Retirees Challenge Michigan Pension Tax In Court

Aug 5, 2013

A class-action lawsuit has been filed on behalf of retired public employees against the state for extending Michigan’s income tax to pensions.

As The Michigan Public Radio Network’s Rick Pluta reports, the lawsuit claims the state broke a promise made in writing to retirees.

The lead plaintiff is a retired school teacher who says state-managed pension funds for teachers and state employees made the promise in their official guidelines and tax information forms. It says the Legislature and Governor Rick Snyder broke that promise by adopting a law that treats pensions like any other income for people born after 1945. The pension tax went into effect last year. The lawsuit says retirees made financial plans based on the state’s promise.

The Michigan Supreme Court ruled in 2011 that the pension tax does not violate the state constitution’s protections against breaking contracts. But the retirees say that does not rule out a non-constitutional court challenge.