Fixed incomes

Critics of the bill to exempt retirement income from the Maine income tax says it was merely a feel-good proposal, a political ploy with no chance of becoming law, a shameless bit of late-session grandstanding.

The critics are being kind. Maybe the wave of support that swept this remarkably bad idea through the House and perilously close to approval in the Senate doesn’t demonstrate a propensity for pandering but something far worse — it reveals among lawmakers a shocking lack of understanding regarding the basics of taxation.

Not that there’s anything wrong with retirees. They’re splendid individuals, one and all. But Maine — like retirees, like anyone who doesn’t get to fill out his or her own paycheck, for that matter — is on a fixed income when it comes to tax relief. Maine needs to spend what money it has on those who most need help, working age or beyond. The struggling elderly need help; so do struggling young families.

The bill would have exempted the first $25,000 in retirement income for a single, the first $44,000 for a couple, at an estimated annual cost to the state treasury of $63 million. Thus, the single retiree at $25,000 pays nothing, the single worker with that amount of taxable income pays $1,573. The retired couple at $44,000 pays nothing, the working couple $2,630.

Even worse, no means test. The single retiree comfortably rusticating on $50,000 pays the same $1,573 as the worker with half that income. The retired couple at $50,000 pays $121, the working couple pays $3,140. The higher the income, the wider the gap.

Even more offensive than the numbers is the rationale behind the bill: retirees consume fewer government services, therefore they should pay less. Only one thing can be meant by services — public schools. The very last thing Maine should be doing is sending the message that funding public education is burden that those without kids in school needn’t help shoulder. What about the single 20-year-old or any other worker of any age with no kids? Shouldn’t, then, parents with three kids pay more taxes than parents with one? Why not do away with taxes altogether and pay for everything with user fees? No Medicare, no police patrols, no public transportation, the $3,000 ambulance call. And, with many people retiring early, how can lawmakers assume retirees don’t have school-age kids? Haven’t they heard of Viagra?

If there is an upside to this it’s the indication that the Legislature is aware that Maine’s income tax structure needs some serious adjusting. It’s about time. Now, if that energy could only be focused upon providing relief to those who need it, working or not.

Still, lawmakers may be on to something here — manipulating tax policy to attract a certain type of person to Maine. But why not think big? Why not an exemption for billionaire software tycoons with philanthropic intentions. Or for entrepreneurs with some hot ideas on what to do with vacant shoe factories and paper mills. Or left-handed pitchers with wicked sliders. The Sea Dogs could use one of those. Or for tax experts — righties or lefties — who understand the concept of targeted tax relief on a fixed income. The Legislature could use several.