Relieve pension tax

Where the Legislature starts as it removes the tax on pensions for retired government employees is not nearly as important as where it ends up. Removing this tax is a matter of fairness toward people who have devoted their careers – or, in the case of the military, risked their lives — for the public good. To have them subject to a tax that Social Security recipients need not pay is inequitable and poor policy.

Social Security is untaxed up to $17,000 in benefits. Gov. Angus King proposes to remove the tax on the first $6,000 in public pensions; a legislative proposal would take the tax off the first $10,000. The Appropriations Committee is expected in the next few days to decide on a number its members believe the state can afford. Gov. King’s proposal has a price tag of $13 million per year.

And $13 million is, coincidentally, just what removing the snack tax would cost Maine. If lawmakers are to set priorities, they should ask whether the break on pensions is more or less important than one on potato chips. If they are serious, they will turn down the proposal to remove the snack tax, urge voters to reject it at the polls and boost the break on pensions.

The goal for lawmakers should be to equalize the Social Security and public pension tax levels, without bringing down the Social Security number. That means going to at least $17,000 for the pensions. Lawmakers will not get there this year, but it should be their clear stated resolve that they meet this mark during the next couple of years. A focused Legislature convinced of the unfairness of the current system could get there by the end of next session.

It’s all well and good to claim, as some politicians will, that Maine can eliminate the snack tax and cut the pension tax. But experience shows that this does not often happen. Most often, one major tax cut prevents another from occurring. Given that a significant part of the snack tax is paid by tourists and is entirely made up of discretionary spending, while the pension tax affects residents’ day-to-day spending, the choice for Maine should be clear.

Whether lawmakers approve the $6,000 level, the $10,000 or somewhere in between, the important thing is to reach the full $17,000 as soon as practical. A sense of priorities in tax cuts will help the state get there quickly.