Whitmer wants to end Michigan’s retirement tax: How it works

Tax started in 2011

Taxes, pen and paper. (Generic) (Photo by Pixabay)

Michigan Gov. Gretchen Whitmer wants to repeal the state’s retirement tax -- here’s a look at how the tax works and why she wants to end it.

Michigan retirement tax

The Michigan retirement tax, as it works today, was written into the state’s tax code back in 2011, as part of a major overhaul of the tax code under Gov. Rick Snyder. Before then, Michigan was one of 14 states that didn’t tax retirees on their pensions.

The rewritten code was based on age. Retirees born between 1946 and 1952 are allowed to deduct the first $20,000 of retirement income for a single taxpayer filing, and $40,000 for a joint filing, prior to turning 67. Once they turn 67, they can claim those exemptions against all income, not just pension income.

Retirees born after 1952 can’t deduct any retirement income until they turn 67. (Read more about the retirement and pension tax in Michigan here)

Repealing the tax

Repealing the retirement tax was one of Gov. Whitmer’s campaign promises when she first ran for office in 2018. There’s already a Senate bill introduced by Republican State Senator Tom Barett that proposes a repeal of the tax. It was introduced back in January of 2021.

Whitmer says repealing the retirement tax would save 500,000 Michigan households an average of $1,000 per year.

“By the end of 2024, my proposal would again exempt public pensions and restore deductions for private retirement income, including private-sector pensions, withdrawals from individual retirement accounts (IRA), and the portion of a 401k account that is subject to an employer match,” Whitmer said in a letter to the state’s Legislature. “Retirement income for people born after 1946 is taxed. That’s just wrong. After working for a lifetime, Michiganders deserve to retire and keep their hard-earned dollars.”

It’s unclear if Republicans will support Whitmer’s proposal, or come up with their own. The GOP-led Legislature has passed tax cuts this year, but they were vetoed by Whitmer, who called them “unsustainable,” and said it would lead to spending cuts.

Related: Michigan Gov. Whitmer proposes tax cuts, more mental health workers in speech

About the Author:

Ken Haddad is the digital content and audience manager for WDIV / ClickOnDetroit.com. He also authors the Morning Report Newsletter and various other newsletters. He's been with WDIV since 2013. He enjoys suffering through Lions games on Sundays in the fall.