The Michigan Supreme Court and the Pension Tax

Sep 8, 2011

The Michigan Supreme Court will soon issue an opinion on whether the new law taxing pensions is constitutional.

If they say it is, it’s full speed ahead for the governor’s plan. If they decided that taxing pensions is not constitutional, it’ll knock a huge hole in the budget. That means the state will have to get more revenue -- which means raising taxes.

That, or roll back the business tax cuts or slash aid to education and other programs more severely than ever.

And while I don’t pretend to know exactly what would happen, I can tell you this, after talking to the governor last week. He isn’t about to roll back the tax cuts, and he doesn’t want to raise taxes.

But how will the court decide? I have my suspicions, but first, I want to say three things about this. First, whatever you think about taxing pensions, you have to commend Governor Snyder for jump-starting the process by asking the court for a ruling.

That’s what he did, more than three months ago, after the legislature passed the pension tax bill. The court was bound to take up the issue eventually, but without the governor asking for a ruling now, it could have taken years.

What Michigan doesn’t need is years of uncertainty, much less the chaos that would have resulted if the court were to overturn the pension tax, say, four years from now.

Second -- whether or not you think this is good public policy, we should want the seven justices to decide this issue on one basis, and one basis alone. The Michigan Constitution.

Personally, I am in favor of taxing pensions; I view them as income just like any other income. But if taxing them is truly  unconstitutional, that’s how I want the court to rule.

And finally, we need to believe in the integrity of our highest justices. Michigan’s Supreme Court has been repeatedly criticized by some of the nation’s top legal scholars as one of the most blatantly partisan courts in the nation.

If they follow that pattern, we will get a decision where the justices vote four to three to support the governor. The Republican justices -- Young, Markman, Mary Beth Kelly and Zahra will find the tax constitutional; the Democrats -- Marilyn Kelly, Hathaway and Cavanaugh -- will say it is not.

That’s exactly the pattern we don’t want to see. If they line up that way, it will further deepen Michigan citizens’ cynicism about the impartiality of this court.

Last night, I asked former Michigan Attorney General Frank Kelley what he thought about the issue. He was attorney general when the present constitution took effect, and for more than thirty years afterwards. Turns out he issued an advisory opinion twenty years ago, saying any pension tax would violate the constitution.

Yesterday, during oral arguments, two of the Republican justices hinted they might find the tax unconstitutional on other grounds, because its exemptions somehow create a form of a graduated income tax.

Those familiar with the process know that what is said in oral arguments often bears little resemblance to what is handed down.

But what matters most is that when we get that decision, it appears to have the judicial integrity that we deserve.