2011 tax changes are being felt now

By George Darany
Michigan taxpayers are in for many distressing surprises this year when they file their state income taxes. The Republican-sponsored tax changes passed in 2011 take effect this year with the taxes you are filing now. Retired residents have already felt the effects of the retirement tax in their monthly checks. Many families that have relied on exemptions and credits will find them reduced or gone this year.

There is no longer a $600-per-child deduction, or a $2,300 senior exemption. The Earned Income Tax Credit for low- and middle-class families is reduced from 20 percent to 6 percent. Instead of being available to taxpayers earning less than $82,650, the Homestead Property Tax Credit is reduced and will only be available to individuals earning $50,000 per year or less, and homesteads with a taxable value of less than $135,000. Some senior citizens who once qualified for a 100 percent credit will now qualify for something less than 100 percent.

Retirement benefits are now taxable for some individuals based on age and income. Joint filers’ pensions are taxed based on the age of the eldest joint filer. People born before 1946 will see no change: public pension income is exempt from income tax, and private pension income is exempt up to certain amounts. People born from 1946 to 1952 will be taxed on retirement income above $20,000 for single filers and $40,000 for joint filers. Social Security and military pensions are exempt. People born after 1952 will see all retirement income taxed as regular income except for military pensions and Social Security.

Nonrefundable tax credits that are no longer allowed include credits for college tuition; city income taxes; automobile donations; donations to homeless shelters, food banks, community foundations; and contributions to medical savings accounts.

These changes will not only create hardship for our middle-class families, they will also hurt our local nonprofit groups who may see reduced donations now that state tax credits for these are no longer allowed. During these tough economic times, more families have relied on these groups and the services they provide to help make ends meet. This is not the time to change tax policy to benefit big corporations at the expense of low- and middle-income families and the groups that try to help them.

My Democratic colleagues and I will continue fighting for tax reform. We don’t want a tax system that unfairly takes money out of retirement checks or the wallets and savings accounts of our hard-working middle-class families who are struggling to provide basic necessities and ensure that their kids have a chance at a college education.

Many local groups work with tax preparers to provide free tax help for individuals and families. For more information please contact my office at 517-373-0847, via email at GeorgeTDarany@house.mi.gov, or go to my website at www.darany.housedems.com.

(State Rep. George Darany represents the 15th House District. To contact him, call 855-775-1515 or email him at georgetdarany@house.mi.gov. To sign up for his e-newsletter, go to his website, house.mi.gov/gdarany.)