February 26, 2011

Sending Seniors South is Stupid

One of the silliest arguments I've read in favor of taxing pensions is that Michigan would become a mecca for retirees seeking favorable tax treatment. That, apparently, is a bad idea in the mind of some editorial writer.

While Rick Snyder and his policy team at Business Leaders for Michigan argue constantly for Michigan to be a low-tax state for businesses (right now, we're right in the middle), they don't like the idea of being a low-tax state for retirees.

Kiplinger rates Michigan as one of the ten tax-friendliest states for retirees, and one of the 18 friendliest states for pensions.

So let's concede Michigan can continue to be a magnet for retirees because it doesn't tax pensions. Is that a bad thing?

Seniors are an economic plus for Michigan. They tend to consumer fewer government services, but continue to pay other taxes (notably sales and property taxes, plus Lottery games) and spend most of their income in our state:

  • They don't have kids in school
  • Their major medical costs are covered by either insurance or Medicare
  • They bring federal money (Social Security and Medicare) into the state's economy
  • They are "economic givers" — they don't compete with younger folks for jobs but spend their money here
  • They tend to stabilize neighborhoods by being less transient than younger people
  • They generally don't create a lot of business for the police, the courts or the prison system
So if the Snyder plan to significantly raise taxes on our seniors results in a loss of this demographic group, we all lose.

And it could happen. When you are retired, it's a lot easier to relocate. Many already succumb to the lure of a warmer clime, especially those senior-friendly states like Georgia and Florida which offer lower taxes and higher temperatures. Drastically increasing their taxes makes those sunbelt states even more attractive to those of us who are approaching retirement.

The last thing I want to do is take my pension, guaranteed to me by the Michigan Constitution, and spend it somewhere warm. The Snyder plan makes it much more tempting.

You'd think a nerdy accountant could have figured this out.


  1. Curmudgy-
    You are a very fortunate person...most of us don't have a pension. Did you work harder than I to deserve years of support that I have to continue to work and pay for it?

  2. Responding to Chip: I sought out employment that included retirement benefits. I earned it; I received lower wages than I might have made elsewhere as a tradeoff.

    Don't be angry at me because I planned for my retirement.

  3. Curmudgy-
    My sincere apologies. I am not angry at you.

    My grandad worked until he was 88, my dad was 78, hopefully I will be able to do the same as I enjoy what I do. But if you think you planned your retirement by getting the almighty pension, think again. Somebody else planned it for you. Somebody else can take it away. In that case, it's backed by the US Govt. And that's where I have a problem. Why will I have to continue to work and pay taxes to pay you not to work? Nonsense,that is when I will quit and join you on the dole. Let our children pay for us.

    Seniors don't move out of state because of taxes. Their houses are paid for. Their treasures and memories are here. Those that are making pensions and social security should have the pensions taxed. There is no free lunch just because a magic age is hit to collect money. It's income. Tax it.