One of the top ten tax issues this year for MTA is preventing targeted income tax exemptions for special interest groups. Rather MTA favors exemptions for complete coverage of all people in the broad category. For example, MTA does not favor exemptions for retired State Police, retired Federal employees, retired Coast Guard or military; MTA favors exemptions for all.
I am commenting on three bills today. Most people who would benefit do not know that you are discussing these bills and they do not know the effect of these bills. I presume each of you knows in detail what each of these bills does, but from experience, I am certain that a large percentage of you have an incomplete or unclear understanding of the effect of the bills.
When I have mentioned the fact that a bill was introduced initially in the Maryland Senate that would exempt retirement or pension income for persons over 65 years of age or disabled persons, including persons with a disabled spouse, most people have no idea that this was introduced. I tell them that they have not read about this because most print media reporters do not know about it either. Taxes are a mystery to people because your predecessors planned them that way. Indirect, stealth taxes are evil mischief.
I say to members of the Ways & Means Committee that the elderly are not among those in Maryland who received an average of 7.25% increase in personal income every year for the last four to five years as your committee chair decided was the case when she voted as part of the Spending Affordability Committee on December 14. I say that the elderly and disabled are not going to be among the group that the Spending Affordability Committee decided would receive another 7.25% increase in personal income in the next fiscal year.
MTA has received letters from people have are or have been retired, who have nothing but an Individual Retirement Account from their prior employment. Take employees for the bankrupt Hechinger company, for example. They had no pensions or retirement plan like State of Maryland employees have and nothing like members of the General Assembly have at the present time. When Hechingers went under, these people moved their IRA to another company or were forced to retire. These, too, should be exempt from the Maryland income tax if their IRA is the only source of retirement income. MTA agrees that these people should be exempt as others.
Other states give a break to the retired. In West Virginia, $8,000 is exempted for those over 65 years of age or totally disabled, but a more limited exemption is given for persons retiring as teachers, public employees and military, probably because these persons retire long before they are 65 years old or disabled. In Delaware, $5,000 is excluded from income for those over 60 years old and only $2,000 if you are under 60 and retired. Several states do not tax retired Federal employees because of their state constitutions or other legal reasons.
In Maryland we give a pension exemption for some with one hand, then take it back with the left hand because they receive social security benefits. We are the only state in the region that is so greedy with the elderly.
Some Maryland employees are smart. More than 14,000 of the retirement checks are sent to addresses outside of Maryland. These people have escaped the Maryland tax. And, we have learned that over 11,000 active Maryland employees or 14 percent of all employees live out of state because they find Maryland to be inconvenient or a high tax state. Do not forget that Pennsylvania income taxes are less than 3 percent and they do not have a tax on clothing.
It is time for Maryland to recognize that the elderly have contributed all of their lives to provide taxes and when they reach 65 years of age they cannot earn like they could in their younger years. Likewise, the disabled cannot work at any age. Some simple justice and fair-minded thoughtfulness should be given to helping these people survive in a state with an otherwise staggering cost of living. Maryland does not win prizes for being a good state to retire in or die in. Maryland does not get high recommendations from senior citizen associations for retirement. Around here, Delaware and Pennsylvania are attracting more and more, and Marylanders are moving on to those states or to non-income tax states like Florida.
Speaking for my family, Maryland will need to try harder to keep me from retiring to Florida where three of our four children live with some of our grandchildren. At age 65 in a few years, I would rather have that 7.5% Maryland Income Tax to do things with my grandchildren, so if Maryland does not acknowledge this, I will be gone with the thousands of others who have already made that decision. If a move costs $10,000, and I retire at $30 to 40,000, it will only take me about three years to pay for the move. We may be getting older, but remember we are also getting wiser. During the next few issues of the Taxpayers News, we will educate our members about the benefits of retiring where there are no income taxes in retirement. The elderly and disabled deserve choices. You should make the decisions easier.
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