Richard Rothschild: Tax breaks should apply to all

Several recent letter writers expressed concerns about the commissioners' positions on bills related to additional tax breaks for people with government pensions.

In particular, some disliked our position on additional tax breaks for military pensions. As a constitutional conservative, I truly appreciate the sacrifices made by our veterans. In fact, three of my family members are veterans, so I am sensitive to these concerns, and believe further explanation is appropriate.


Responsible discussion requires we first understand current Maryland treatment of retiree health care benefits and pension taxation.

First, most government retirees (civilian and military) generally retire with benefits that are either unavailable to, or in many cases better than the private sector. Why?


I believe veterans who risked their lives in the armed services have earned it and deserve it.

However, most private sector employees receive none of the deeply discounted post-employment health care coverage that is available to government employees, and the majority of the private sector does not receive the richer defined benefit pensions still standard within government.

Differences in retiree health care costs can be astronomical. For example, for a retired middle income couple age 60, the cost of a $500 deductible policy under Obamacare easily exceeds $15,000 a year. Conversely, many government retirees may continue coverage under government plans for less than $5,000 a year.

On pensions, retirees from government and the military generally receive a type of pension referred to as a defined benefit plan. Under Maryland tax code, an employee retirement system qualified under Sections 401(a), 403 or 457(b) of the Internal Revenue Code for people 65 or older qualifies for up to $27,800 in annual deductions. To be fair, a limited but dwindling number of private sector employees also qualify for this break.

According to the Department of Veterans Affairs, up to $5,000 of pension income is deductible for members that served in the armed forces, reserves, Coast Guard, commissioned corps of the Public Health Service, the National Oceanic and Atmospheric Administration and the Coast and Geodetic Survey.

Compare this to the private sector where, according to the Maryland Comptroller's website, "a traditional IRA, a Roth IRA, a simplified employee plan (SEP), a Keogh plan, an ineligible deferred compensation plan, or foreign retirement income," do not qualify for any deductions or preferential tax treatment. Other than 401-K's, few private pension plans qualify for deductions.

Clearly, many defined-benefit government and military pensions already receive preferential treatment under Maryland tax law, while most private sector plans receive no tax breaks whatsoever.

Furthermore, the vast majority of private sector retirees under the age of 65 receive no post-employment health care benefits. Conversely, retirees from government and military are eligible for at least limited medical or subsidized post-employment health care benefits. Advantage: Government.

Employees with government health care and government pensions generally enjoy superior benefits than the private sector and are more likely to receive preferential tax treatment.

In light of this disparity, I believe additional preferential tax treatment for recipients of government retirement plans, while providing nothing for millions in the private sector, is not right, and inconsistent with the ideals of our country or our constitution.

My position? I want tax breaks for every citizen, not just government-selected winners and losers.

The legislation should be enabling legislation that gives counties the ability to phase-in tax reductions to provide time for an orderly adaptation by local governments that are tasked with funding local services, including roads, law enforcement and education.


Meanwhile, state officials should focus on cutting Annapolis's spending and state taxes, and leave it to county commissioners to take responsibility for cutting county spending and county taxes. We did it four times from 2010 to 2014 while refusing to implement a rain tax.

Finally, policies of identity politics that pit one group of Americans against another are inconsistent with the spirit of the Equal Protection Clause of the 14th Amendment, and are insulting to patriotic veterans that risked everything in defense of America's constitutional form of government. I believe the single very best way civilian officials can honor veterans is to take a stand in defense of policies that uphold our constitution as envisioned by our founders.

Thank you veterans.

Richard Rothschild is a member of the Carroll County Board of Commissioners.

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