MARYLAND NARFE 2015 LEGISLATIVE PROGRAM The Maryland Federation of Chapters of the National Active and Retired Federal Employees Association represents the interests and needs of almost 300,000 federal employees and annuitants in Maryland. While our main efforts focus on our members and constituents, we support legislation benefitting all seniors. Currently 9 states do not have any state income tax and 14 states exempt all or part of Federal pensions from state and local income taxes. While Maryland has a general pension exclusion tied to Social Security, this exclusion pales in comparison to these other states. Maryland, when compared to other states, does not provide as friendly a senior environment despite the fact that seniors, as a general rule, require fewer governmental services such as schooling for children; provide numerous volunteer services; and generate job opportunities for goods and services required by seniors. North Carolina, for example, recognizes that each senior family generates 0.5 new jobs and plows the bulk of their income into the state’s economy. Significant increases in taxes in Maryland over the past decade have especially impacted seniors, primarily living on fixed incomes, who live in Maryland. The high cost of living in Maryland has also resulted in low rankings by national senior organizations and publications recommending potential locales for senior emigration. Thus, to keep seniors in Maryland the state must aggressively compete with other states that recognize the socio-economic value of senior populations and are now actively recruiting
seniors. We believe the best way to change Maryland’s negative senior image is to exempt the pensions of all seniors. This can be phased in over a period of 2 to 4 years, starting with Federal and military pensions, then to other government pensions and finally to all senior pensions. The result would be to encourage Maryland seniors to remain in Maryland as well as to encourage inmigration from other states, thus improving the economy of the state for all Marylanders. SPECIFIC INITIATIVES I. STOP MIGRATION OF MARYLANDERS AND THEIR ASSOCIATED BUYING POWER TO OTHER STATES DISCUSSION: Providing incentives that will encourage Maryland seniors to age in place should be considered an investment for both our citizens and, through them, the state’s overall economy. Unlike states like Pennsylvania, North Carolina, Florida, Nevada and South Dakota; Maryland offers minimal tax incentives for seniors and retirees to entice them to NOT look to other states that do offer more robust incentives such as no state income tax on pensions. DATA: In a recent Gallup poll, almost half of Maryland respondents indicated that, if given the chance to move to a different state, they would do so. The same percentage indicated that they were likely to move within the next twelve months. While there are several reasons given for wanting to move, such as business and family issues, taxes were a uniquely important factor in New York, Illinois and Maryland. A 2008 report entitled “Investing in North Carolina’s Future” found that “the ratio of benefits
to costs of a North Carolina income tax exemption for public retirees is 2.5 to 1.0 showing that such an exemption would be an excellent investment for North Carolina”. The report also indicated that the financial “benefit to the state of government retirees exceeded the combined earnings of three traditional NC industries – textiles, furniture and farming”. Another study compared ten states with the highest income taxes against ten states with the lowest income taxes and found that “the highest income tax states had only a 191% increase in economic growth versus a major 455% growth increase in the low tax states. CONCLUSION: State leaders have important reasons for wanting to see their state populations grow rather than shrink. A growing population usually means more commerce, more economic vitality, and a bigger tax base to pay for state services. A shrinking population of citizens with buying power not only hurts government coffers, but can weaken a state politically by virtue of the potential loss of U.S. House members through Congressional redistricting. RECOMMENDATIONS: 1. Begin a four year phased-in state income tax exemption for all seniors starting with Federal and military pensions, then to other government pensions and finally to all senior pensions. 2. Increase the current $4,200 senior exemption in phases beginning in 2015. This change would be subject to the same means testing as applies to standard exemptions. 3. The Homeowners Tax Credit (HTC) Program is limited to low and moderate income