Snyder, GOP legislators agree on budget deal

Gov. Rick Snyder and the Republican leadership in the state legislature announced that they had reached a tentative deal on budget matters that would modify some of Snyder’s proposals and phase in others over time.

The Detroit News reports:

Gov. Rick Snyder joined the Republican leaders from the House and Senate this afternoon to announce a tentative budget deal that will phase in and modify Snyder’s proposed tax on pensions and delay a scheduled reduction in the personal income tax rate…

Details are being worked on, they said, but the changes would continue the pension income tax exemption for residents born in 1946 or earlier and soften the impact for those born between 1947 and 1952…

The new proposal would exempt those aged 67 and older from the pension tax, Snyder said. For people 60 to 66 years old, the first $20,000 would be exempt for an individual and the first $40,000 for a couple. Pensions would be taxed at the full rate for retirees aged 59 and younger.

But once any Michigan resident turns 67, income exemptions of $20,000 for individuals and $40,000 for couples would apply, Snyder said. All income, including Social Security income, would apply against that higher-than-normal exemption, he said.

The tentative agreement also delays a scheduled decrease in the income tax, which was supposed to drop from 4.35 percent to 4.25 percent on Oct. 1, the start of the 2011-12 fiscal year. The tentative agreement would delay that planned reduction to Jan. 1, 2013, putting about an extra $170 million in state coffers, according to one source.

If the deal goes through, it will also require even more spending cuts than those already proposed because the phased in pension tax would bring in about $600 million less next year than the original plan and putting off the income tax decrease would only bring in about $170 million. No new cuts were specified by the GOP leaders today.

In a statement released to the press, Senate Democratic Leader Gretchen Whitmer (D-East Lansing) and House Democratic Leader Richard Hammel (D-Mt. Morris) said:

“The Republicans are putting a fresh coat of paint on the same plan to balance the budget on the backs of seniors, working families, and students while giving billions away to big corporations. This new proposal blatantly violates the Governor’s very own ‘simple, fair and efficient’ ideal. Their revised plan is nothing but a bait-and-switch that offers little relief in exchange for yet another tax increase on residents. It does nothing to resolve the concerns and frustrations that have brought people to the Capitol by the thousands in recent weeks to voice their opposition to his agenda. We also question the amount of revenue this plan will actually generate since the bulk of the revenue raised from the pension tax comes from hitting the lowest pensions.”