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For Immediate Release

Date: 03/26/11

Rep. Harmon's Bill Would Exempt Pension Income from State Taxes

AUGUSTA - State Rep. Ryan Harmon yesterday formally presented a bill to exempt the pension income of residents age 65 and older from Maine income taxation. In testimony before the Legislature's Taxation Committee, he said the measure would provide an incentive for retirees to stay in Maine and entice more people to retire in the state.

Rep. Harmon (R-Palermo), a first-term legislator, said the bill would benefit middle-income taxpayers, such as teachers, state workers and private sector employees with employment-based retirement plans, including 401 (k)s and 403 (b)s. As he told the Taxation Committee, "The intention of this bill is to cherish Maine's retired residents by allowing them to keep more of their income, encourage them to claim the state of Maine as their permanent residence and perhaps attract other retired citizens to Maine to retire as well."

The legislation is LD 358, "An Act to Exempt from the Income Tax Military Death Payments and Employment-based Retirement Income of Persons Who Are 65 Years of Age or Older." The bill has bipartisan support. Co-sponsors include the House and Senate chairmen of the Taxation Committee, which plans a work session on the bill on March 23.

Under the legislation, an "employee retirement plan" means a state, federal or military retirement plan or any other retirement benefit plan established and maintained by an employer for the benefit if its employees.

"Retired residents are a tremendous benefit to Maine," Rep. Harmon said. "They enrich our communities in numerous ways. Many of them do volunteer work and they are active in community activities of all kinds. Their impact on the school system is very light or nonexistent, yet under my bill they would pay sales and property taxes like anyone else. Many retirees leave Maine and move to low-tax states, away from their children and grandchildren, and we're losing the benefits they would bring to Maine if they stayed here or moved here.

"We have a lot to offer older folks - a beautiful state with a magnificent coastline, open countryside and a strong sense of neighbor helping neighbor," he said. "I realize this bill will have a high fiscal note for lost revenue, but if did an all-encompassing analysis, I think we'd come out ahead, on balance."

The portion of the bill dealing with "military death payments" has been ruled moot by Maine Revenue Services. In its advisory memo to the Taxation Committee, MRS said: "Any death gratuity payment to a survivor of a deceased member of the military under 10 United States Code, Chapter 75, is excluded from federal gross income and no Maine statutory provision requires this income to be included in Maine taxable income."

Rep. Harmon, a member of the Taxation Committee, holds an MBA. He has worked in the financial sector and served on the Palermo budget committee. ###

Contact:
Jay Finegan
Maine House Republicans
Tel: (207) 287-1445