It’s time to get things right with retirement tax

Michigan has a problem.

What is next: Economic development ocials and government leaders from both parties say the SOAR account has put the state “in the game,” signaling it is serious after big tax incentives were eliminated by Gov. Rick Snyder but later made a comeback in a di erent program that did not last long.

e SOAR fund will have more than $200 million left after legislators soon nalize three large transfers and Gov. Gretchen Whitmer signs a bill depositing $150 million more into the account. More than $1.5 billion will have been disbursed in a year, 15 times the annual allotment to what had been the state’s agship business attraction and retention tool.

Other ideas:

“ is is a window over the next arguably 18 to 30 months that’s going to be vital for Michigan to have an outsized impact,” said Quentin Messer Jr., president and CEO of the Michigan Economic Development Corp. and chair of the Michigan Strategic Fund. “ e U.S. is nally catching up to what the rest of the world has been doing, which is subsidizing companies particularly in Asia and Europe to a lesser extent for R & D and helping de-risk signi cant amounts of capital investment because there will be 18, 20 months of upfront ramp-up where companies are not making pro ts from signi cant investments. at’s part of the ethos in which we’re in. is ethos won’t be (here) forever. So you got to win now.”

Some experts are skeptical that such incentives pay o in improving a state’s economic competitiveness. They are ine ective and expensive, they said. Michigan, according to critics, should focus on bolstering college degree attainment and knowledge-based jobs, though others say manufacturing increasingly requires technology skills and remains crucial.

A dozen years ago, in the painful wake of the Great Recession, the leaders of our embattled state sought scal nancial relief through various legislative maneuvers, including a 4.25 percent retirement tax. Enacted through Public Act 38 of 2011, this new tax blindsided Michigan retirees who unexpectedly saw their budgeted monthly incomes diminished.

To understand the full impact of this tax, one must look through the lens of the demographic. e median annual income for a Medicare bene ciary is $26,000 and from that modest income, housing and food costs in Michigan carve out nearly $11,000, according to the Massachusetts Institute of Technology living wage calculator. is demographic also endures the highest medical costs and prescription drug costs of any other age demographic.

Our state did a shameful thing in 2011 when it pulled the rug out from under an already nancially vulnerable population of people who worked hard, played by the rules and paid their dues to retire with dignity. ey believed their retirement income would not be diminished by a state tax, but they were betrayed, forcing many to go back to work or delay retirement. To this day, the retirement tax continues to impact new waves of retirees, including the surge of COVID-19 retirees. Enough is enough.

As a erce advocate and defender of those 50 and older, AARP has fought Michigan’s retirement tax from the beginning. Today, with a new Legislature in place, there’s momentum in Lansing through House Bill 4001 and Senate Bill 1 to right this wrong and remove the retirement tax burden from the backs of our retirees. To make it happen, AARP is sounding the alarm and asking all Michiganders, including its nearly 1.3 million members, to turn up the heat by urging state legislators to vote YES on repealing the retirement tax. To contact your state legislator, visit aarpmi.org/repeal.

Let’s get this done once and for all.