PORTLAND – I just finished watching an edition of “Inside the Blaine House,” in which Gov. LePage repeated his “urgent” proposal to eliminate state taxes on pensions.

I first saw this proposal in a Maine Sunday Telegram story (“LePage seeks boost for retirees by ending pension taxes,” Aug. 21), where the governor argued: “There are two basic reasons (to eliminate those taxes). No. 1, retirees living in this state are living on a fixed income. So we need to make it easier for them to put more money in their pocket.”

He said he also wants to encourage wealthier retirees who “stay in Maine six months, less a day” to make Maine their official residence.

“They are residents of Nevada, Arizona or Florida, where there is no income tax,” he said. “They move their wealth away from Maine, but they come back and spend summers here.

“We need to stop that. We need the capital they have to help invest. They are the least costly of all the citizens. They don’t have kids in school, they’re generally not on welfare.”

I suspect that only the quite well-heeled (think “the 1 percent”) among us go through the “tax avoidance” procedure the governor describes, in deciding whether to live in Maine. Moreover, such “wealthier retirees” typically get most of their income from stocks, bonds and other investment income.

The governor’s idea, to eliminate the income tax on pensions, would make little difference to these wealthy people, since investment income is not pension income. So making this further tax loophole would probably have minimal effect on which of our wealthy neighbors chooses to remain among us for more than six months a year.

On the other hand, would there be other effects from this change?

On Oct. 26, The Portland Press Herald ran a story (” ‘Tidal wave’ of aging boomers has begun”) about the predicted economic effects of an aging population on the state of Maine over the next 20 years.

Maine is today the oldest state in the nation (median age 42.7, versus national median age of 36.5), and almost 16 percent of Maine citizens are now over age 65, compared to the national average of 13 percent. By 2030, more than 25 percent of the state’s population will be over 65 years old.

It is expected that the transportation, health care and housing needs of this huge cohort of the elderly “will put a particular strain on state and federal resources,” even as massive budget cuts in such programs are being passed or considered.

How will “non-wealthy” retirees respond to the elimination of state taxes on their pensions? Well, if, as the governor states, non-wealthy retirees “are living on a fixed income,” they will surely be more likely than the wealthy ones to stay in Maine, or, if they live elsewhere, to move to Maine, to avoid paying taxes on their pensions.

They, along with our wealthier retirees, will be part of that huge cohort of the elderly whose need for transportation, health care and housing needs “will put a particular strain on state and federal resources.” It is hard to imagine that more rich folks will come to Maine to avoid that tax than poor ones, since the rich get far less proportional benefit from the tax break than the poor.

Do we really want to attract thousands of non-wealthy retirees from other states – Maryland, Vermont, Ohio, you name it – inducing them to move to Maine because, like Florida now, we will then also have no income tax?

Of course, maybe the governor has thought this through, and his solution is to create a hostile environment for the non-wealthy, retired or not.

His announcement last week that he wants to remove more than 65,000 of the poorest people in Maine from Maine-Care certainly sends such a message. So does his ongoing diatribe about the “lazy unemployed” who refuse to get jobs because the weekly unemployment benefit is so generous.

Yes, Maine would be a far, far different place if we could just get the rich to move in, and the poor to move out.

Different, yes; better, not so clear. There would be fewer poor folks available to perform the gardening and domestic services that our new elite would like to enjoy.

I suspect the solution to that will be to maintain the current regime, in which those services are performed by undocumented people, under the table, who will be barred from access to MaineCare or any other public services.

Heck, if we follow the lead of some other states, we can even keep these people out of our hospitals, public schools and any other public institutions financed by our generous wealthy.

 

– Special to The Press Herald

 

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