Caswell Supports Major Changes To Tax Reform Bill
Thursday, May 12, 2011
LANSING – Senator Bruce Caswell voted today for House Bill 4361, the legislation that makes a number of reforms to Michigan’s business and income taxes. The bill contained a number of provisions, but the business and pension tax portions have garnered much attention in recent weeks. The version passed by the Senate contains $1 billion in tax relief for small businesses with a heavily-modified income tax on pensions that will raise $300 million in revenue. It represents an initial net tax cut of $780 million over the next two years.
“This proposal is all about job creation and making Michigan more competitive with other states. We have significantly cut the Governor’s original pension tax from $900 million to $300, while ensuring that small businesses receive much needed tax relief,” Caswell said. “These reforms, coupled with reductions in state spending and a commitment from the Governor to pay down the state’s long term debt, will put Michigan on the track for recovery.
The bill passed by the Senate lowers the taxes paid by small businesses, the very employers that provide nearly 80% of the jobs for Michigan’s workers. Larger companies may see an increase in their taxes, as the legislation levels the playing field for all businesses in Michigan, instead of favoring large corporations over the smaller companies that reside all around us in our communities and are owned by our neighbors.
“If we invest in our own people, they will keep jobs here and continue to grow their business in our communities. I have long maintained that we need to lessen the burdens that the state has placed on the engine of our economy – small businesses and entrepreneurs. They account for 4 out of every 5 jobs created in Michigan and they have struggled against all odds to stay afloat through the recession,” said Caswell. “These tax reforms will allow small business owners to invest their resources in their businesses and their employees by reducing the amount they send to Lansing in taxes.”
The other major component of the tax reform bill contained changes to the income tax exemptions on certain types of retirement and pension income. Under current law, only private pensions and unmatched income on 401(k) plans over $45,120 for an individual or $90,240 for a couple have income tax levied against them. The legislation passed by the Senate makes a number of changes to what pensions and retirement income will now be subject to the income tax (see table below). The pension tax will also apply to the pensions and retirement income of retired legislators.
“I have heard from hundreds of the constituents that I serve on both sides of the pension tax issue. Substantial changes have occurred in this proposal from where it started based on the citizen input I received and that I have shared with the Senate leadership and the Governor,” Caswell said. “I believe that the changes we made to this legislation provide significant protection for the vast majority of Michigan’s current retirees as we transition into the new tax structure, while ensuring a more viable and sustainable revenue source as the average age of Michigan’s population continues to rise over the next decade. Sacrifices will be required from us all, but together we will succeed.”
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