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Pension tax arguments focus on state constitution

By Rick Pluta, Michigan Public Radio Network

LANSING, MI – The Michigan Supreme Court heard arguments for and against the state's new tax on pensions. The court could make a decision within days or weeks on whether it violates the state constitution. Many of the arguments centered on whether the new tax is a thinly disguised version of a graduated income tax.

A graduated income tax charges different rates -- instead of just one -- to different taxpayers. Michigan's constitution does not allow a graduated tax.

But opponents say the way Governor Rick Snyder wants to phase in his tax reform plan is a graduated tax. Public employees and retirees also say it violates their agreements with the state by reducing their pensions.

Lieutenant Governor Brian Calley showed up for the arguments. Calley says he and Governor Snyder expect the tax will be upheld.

"We felt very comfortable coming into this that subjecting all forms of income to the same type of tax was constitutional," Calley says.

It's not upheld, the state budget will be short 340 (m) million dollars. The pension tax would help offset the revenue loss from eliminating the Michigan Business Tax.

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