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Started By
Message
Time to end state tax free treatment of government employee retirements
Posted on 11/29/16 at 9:27 am
Posted on 11/29/16 at 9:27 am
There is nothing fair about taxing the rest of us while state and federal government employees get tax free retirement income.
The original rationale for this was that state employees do not pay into the social security system and social security income is not taxed. That rationale fails on two points--social security income is capped and many state retirees do get social security from other jobs they had so they are double dipping. (The federal employees get tax free treatment because the federal law states that a state cannot tax federal employees if they exempt state employees.)
A question in the Advocate addressed this issue today:
Nothing fair about it but you will never hear the government loving JBE raise this tax. He will simply raise more taxes on the rest of us.
The original rationale for this was that state employees do not pay into the social security system and social security income is not taxed. That rationale fails on two points--social security income is capped and many state retirees do get social security from other jobs they had so they are double dipping. (The federal employees get tax free treatment because the federal law states that a state cannot tax federal employees if they exempt state employees.)
A question in the Advocate addressed this issue today:
quote:
Are state workers and retirees exempt from paying state income tax? How much does that cost the state every year in lost revenue?
Byron Henderson, public information director for the state Department of Revenue, says state employee wages are subject to state income tax; however, "Individuals receiving benefits from certain retirement systems are allowed to exclude those benefits from their Louisiana taxable income under the State Employees, Teachers and Other Retirees Benefits Exclusion.
"For the fiscal year ended June 30, 2016, the estimated revenue loss from the State Employees, Teachers and Other Retirement Benefits Exclusion was $91,959,000."
There are some 46 retirement programs exempted from state income tax, including retirement systems for state and municipal workers, teachers and school employees, assessors, clerks of court, district attorneys, sheriffs, etc.
That list also includes a somewhat peculiar entity called the Pension for Confederate Veterans and Widows of Confederate Veterans, which Henderson says was merged by a 1991 state law (R.S. 29:461) with a system of assistance for aged, needy persons.
To see the full list of exempt retirement systems, log onto revenue.louisiana.gov/faq/details/1216.
Nothing fair about it but you will never hear the government loving JBE raise this tax. He will simply raise more taxes on the rest of us.
12
Posted on 11/29/16 at 9:28 am to I B Freeman
WTF I have never heard of this
Posted on 11/29/16 at 9:36 am to I B Freeman
In Georgia, state employee pensions are taxed and we pay into SS.
Posted on 11/29/16 at 9:39 am to Wally Sparks
quote:
In Georgia, state employee pensions are taxed and we pay into SS.
Hopefully their salaries are more competitive with private sector's if that's the case.
I work for a state agency, and I agree that the pensions payments should be taxed just like any other citizen's.
Posted on 11/29/16 at 9:40 am to Wally Sparks
quote:
In Georgia, state employee pensions are taxed and we pay into SS.
As should Louisiana employees but they do not. Now we have HUGE unfunded pension liabilities because our plans are rich enough to cover what would normally be social security AND because we let retirees retire much earlier than they would under SS.
Posted on 11/29/16 at 10:06 am to I B Freeman
quote:
It is a Louisiana thing.
No it's not. Almost all states give special treatment in one form or another to pension income.
LINK
Posted on 11/29/16 at 10:24 am to Layabout
quote:quote:
It is a Louisiana thing.
No it's not. Almost all states give special treatment in one form or another to pension income.
You are correct in that most states give special treatment to state pension income. However it is misleading to lump Louisiana in with the other states. LA is only one of 10 states that give a 100% income tax exemption to public retirement income.
Out of those 10 it is one of the stingiest when it comes to private sector pension income, only excluding the first $6,000.
It is a messed up system designed by politics.
I am OK with an across the board exclusion up to some cap (like $30k). This way retirees have an amount they can live on that is not subject to taxes which would disproportionately help those with smaller incomes. It would also be fair to those with private pensions.
Posted on 11/29/16 at 10:26 am to BigJim
quote:
Out of those 10 it is one of the stingiest when it comes to private sector pension income, only excluding the first $6,000.
The exemption should be the same for public and private pensions. If that means it doesn't exist at all, so be it.
Posted on 11/29/16 at 10:30 am to Layabout
Where did the government get the idea that they are somehow special and should not be burdened as the masses are???
If anyone is to be taxed, nobody should get retirement income tax free before age 65.
Now I am all in favor of ending the income tax for everybody.
If anyone is to be taxed, nobody should get retirement income tax free before age 65.
Now I am all in favor of ending the income tax for everybody.
This post was edited on 11/29/16 at 10:40 am
Posted on 11/29/16 at 10:33 am to BigJim
quote:
I am OK with an across the board exclusion up to some cap (like $30k). This way retirees have an amount they can live on that is not subject to taxes which would disproportionately help those with smaller incomes. It would also be fair to those with private pensions.
Even taxing the pension like social security income would be a move in the right direction. The complete exclusion is ridiculous.
Posted on 11/29/16 at 10:35 am to Wally Sparks
As do as I, in Texas.
Is not like I didn't contribute to my retirement while employed and my retirement is taxed. Also paid for any Social Security benefits I might realize.
My conscience is real screaming clear...
Is not like I didn't contribute to my retirement while employed and my retirement is taxed. Also paid for any Social Security benefits I might realize.
My conscience is real screaming clear...
Posted on 11/29/16 at 10:40 am to I B Freeman
My mother gets my father's state employee "pension" (he passed away a few years ago) and it is untaxed... but he wasn't given the option to put into the system. I do believe that they have changed that now, but when he was working it wasn't an option. Yes, she gets that money without having to pay state taxes; however, the ROI on that is abysmal. He would have done far far far better had he been allowed to put that money into an independent investment even with capital gains taxes.
(Not to mention that when mom dies that money is gone forever... the state gets to keep anything extra... that money doesn't get left to the family.) So, it isn't all rainbows and moonbeams with the state retirement.
ETA: He wasn't allowed to collect on SS benefits either... though he paid into it every time he did independent work. Thank you Uncle Sam.
(Not to mention that when mom dies that money is gone forever... the state gets to keep anything extra... that money doesn't get left to the family.) So, it isn't all rainbows and moonbeams with the state retirement.
ETA: He wasn't allowed to collect on SS benefits either... though he paid into it every time he did independent work. Thank you Uncle Sam.
This post was edited on 11/29/16 at 10:42 am
Posted on 11/29/16 at 10:46 am to SlapahoeTribe
Is your argument:
1. Public retirement is crappy;
2. Therefore, it is OK it isn't taxed like private retirement?
I would disagree with you on both points.
1. Public retirement is crappy;
2. Therefore, it is OK it isn't taxed like private retirement?
I would disagree with you on both points.
Posted on 11/29/16 at 10:52 am to BigJim
quote:
Is your argument:
1. Public retirement is crappy;
2. Therefore, it is OK it isn't taxed like private retirement?
I would disagree with you on both points.
Yes... I'd much rather be given the option to invest on my own.
No... I was just pointing out that it isn't like some wonderful loophole that they get to live in. BUT, since you asked - the idea of a tax is that the state needs to get its "share" of the work-product. In the case of the state employee retirement system, the state gets its "share" though other means therefore the tax isn't warranted/needed/justified.
Posted on 11/29/16 at 10:55 am to SlapahoeTribe
quote:
Yes... I'd much rather be given the option to invest on my own.
Well when your father was working a pension was commonplace in all industries. He could have made IRA contributions and invested in non-qualified accounts as well.
Posted on 11/29/16 at 10:57 am to slackster
quote:
He could have made IRA contributions and invested in non-qualified accounts as well.
He did... but that's not what we're discussing here.
This post was edited on 11/29/16 at 10:57 am
Posted on 11/29/16 at 10:59 am to I B Freeman
My retirement is the #1 reason I stay in teaching. Don't get me wrong, I like working with the kids and helping them. However, I have gotten several offers in the past where I would make much more money. The stability of the job, time off, and retirement are what keep me here.
Also in La, state employees cannot double dip. If you take state retirement, you cannot go into another career field after 20 years, and then draw SS even though you must pay into it.
ETA: La does not have a revenue problem. It has a spending problem. The argument that we 'lost" money on the retirement tax is voided until our state starts spending money in a responsible way.
Also in La, state employees cannot double dip. If you take state retirement, you cannot go into another career field after 20 years, and then draw SS even though you must pay into it.
ETA: La does not have a revenue problem. It has a spending problem. The argument that we 'lost" money on the retirement tax is voided until our state starts spending money in a responsible way.
This post was edited on 11/29/16 at 11:01 am
Posted on 11/29/16 at 11:03 am to SlapahoeTribe
I agree with Slapahoe---the state pensions should be defined contributions and not defined benefits and the employee should own them.
Posted on 11/29/16 at 11:06 am to CoachChappy
quote:
Also in La, state employees cannot double dip. If you take state retirement, you cannot go into another career field after 20 years, and then draw SS even though you must pay into it.
Hasn't that changed depending on which retirement option you choose?
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