Supreme Court finds only some parts of pension tax unconstitutional

The Michigan Supreme Court has ruled that Gov. Snyder and the Republican-led Legislature could apply the state’s personal income tax to senior’s pension income. However, the court also ruled that basing exemptions on an individual’s wealth is unconstitutional since it could be considered a graduated tax, which is banned under the state constitution.

Eliminating the unconstitutional graduated tax creates a $60 million budget shortfall and seniors are being hit with $343 million in new taxes on their pensions. Meanwhile, corporate CEOs are enjoying their $1.8 billion in tax breaks.

Despite the need to rework the unconstitutional parts of the law, the tax will go into effect Jan. 1, 2012. According to Gov. Snyder, the impetus for the law “to help get Michigan’s fiscal house in order and economy back on track,” was still preserved by the Supreme Court’s ruling.