RH Jones: No Ohio income tax for retired educators

From RH Jones, December 28, 2009

To all:

The questions is: How can Ohio (OH) in the coming years grow its economy while at the same time helping its retired teachers from further economic losses? Backing up the need to answer this question is an article published today, 12-27-2009, by the Beacon. It reports in an article “Decade of unemployment might loom for Americans” that: “They (Feds) note that a healing economy will cause more people to stream back in the labor force, vying for too-few jobs.” In other words, can OH create more jobs without raising taxes? Sure, with a legislative grant to exempt retired teachers income from all state income tax would help do it.

States are generally free from federal control in deciding how to tax pensions. Currently, there are ten of the 50-states that offer retired teacher exemptions. These include Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, New York and Pennsylvania. (Source: Retirement Living Information Center) You will notice OH is not one of them.out of the top ten states taxing retired teachers OH at 10.4% puts OH in 4^th. Place! Only Maryland (10.8%), Hawaii (10.6%) California (10.5%), lead our Ohio (10.4%). To continue -- according to the Tax Foundation -- the nation as a whole paid an average of 9.7%, down from 9.9% in 2007. This was primarily because income grew faster that tax collections between 2007 and 2008. Therefore, friends, is it no wonder then that retired teachers are having trouble keeping up with those who are employed? Sadly, this source states that

Further, you may ask, why do retired educators need an exemption from Ohio (OH) state income tax? This is because retired educators are not “well to do” and taxing us is burdensome in our senior years when inflationary pressures, particularly of health care/prescription costs, increased local taxes and escalating energy costs, have greatly diminished our limited purchasing power. For the foreseeable future, it may be difficult for us to secure an effective COLA, our supplemental “catch-up” (13^th) check, or an Ad Hoc raise in our base. Without a hedge against inflation, an income tax break is therefore the right thing for the legislature to do at the moment.

Exempting retired teachers is a positive benefit for OH as a way for economic development. To innumerate this: 1) All things being equal, having a lower tax burden for us makes OH a more attractive place for teachers to retire and live in than in state with a higher income tax rate. 2) More retiree money being spent at home in OH makes more OH private sector jobs that, therefore, brings in additional tax money into state coffers. 3) Relatives or friends living with retired educators will also spend, and if employed, will be paying OH income taxes and all other state an local taxes; all-the-while, helping to create both OH private and public employment as well. 4) In periods of heavy demand, residing retired teachers fulfill substitute-teaching and tutoring positions. 5) OH residing retired teachers provide universities and school systems with master teachers that supervise student teachers. 6) Retired teachers choosing to live in OH pay rent and property taxes here, as well as sales taxes. 7) We spend our health care and prescription (HC/Rx) dollars in OH employing HC/Rx workers. 8) Too numerous to list here, retired teachers in OH provide a host of employment for the numerous retail businesses. 8) Not to be ignored is the large number of retired teachers who for no pay volunteer in any number of service industries such as schools, hospitals, nursing homes, religious intuitions, juvenile centers, all of which save the state monies that would have to be paid to hire people to do this OH service work. Of course, OH teachers retired to other states enrich that those states with their OH dollars. As every taxpayer should know, 25% of retired teacher income comes from them; and, therefore, the OH legislature owes the taxpayer the effort to keep this tax money here in OH. In spending, what goes around comes around or we lose it to other states. 9) Without this tax break to entice retired teachers to stay here with family and friends, and without hope of Ad Hocs, the 13^th check, and the threat of a reduced simple COLA, many resident retired teachers will be forced into Medicaid and other state welfare subsidies. 10) Forcing active teachers into defined contributions, rather than the tried and time tested defined benefit system, will further weaken the income of those educators who are already retired. This will force many to migrate to state that do, at least, give them a state tax break greater than Ohio’s. Any out migration of OH retired educators weakens OH, which is already losing population, and risking losing, some say, two U.S. Congressional seats! That means less federal income tax dollars coming back to OH. Therefore, the need to keep retired teachers here in their home state is real. 11) Increasing resident OH retired teachers has been a goal of teacher unions for many years. Any legislators that sponsor a retired teacher income tax exemption bill will be well remembered by the active as well as retired teachers, and their unions. Everyone benefits. Even being of southern heritage, to me, OH offers the best in fulfilling my retirement needs and I would like to continue to live here and spend here where I was employed as a career OH teacher. 12) With their vote, resident retired educators have traditionally backed public education that has been the catalyst that has made OH great and successful in the competition for an educated work force for businesses. OH residing retired teachers provide universities and school systems with master teachers that supervise student teachers.

As a reasonable conclusion, one must conclude that in these modern times, in order for OH to move forward economically, this tax exemption for retired educators will be a catalyst that brings OH out of this economic recession.

Respectfully submitted,

Robert Hudson Jones, an OEA, OEA-R, NEOEA-R, ORTA, SummitCRTA, and proud member of the CORE