Hawaii Should Not Tax Pensions

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BY MICHAEL P. RETHMAN – The number of states, including Hawaii, who don’t tax pension income is nineteen, not just ten — the latter a sum often cited by those who don’t include the nine other states that don’t tax retirement or earned income.  Furthermore, a total of twenty-six states don’t tax military pensions.

As the Hawaii legislature considers whether to begin levying income taxes on some or all receiving pension income, careful consideration is needed.  This is because in every state where such taxes exist, many retirees simply pack-up and leave.  In other words, much of the money that Hawaii would plan on getting would simply disappear as recently happened in Oregon when that state foolishly implemented a “millionaires’ tax” that prompted the departure of many of its wealthier citizens to more favorable locales.  And such a loss!

Such retirees are the same people who buy goods and services, pay other state and local taxes, serve others by volunteering, don’t have school-age children and require less policing and other state services.  Such retirees are also responsible for indirectly contributing to a state’s economy via the federally-paid Social Security and Medicare benefits that most of them receive.

So how do other states manage their finances?  Most spend a lot less per capita than does Hawaii — a fact that the Legislature ought to take to heart.  All other states have higher residential property taxes than does Hawaii, and many have higher sales taxes.

So if additional tax revenue is needed and Hawaii doesn’t want to chase off retirees, increasing property taxes and the G.E.T. make more sense.  But first Hawaii must drastically cut its profligate spending, increase its effectiveness and efficiency and do well with less.

To fully illustrate its effects, any bill that aims to levy an income tax on pension income in Hawaii ought to be named “The Greater Las Vegas Revitalization Act” because Nevada is a state, among many, that already welcomes our retirees.

Michael P. Rethman is a resident of Kaneohe, Hawaii

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