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Wednesday, March 09, 2011
Marumoto: Pension Tax threshold could be dropped to $75K at end of session
By Video @ 7:29 PM :: 5258 Views :: Maui County, Education K-12, Energy, Environment

Reps Pine and Marumoto Oppose Taxing Pensions:

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Representative Barbara Marumoto's Floor Speech

HB 1092- Taxation – March 8, 2011

Thank you Mr. Speaker, I rise in opposition to this measure which imposes a state tax on pensions.

When I spoke on this measure a couple weeks ago, my comment was that this bill in its original form, and the $37,500 threshold at which it proposed to begin the tax, was  too low "almost cruel." At the time, I was referencing the low threshold, and one of my concerns with this bill as currently drafted is that, (while the threshold is now higher, $100,000,) it opens the door to taxing the pensions of those with a lower AGI in the future.  It could slip down to $75,000 or lower before the end of session or in future sessions.

The fact is that this bill will tax our seniors, those on a fixed income, with less opportunities to adjust to our rapidly rising costs-of-living.  Ms. Barbara Stanton of the American Association of Retired Persons said it best in this Sunday's Star-Advertiser when she said that this "came as a shock to Hawaii's seniors whose fixed incomes are no match for rising costs." According to her, the consumer price index shows a 70 percent increase for Honolulu over the past 20 years. With costs continuing to rise, it is unfair to take from those who were promised tax free pensions decades ago.

Ms. Stanton's article also raised some important legal concerns that this body should be well-aware of before it moves forward with this legislation. First, she points out, Federal law prohibits taxing pension income of nonresidents living in Hawaii (Public Law 104-95). Second, the Hawaii Constitution (Article XVI, Section 2) states that accrued benefits of retirees in the state retirement system shall not be diminished or impaired. These are potential legal problems that would diminish the gains this bill claims to generate.

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Pension Tax Passes: “One day, with inflation, all pensions will be taxed”

KITV: Gov. Neil Abercrombie originally proposed taxing the pension income of retired single people who earned $37,500 a year or married retirees who make $75,000 combined, a proposal that was attacked by the AARP and other groups representing retirees.

Tuesday, the State House approved the pension tax for much higher income retirees. Single seniors would have to earn $100,000 and married couples would have to make $200,000 before the pension tax would kick in.

"It only affects about 3,000 taxpayers and these are taxpayers in very, very high incomes," said State Rep. Isaac Choy (D-Manoa, Moiliili), an accountant who spoke in favor of the pension tax during debate on the State House floor.

"Because we set the limit so high, one day, with inflation, all pensions will be taxed. But that date will be 15 to 20 years in the future. I believe that's enough warning for anybody," Choy added. (Google: “Boiling Frog”)

All eight Republicans in the State House voted against the pension tax, including State Rep.George Fontaine of Maui, who's a retired police officer and pension recipient.

“Are we just gonna say 'Well, it's OK, because it's the rich retirees and everybody else is safe.’ Now that's not fair either. It's like we'll take from the rich and pay for the bills and that's not correct," Fontaine said.

Shapiro: Will a higher threshold make the pension tax palatable?

AP: Hawaii legislators advance taxes on pensions for the wealthy, liquor and timeshares

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