Bellows bill to increase fairness for retired state employees and teachers advances

AUGUSTA — A bill by Sen. Shenna Bellows, D-Manchester, to increase fairness between retired Mainers who receive a public pension and retired Mainers who receive Social Security benefits was unanimously approved by the Legislature’s Taxation Committee on Wednesday.

Under current Maine law, the State of Maine does not charge state income tax on Social Security benefits but does charge a state income tax on public pension benefits over $10,000. The bill – LD 162 “An Act To Eliminate the State Income Tax on Maine Public Employees Retirement System Pensions” – would, as amended, increase the amount of income from public pensions exempted for Maine income tax purposes from the current $10,000 to $35,000 in $5,000 increments over the next five fiscal years.

“We should not be taxing our retired teachers, retired law enforcement and other public service retirees more than everyone else. Over the next five years, my bill will ensure that the State of Maine treats all retirees equally under the state income tax law,” said Sen. Bellows. “Those who go into teaching or work for the state or federal government do so in full knowledge that their salaries will be lower than what they could make in the private sector, but they may not realize that the State of Maine will punish them upon their retirement. LD 162 seeks to address this injustice by bringing treatment of MePERS pension benefits in line with how Maine treats social security benefits under our tax law.”

Social Security income is not subject to Maine income taxes; however, any public pension income over $10,000 is. This is one portion of the inequity felt by retired state employees and teachers. These positions often pay less than similar positions in the private sector, and they also subject to the Windfall Elimination Provision/Government Pension Offset, reducing retirees’ overall retirement income.

At a recent public hearing on the bill, the Maine Education Association, Maine Association of Retirees, Maine State Employees Association, and Maine Education Association – Retired, as well as numerous retired teachers and state workers, spoke in favor of the bill. No one testified against LD 162.

LD 162 now heads to the Maine House and Senate for initial votes.