Actual tax
benefits will be limited but many seniors will benefit
By
Will Collette
For
a while, it looked like Rhode Island retirees over 65 were going to get a big
break on their state income taxes when the General Assembly announced it was
folding the language from two bills, one (2015-H 5000) by Rep. Bob
Craven (D-North Kingstown) and the other (2015-S 0029) by Sen. William A. Walaska (D-Warwick) into the state
budget which was just signed by Governor Raimondo. Craven is also one of
Charlestown’s municipal lawyers.
Their
news release included links to both bills leading to some hope that Bob
Craven’s version, which would have exempted nearly all forms of retirement
income would be written into the budget. Click here for details on that earlier news
announcement.
But, as I warned, we'd have to see the actual language in the budget to see how far the benefits would extend. Now we have the actual state budget.
Unfortunately, the very generous version in Rep.
Craven’s bill that would have allowed you to exclude other forms of retirement,
such as a government or private pension and earnings from retirement accounts
to determine whether you qualify did not make the final cut.
The final result is that a smaller number of senior citizens will qualify.
The people this new legislation will benefit are elderly retirees with adjusted gross incomes above $25,000 if single or $32,000 for couples and below $80,000 for singles and $100,000 for couples.
It's those middle-class seniors who get this new tax break. And good for them, I say.
Here’s
the actual language relating to Social Security on pages 269-70 that appears in
the budget signed into law by Gov. Gina Raimondo:
(8) Modification for taxable Social Security income. (i) For tax years beginning on or after January 1, 2016: (A) For a person who has attained the age used for calculating full or unreduced social security retirement benefits who files a return as an unmarried individual, head of household or married filing separate whose federal adjusted gross income for such taxable year is less than eighty thousand dollars ($80,000); or
(B) A married individual filing jointly or individual filing qualifying widow(er) who has attained the age used for calculating full or unreduced social security retirement benefits whose federal adjusted gross income for such taxable year is less than one hundred thousand dollars ($100,000), an amount equal to the social security benefits includable in federal adjusted gross income.
(ii) Adjustment for inflation. The dollar amount contained in subparagraphs 44-30-12(c)(8)(i)(A) and 44-30-12(c)(8)(i)(B) shall be increased annually by an amount equal to: (A) Such dollar amount contained in subparagraphs 44-30-12(c)(8)(i)(A) and 44-30-12(c)(8)(i)(B) adjusted for inflation using a base tax year of 2000, multiplied by;
(B) The cost-of-living adjustment with a base year of 2000.
(iii) For the purposes of this section the cost-of-living adjustment for any calendar year is the percentage (if any) by which the consumer price index for the preceding calendar year exceeds the consumer price index for the base year. The consumer price index for any calendar year is the average of the consumer price index as of the close of the twelve (12) month period ending on August 31, of such calendar year.
Art11 RELATING TO REVENUES
(iv) For the purpose of this section the term "consumer price index" means the last consumer price index for all urban consumers published by the department of labor. For the purpose of this section the revision of the consumer price index which is most consistent with the consumer price index for calendar year 1986 shall be used.
(v) If any increase determined under this section is not a multiple of fifty dollars ($50.00), such increase shall be rounded to the next lower multiple of fifty dollars ($50.00). In the case of a married individual filing separate return, if any increase determined under this section is not a multiple of twenty-five dollars ($25.00), such increase shall be rounded to the next lower multiple of twenty-five dollars ($25.00).
In
a nutshell, if you are a Rhode Islander 65 or older on Social Security, your
Social Security and only your Social Security is exempt from state income tax
if your federal adjusted gross income is $80,000 for singles and $100,000 for
couples.
I
wanted to make absolutely certain that the new and final language says what I
think it says, so I asked Bob Craven, as the main sponsor of the legislation,
to clarify. In an e-mail, this is what Bob told me:
“You are reading the budget correctly. The state income tax relief for retirement income is limited to Social Security only.”
While
it would have been nice to get this tax break, Cathy and I felt we really don’t
need it, plus the state has other, more pressing needs than pandering to old
geezers like us.
It was odd for Filippi to even bring up Social Security since, as a Libertarian and Tenther, he holds Social Security to be unconstitutional |
Incidentally,
one of Blake “Flip” Filippi’s (I-Oath Keepers) first promises in his campaign that
defeated Rep. Donna Walsh (D) was his pledge to introduce a bill in the first
week he was in office to eliminate state income tax on Social Security.
Flipper
never got around to introducing a bill. Later, he did sign on as a
third-cosponsor to a couple of “me-to” bills by his Republican colleagues Rep.
Patricia Morgan (House Bill No. 5056) and Rep.
Doreen Costa (House Bill No. 5057). Those two
bills were filed after Craven filed his bill and seemed to have no other
purpose than to get a little media coverage.