated laws.
On January 19, three new petitions had their 100-word summaries approved by the Board of State Canvassers:
Audit Michigan — “Initiation of legislation amending Michigan Election Law to: transfer election audit authority from secretary of state and county clerks to audit board of 10 Republican and 10 Democratic Party delegates selected by House speaker and minority leader; create grand jury of 7 Party delegates selected by speaker and 6 by minority leader; require audit board hire contractors to review, for the 2020 and subsequent statewide elections, protected election materials, equipment, and voters, and disclose findings; allow grand jury to issue subpoenas, arrest warrants for noncompliance, and criminal immunity for cooperation; require audit board raise funding for audit with no disclosure requirement for private funding sources.”
Reproductive Freedom for All — “Constitutional Amendment to: establish new individual right to reproductive freedom, including right to make and carry out all decisions about pregnancy, such as prenatal care, childbirth, postpartum care, contraception, sterilization, abortion, miscarriage management, and infertility; allow state to prohibit abortion after fetal viability unless needed to protect a patient’s life or physical or mental health; forbid state discrimination in enforcement of this right; prohibit prosecution of an individual, or a person helping a pregnant individual, for exercising rights established by this amendment; and invalidate all state laws that conflict with this amendment.”
Raise Michigan — “Initiation of legislation amending Improved Workforce Opportunity Act 2018, PA 337, MCL 408.932 and 408.934, and adding MCL 408.934e, to: increase the minimum wage to $11/hour in 2023, $12 in 2024, $13 in 2025, $14 in 2026, $15 in 2027, regardless of unemployment rate; in following years, increase minimum wage based on inflation rate for urban wage-earners (CPI-W); adjust over 6 years the minimum employer-paid portion of pay for workers receiving tips until it matches minimum wage for all employees; provide that employees keep tips unless they agree to share them with other non-manager employees; remove state authority to approve lower minimum wage based on determination that minor, apprentice or disability status reduces productivity.”
At its February 11 meeting, the Board likely will take up new petition submissions from MI Right to Vote (initiative reform and voting rights), Promote the Vote 2022 (voting rights and vote counting regulation), Michigan Initiative for Community Health (reducing controlled substance penalties), and Voters for Change (ranked choice voting). More on those in next month’s column.
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