State, federal retiree income would be exempt under bill

Posted March 21, 2013


— North Carolina would exempt government retiree pensions from income tax under a bill that cleared the House Government Committee Thursday morning.

House Bill 96 would apply to North Carolina and federal retirees who live in the state. The measure would also grant exemptions to retirees from other state governments, consistent with how those states would treat North Carolina retirees.

Currently, retirees are treated differently depending on when their retirement vested, or became money they couldn't lose under normal circumstances. Pensions that vested before August 1989 are exempt from North Carolina income tax due to a pair of court rulings, including the Bailey case. Pensions that vested after August 1989 qualify for up to a $4,000 deduction.

Under House Bill 96, which is sponsored by Rep. George Cleveland, R-Onslow, and Rep. James Boles, R-Moore, the complete exemption for retiree income would be phased in over the next 10 years, through Jan. 1, 2022.

A representative of the State Employees Association of North Carolina said his group supports the bill.

A handful of lawmakers voted against the measure when it passed the committee on a voice vote.

"This is a revenue loss the General Assembly can't afford," said Rep. Paul Luebke, D-Durham. He said the state was already cutting programs due to sluggish revenue growth. This, he said, would exacerbate that problem.

The measure next goes to the House Finance Committee.


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  • mountainlover Mar 21, 2013

    I am for this bill. Many states do not tax state pensions, or exempt a good portion of those pensions. State employees are the best money managers around. There is always a reason not to give them a raise. Twenty-thirty years ago, they were hired at twenty percent less than what others were making in a comparable position. Given their money management skills, they have other assets. The question is would you rather have that money spent in NC or in another state?

  • Wirklich Mar 21, 2013

    GOP, I thought ALL tax cuts were good, since the more employees/retirees are allowed to keep of "their own money," the more it will stimulate the economy and create jobs. Or do you think that tax cuts only apply to the wealthy, since they are only ones who create jobs?

  • jason19 Mar 21, 2013

    Terkel, I am also against this measure, but your reasoning is terrible. The working/not-working ratio is the same for state employees as it is company employees. There is no difference. Most state employees cannot "step down" when they mess up; they are fired. The only ones that are allowed that are higher-ups (usually elected officials, not employees). And, their Social Security would be unchanged; this affects only the state pension.

    But yes, I am against this because it further drains revenue from the state in a time when the state *needs* revenue. Historically, NC state revenue is actually quite low, when adjusted for inflation and population.