Kalamazoo Gazette: Michigan tax increases hitting more Kalamazoo-area families this April
media mentionBy Yvonne Zipp | [email protected]
on March 25, 2013 at 5:10 PM, updated March 26, 2013 at 8:57 AM
KALAMAZOO, MI – As Kalamazoo-area residents fill out their Michigan income tax returns ahead of the April 15 filing deadline, many are getting an unwelcome surprise: The amount they owe has gone up.
A number of changes to the tax code that were signed into law by Gov. Rick Snyder in 2011 are taking effect this year.
Parents, retirees, homeowners and the working poor are among those seeing tax increases – with the implementation of the Pension Tax, the reduction of the Homestead Property Tax Credit and the elimination of the $600 per-child tax deduction and the $2,300 exemption for seniors, among other changes. The Earned Income Tax Credit has been cut from 20 percent of the federal EITC to 6 percent.
Cumulatively, the changes constitute “the largest tax increase on individuals in Michigan in history,” said Senate Democratic Leader Gretchen Whitmer, in a statement.
Some 51 percent of Michigan taxpayers will pay more in income taxes in 2012, according to the Institute on Taxation and Economic Policy.
One of those is Luke Howell, of Comstock Township.
“The child credit losses and the homestead losses have doubled my tax burden in the last year,” said Howell, who said that he and his wife, who works for Kellogg Co.
“We really don’t make too much, but before, we made just under enough to qualify for the homestead deduction. We lost that deduction,” said Howell, who also lost the $600 per-child deduction for his two young daughters. “There’s nothing for the middle class anymore. It’s frustrating.”
Howell said that he knew the changes were coming.
“I was expecting to have to pay a little bit more, but it never really hits you until you’re sitting down and preparing your taxes,” said Howell, a former teacher and stay-at-home dad. “I really think there are legislators in the state who think that (the increase) means that we sacrifice a vacation or go from driving an Audi to a Toyota. That’s just not the reality anymore.”
State Rep. Sean McCann, D-Kalamazoo, held a press conference on the changes on Monday, March 25, during which he said the changes unfairly shift the burden away from businesses and onto those who can least afford to pay, such as the elderly and the working poor. Democrats are seeking to repeal the pension tax and the reinstate the homestead property tax credit for middle-class families.
So are a group of five Republicans in the state Senate, led by sponsoring Sen. Rick Jones, of Grand Ledge, all of whom voted against the changes in the tax code in 2011 that did away with the much-criticized Michigan Business Tax.
Jones told MLive.com Thursday that his bill was a direct result of calls from frustrated constituents.
McCann said Monday that he has been getting similar calls.
“Kalamazoo-area seniors and working families continue to tell me that the tax increases imposed by the Republicans in Lansing make it difficult for them to make ends meet,” said McCann, who sits on the House Appropriations Committee. “Most taxpayers are just realizing that a greater burden is now shifted onto them than before.”
McCann cited statistics by the Michigan League for Public Policy, which found that businesses have seen an 83 percent tax cut, while taxes for individuals have gone up 23 percent. Individuals making less than $17,000 a year will pay $101 more in taxes this year, while those making more than $334,000 will pay $7 more, he said.
Michigan retirees had $294 million in taxes withheld from their pensions in 2012, according to the Senate Fiscal Agency. In addition to the $1,200 in pension tax for seniors born after 1952, seniors also lost $2,300 in the senior exemption cut, for a total of $3,600 in new taxes.
“There is no doubt the tax increases on individuals will have a direct negative impact on the local economy,” said Norman Hawker, professor of finance and commercial law at Western Michigan University’s Haworth College of Business.
He pointed to tax increases of up to $3,600 on seniors, which is $300 a month that they can’t spend. “That’s a car payment for a new car that isn’t being bought … That’s $300 less in groceries being spent at our local grocery stores,” Hawker said.
The WMU professor also disputed the idea that cutting taxes on businesses automatically leads to more jobs.
“It’s a myth that businesses exist to chase tax cuts and that they would magically bring jobs into Michigan,” said Hawker. “Wealthy businesses do not expand to get tax cuts. They expand to meet demand.”
If tax cuts alone worked, he added, “We’d be talking about the economic miracle in Mississippi.”
Yvonne Zipp is a reporter for MLive/Kalamazoo Gazette. You can reach her at [email protected] or 269-365-8639.