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Friday, July 25, 2014         

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Pension tax bill unfairly burdens seniors

By Rep. Barbara Marumoto

POSTED:



Abercrombie’s budget proposal calls for a variety of new and increased tax hikes that will cost taxpayers approximately $279 million per year. For now, let’s put aside Abercrombie’s campaign promise that he would not raise taxes. Let’s instead focus our attention on how these taxes will affect seniors.

Seniors, like the rest of the population, will be affected by the repeal of the state income tax deduction. But, more important for retirees, Abercrombie’s plan also paints a target specifically on senior citizens by eliminating the income tax exemption on their pensions.

Abercrombie wants to tax pensions starting with anyone with an adjusted gross income of $37,500 or higher. According to his projections, his plan will raise $112.3 million per year. This is a 40 percent share of his $279 million annual tax hike, taken from the pensions of the 43,520 seniors who are retired in Hawaii. That is an astounding average of $2,580 per retiree!

Despite the governor's proposal, the House recently passed House Bill 1092 over to the Senate with thresholds that start at $100,000. The House’s thresholds are substantially higher than the governor’s. But be forewarned, the thresholds can still be lowered as the bill moves through session. As the proposal stands now, there would be only a $17.1 million gain to the general fund.

AARP fears that the $100,000 threshold can easily move down, if not this year, then in future years. One representative even said it on the floor of the House, and it’s been in the testimony from the Department of Taxation and the Department of Budget and Finance — a lower threshold is the ultimate goal.

Whatever the threshold ends up being, it will be a hit aimed directly at Hawaii’s seniors, the people who have planned their whole lives for their retirements.

Abercrombie says that these increases are necessary so that we can fund government operations at the level people expect them to be. But what about expectations our seniors had when they retired from their jobs?

These retirees expected that their pensions would not be taxed and did not budget for the kinds of cost-of-living increases they now face.

It is unfair for the government to change the rules when these retirees have little means to change their plans. Little do they realize that there will be less funds for Medicaid and Medicare in the near future.

I understand that the state has a big deficit to close and that everyone has to make sacrifices. But, the government needs to make sacrifices, too. It doesn’t need the governor to propose $728.6 million in spending increases in the face of a huge deficit crisis.

The administration has not spent enough time evaluating ways to cut costs, streamline activities or support new industries that could be generating revenues as we speak. Instead, this administration has placed over a third of the burden exclusively on the backs of seniors, many of whom are least able to absorb or adapt to it.

This is unreasonable and disrespectful.

And the governor’s proposal to tax pensioners with incomes as low as $37,500 is almost cruel.






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