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Retirement should be tax, worry free
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Recent Legislators at Work
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December 15, 2010 | 08:00 AM
By Neal Kedzie
State Senator
At some point in time, we all think about what may be when our career paths come to an end. While the traditional course toward retirement may have changed, it remains a goal that many wish to achieve as a milestone for a lifetime of work, and a new path to relaxation and reflection.
However, much of the ideal of retirement has been tarnished by uncertainties in the economy. Couple that with the rising cost of living and instability in the stock market, and many retirees find themselves struggling to make ends meet, while those nearing retirement may consider putting off plans until conditions improve.
The general consensus is to hold firm and allow the market to correct itself and rebound over the next several years, but that may be little comfort to those in or nearing their retirement years. People are searching for assistance from wherever it may come, and one such way the Legislature can provide that assistance is to end the punitive practice of taxing retirement and pension income.
Wisconsin must re-establish its position as a place where retirees can call home, and for more than 10 years, I have worked to provide such tax relief, including my work to end state taxation on Social Security benefits. The state took its first step towards such tax relief in 2006, however the tax savings are minimal. That is why I will reintroduce my bill to dramatically phase out state taxation of retirement income.
Representing a border district creates its own unique set of circumstances, one of which is the number of people who work in another state, but retire here. To their surprise, the reality of life for Wisconsinites means their pension income is subject to state taxes. Some neighboring states do not tax pension or retirement income at all, while others offer more measurable amounts of tax relief.
Under my plan, an individual's pension and retirement income would be exempt from state taxes, starting with the first $2,500 of income. Then, over five years, the exemption would incrementally increase to a point whereby the first $20,000 of retirement income is tax free. If enacted and fully implemented, it would mean an average annual tax savings of nearly $1,000 for approximately 391,000 retirees.
The tax savings would allow seniors more opportunities to spend and save their money as they choose, and provide a necessary incentive to keep them here as a vital part of our statewide community. In addition, those who stay in Wisconsin rather than move to a more tax or climate-friendly state would continue to fund local government obligations and provide the necessary support to their city, village or town.
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After a lifetime of working hard, raising a family, establishing roots, and simply being a longtime member of a community, the state should reward your accomplishments, not punish them. My pension tax relief plan would go a long way in achieving that goal, and a long way in making retirement in Wisconsin both tax free and worry free.
Kedzie can be reached in Madison at P.O. Box 7882, Madison, WI, 53707-7882, or by calling toll-free (800) 578-1457. He may be reached in the district at (262) 742-2025 or on-line at www.senatorkedzie.com.
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