Maryland's military retirees appealed to lawmakers yesterday to stop taxing their pensions, warning that otherwise many of the defense workers whose jobs are transferring to military bases in the state over the next few years will not move here.
But with legislative analysts warning that such a tax break could cost the state $60 million in revenue next year, the retirees' plea faces an uphill battle.
Sporting veterans caps, representatives of more than 40,000 military retirees in the state made what has become an annual plea to the House Ways and Means Committee, adding a new argument about military base realignment to their usual point that many other states don't tax military retirement income.
George E. Creighton Jr., legislative chairman of the Joint Veterans' Committee of Maryland, suggested that many of the 15,000 military and defense workers whose jobs are expected to relocate to Aberdeen Proving Ground, Fort Meade and other bases in the state will settle in neighboring states, where their military pension payments won't be taxed when they retire.
Pennsylvania excludes all state and federal pensions from its income tax, according to the National Conference of State Legislatures, while other neighboring states and the District of Columbia offer partial breaks more generous than Maryland's.
Unless Maryland matches the tax breaks of neighboring states, Creighton warned, it could prove more costly to the state - not only in lost tax revenues from other income retirees make but in extra costs to accommodate the traffic as those workers drive back and forth from out of state.
"You're going to have to spend money on infrastructure in Maryland so people can commute from Pennsylvania and Delaware," said Creighton, 70, of Bowie.
Creighton and others pointed out how state officials have pledged in years past to stop taxing their pensions, but never followed through.
"Maryland is not veteran-friendly," said Edward T. Kreiner Sr., 79, a retired Navy officer from Forest Hill.
Del. Sheila E. Hixson, chairman of the Ways and Means Committee, bridled at accusations that legislators don't care about veterans. She pointed out that her son is a colonel in the Marines who has been to Iraq five times.
"For you to think we have no sensitivity to veterans is simply wrong," said Hixson, a Montgomery County Democrat. "We have to do, too, what's good for the state of Maryland."
The bill has 73 co-sponsors, a majority of the House of Delegates, and is the top priority of the legislature's veterans caucus.
The measure's chief sponsor, Del. Mary Anne Love, an Anne Arundel County Democrat, acknowledged that its prospects are not good, considering the fiscal squeeze of state government. Despite a $1.3 billion tax increase and hundreds of millions in spending cuts approved during last fall's special session, budget analysts have warned lawmakers they might need to cut as much as $350 million more from this year's and next year's budgets.
"I don't think it's got a strong chance," Love said, but she added that she plans to appeal to Gov. Martin O'Malley for support.
Two years ago, lawmakers sweetened a modest tax break for low-income military retirees, expanding it to exempt the first $5,000 of military retirement income from state taxes.
But 26 states don't tax military retirement income at all, retirees say, with Pennsylvania among the latest to grant the relief.
"This is the year that Maryland needs to do something, for BRAC," said David M. Fox, 67, of Arnold and Ocean City.
With the possibility that many of the defense jobs coming to Maryland by 2011 as a result of base realignment and closure process, might be vacant, officials are eyeing recruiting military retirees. Of particular interest are those who still have the security clearances needed for many of the jobs, since such clearances are time-consuming and costly to obtain.
About 30 percent of the workers surveyed at Fort Monmouth, N.J., have indicated a willingness to move to Maryland when that base closes and most of its work moves to Aberdeen Proving Ground in Harford County.
Harford County Executive David R. Craig, who was at the hearing while waiting to testify on another bill, said he has long believed military retirees' pensions ought to be exempt from state income tax. The move makes more sense with BRAC, he said, because many workers at Fort Monmouth are former military personnel for whom taxes on military pensions might be a significant issue.
Though the state might give up tax revenues on military retirement checks, Craig said, it would reap others by wooing more military retirees to live in the firstname.lastname@example.org