AARP AARP States Michigan Advocacy

AARP to legislators: Use surplus to lessen tax harm on seniors

Michigan Capitol summer

AARP Michigan has sent the following letter to state legislators regarding the budget surplus:

Michigan’s seniors were among those watching last Friday’s Consensus Revenue Estimating Conference, at which the state’s projected budget surplus was estimated at approximately $971 million.

As the Legislature considers the state’s economic picture in light of this information, we urge you to take action to lessen the harm caused by the tax increases on seniors that Michigan enacted in 2011:  the new state pension tax, elimination of the $2,400 per senior tax exemption, and increased property taxes due to changes in the homestead tax exemption. 

 The retirement security of Michigan residents matters not just to individual retirees, but to our state’s economy as a whole. Americans aged 65 and older spend 84% to 92% of their income, a higher proportion than other age groups. Older adults also tend to spend a larger share of their income locally, purchasing goods and services that are produced locally. As a result, increases or decreases in the amount of money that Michigan seniors have available to spend creates significant ripple effects across our state and local economies. 

 As you know, most seniors live on fixed incomes, which makes it more difficult for them to absorb unexpected new costs.  Worse, Michigan’s senior tax increases have hit at the same time that Michigan residents are facing an erosion of their retirement security in other ways, with increased threats of cuts to Social Security and Medicare at the federal level, a decline in the value of their homes and savings, and reduced confidence that the pensions promised to them as workers will be fully honored.

 Based on previous estimates for FY 2014, the cost to the state budget to reverse these tax increases would be approximately $650 million per year:  $347 million to fully repeal the pension tax; $35 million to restore the senior tax exemption; and $268 million to reinstate the homestead tax exemption. Recognizing that about two-thirds of the projected surplus is “one-time” money, we do not expect the Legislature to fully reverse these three tax increases. However, we urge you to use this opportunity to provide some redress for older Michiganders and help restore their retirement security.

 If you have any questions or if there is further information we can provide, please feel free to contact our Associate State Director for Government Affairs, Melissa Seifert, at 517-267-8934 or mseifert@aarp.org. Thank you for your time and attention to this important issue.

Sincerely,

Jaqueline Morrison, State Director

Thomas E. Kimble, State President

 

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