Gov. Gretchen Whitmer is touting tax relief for seniors following years of sky-high inflation and failed state economic policies that have most in the state struggling to survive.
“Michigan seniors worked hard their whole lives. They should enjoy their golden years,” Whitmer posted to X on Tuesday. “That’s why we’re rolling back the retirement tax. This will save half a million households an average of $1,000 a year, so they can keep more of their hard-earned money.”
Michigan seniors worked hard their whole lives. They should enjoy their golden years. That’s why we’re rolling back the retirement tax. This will save half a million households an average of $1,000 a year, so they can keep more of their hard-earned money 💰
— Governor Gretchen Whitmer (@GovWhitmer) August 13, 2024
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In March 2023, Whitmer signed House Bill 4001 to amend the Income Tax Act “to phase out the retirement tax over four years” on public and private pensions, eventually saving seniors an average of about $2.75 a day. For the 2024 tax year, the deduction is half that.
“Right now, families are facing the pinch and having tough conversations about how to make ends meet,” Whitmer said at the time.
Those tough conversation stem largely from inflationary pressures that have more than half of older Michiganders cutting back on spending to make ends meet.
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A recent National Poll on Healthy Aging from the University of Michigan shows “58% of older Michiganders say they’ve cut back on spending, 51% say they’ve been impacted by inflation a great deal, 57% say they have felt some or a lot of stress about personal finances, and 15% say they’ve avoided or delayed spending on health care and health-related costs.”
And the situation in Michigan is worse than other states, according to the report.
“For instance, 52% of people age 50 and older outside of Michigan said they have cut back on spending, and 16% say they have felt a lot of stress about their finances, compared with 58% and 21% in Michigan,” the report read. “And 35% of older Michiganders said they rarely or never have money left at the end of the month, compared with 25% of non-Michiganders.”
While inflation has cooled from a high of 9.1% in 2022, it remains a significant problem for seniors with items they spend on the most – housing, electricity, medical expenses, and food – continuing to outpace the overall inflation rate.
“Prices are coming down, but the things that seniors are spending on are going up,” Mary Johnson, a Social Security and Medicare policy analyst, told Yahoo Finance. “This is clearly causing distress.”
Johnson points to increasing electricity bills, an 11.4% increase in home healthcare services, double-digit increases for food, and housing costs that eat up half of many seniors’ budgets.
“Even though overall inflation is coming down,” Johnson said, “the standard of living for many older households is not improving, it’s declining.”
A study from Boston College released this spring suggests inflation prompted higher withdrawals from retirement savings that resulted in “a 14.2% decline in the financial wealth held be middle-income retirees between 2021 and 2025. (If rising interest rates trigger a recession, their wealth would decline 16.6%),” according to The Wall Street Journal.
“According to the survey, nearly a quarter of retirees and near-retirees changed with withdrawal rates between 2021 and 2023, boosting distributions by an average of $1,810 in each of those years.”
Other findings show “inflation will reduce the financial wealth of retirees in the top third of the wealth distribution by an average of 4.3% by 2025. Those in the bottom third, who rely more heavily on cash and bonds in their retirement savings, are likely to experience an 18.8% reduction by 2025 due to inflation.”
The loss, of course, is a lot more than the roughly $2.75 a day on average Michigan Democrats are giving back to seniors, though that savings will likely be consumed by the state’s rapidly rising costs for essentials.
A report from the Michigan Department of Insurance and Financial Services working to finalize 2025 health insurance rates shows those in the state’s biggest plans will likely see double-digit rate hikes next year.
Overall, plans in the state’s individual market covering 462,062 individuals could increase by an average of 10.7%, while 424,070 covered by small group plans could see rate increases that average 11.2%.
Michigan energy companies are also requesting back-to-back double-digit rate hikes for electricity, despite already paying among the highest rates for some of the least reliable service in the U.S. DTE energy contends the repeated rate hikes are critical to fulfilling Whitmer’s climate goals.
Those rising costs are on top of Michigan auto insurance rates that are up to 117% more than the U.S. average – the highest in the nation.
The financial stress on Michigan retirees is a major reason why the Great Lakes State tumbled 24 spots from last year in Bankrate’s annual Best and Worst States to Retire Study, going from 13th in 2023 to 37th this year.