2011 Tax Changes Hit Home in 2013

The side effects of cutting out the Michigan Business Tax (MBT) nearly two years ago are now being felt by some individuals across the state at tax time: "[p]arents, retirees, homeowners and the working poor," according to the Kalamazoo Gazette/MLive. 

For at least one Manistee County taxpayer--an 83-year old widow--about $500 is owed to Lansing for 2011 taxes, as opposed to a small refund check in prior years.  A local tax office confirms that others within the county are seeing similar changes and reports that brown postcards reminded taxpayers of the changes' general effect.

In May 2011, the MBT was eliminated [1], but state lawmakers made sure that the revenue came from, or was held back, from other sources: "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" [2].

Representative Ray Franz and Senator Darwin Booher voted for the 2011 legislation [3, 4], but five Republican Senators voted against it: Sens. Rick Jones of Grand Ledge, Tory Rocca of Sterling Heights, Joe Hune of Hamburg Township, Dave Hildenbrand of Lowell and Jack Brandenburg of Harrison Township, reports MLive's Capitol bureau [5]. Those same five Republicans now propose a new bill to reinstate the full Homestead Property Tax Credit and to cut the pension tax. House Democrats also support those two measures [6].

The state webpage describing the 2011's changes to the Homestead Property Tax identifies who would lose the credit:

The groups most likely to experience a change in their credit from the 2011 tax year are:

• Seniors (65 & Older)

• Taxpayers with Total Household Resources over $50,000, and

• Homeowners whose property has a taxable value over $135,000  [7]

The webpage says that the credit is "calculated differently" but a change in wording and definitions is involved as much as mathematics. "Total Household Resources" has replaced "Total Household Income" as one of the criteria examined. The new "Resources" term appears to allow for taxing certain things exempted by federal taxes, and does not account for personal business losses.

1. http://www.mlive.com/politics/index.ssf/2011/05/gov_rick_snyder_signs_michigan.html

2. http://www.mlive.com/news/kalamazoo/index.ssf/2013/03/state_tax_increases_hitting_mo.html

3. http://votesmart.org/bill/votes/35095#.UWRp8KJg848

4. http://votesmart.org/bill/votes/35094#.UWRseaJg848

5. http://www.mlive.com/politics/index.ssf/2013/03/group_of_republican_senators_s.html

6. http://www.mlive.com/politics/index.ssf/2013/04/michigan_state_budget_democrat.html

7. https://www.michigan.gov/taxes/0,1607,7-238-43535_43538---,00.html