The Michigan Supreme Court last week accepted Gov. Rick Snyder’s request to hear a case regarding the constitutionality of taxing retirement income.
A new law eliminates the state’s long-standing income-tax exemption on retirement income, including pensions. Some tax exemptions would continue, depending in part on the retiree’s age. The tax is scheduled to take effect next year.
Snyder’s May 31 request for a peremptory opinion heads off any threatened court challenges against the law, which the governor proposed and the Legislature passed as a key part of the fiscal 2012 budget. The new tax is projected to generate $343 million annually, filling part of a $1.6 billion hole created by the elimination of the Michigan Business Tax.
The court’s review will determine whether the law violates the constitution’s prohibition against impairing or diminishing a public pension benefit, among other provisions. The governor believes the new law is constitutional but asked for the review to avoid years of court litigation.
“As a practical matter, if we went through the court system it could take several years to get a decision from the Supreme Court level,” said Snyder, a Republican. “So I thought it was good, efficient operation to ask for that opinion now and hopefully put that issue to bed as quickly as possible.”
Oral arguments will be heard Sept. 7. Snyder asked the court for a ruling by October, the start of the state’s fiscal year.