NARFE should get equal tax consideration


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Editor:

At the request of the National Active and Retired Employees Association, NARFE, state Rep. Gerald Hocker of Ocean View has introduced HB 97.

The bill excludes 50 percent of Civil Service Retirement System annuities to a maximum of the current Social Security benefit for retirees age 62 and over. This bill would provide Federal Civil Service retirees with a state income tax exclusion similar to that of Social Security and railroad pension recipients whose benefits are totally excluded.

The 7,000 federal retirees living in Delaware deserve to be made aware of this bill and the way that it affects them.

The bill cleared the Revenue and Taxation Committee by a unanimous vote and is now in the House Appropriations Committee. The bill is bipartisan with several senators and representatives from each party as cosponsors.

Federal retirees are currently fully taxed on their annuity while Social Security and Railroad pensions are totally excluded from Delaware State income taxes. In other words, many Federal retirees pay as much as $800 more in state income taxes than does someone receiving Social Security.

When I bring this up to state officials, they respond that we did not have to pay the onerous tax that Social Security recipients did. When I inform them that we had to pay even more than Social Security required, they respond that we paid before tax while Social Security was paid after tax.

When informed that federal retirees also paid after tax, they respond that federal retirees get an exclusion of $12,500 on their pensions. That is true, but those receiving Social Security have their Social Security pension excluded in addition to $12,500 in other retirement income.

Since the reason for the Social Security and railroad pension exclusions appears to be the onerous tax that the recipients had to pay, it seems only fair and equitable that the Civil Service Retirement System annuity also be excluded, at least to the extent that Social Security is excluded.

The State Office of the Controller agrees with our cost estimate of approximately $1 million. I would like to point out, however, that the true cost will almost certainly fall well below that figure for the following reasons:

First, since federal retirees may retire at age 55 with 30 years service, many of the retirees are under age 62 and therefore would not yet be affected by this legislation.

Second, an estimated 10 percent of all federal retirees retired under the new Federal Employee Retirement System, FERS, and would not be eligible for the exclusion as they are covered under Social Security.

Third, the cost estimate used the standard deduction for computing the retiree's tax savings and many of the retirees will be itemizing their deductions thereby reducing their taxes.

I would also like to point out that this proposed legislation represents a cost that will diminish over the years since the Civil Service Retirement System, CSRS, was replaced in 1983 by the new Federal Employee Retirement System, FERS, which place Federal employees under Social Security.

All federal retirees and other civic-minded citizens who are interested in fair and equitable tax treatment should contact their state legislators, Secretary of Finance Cordrey and the Governor and ask them to support HB 97 in the spirit of fair and equitable taxation.

NARFE has been working with state legislators for several years in an attempt to achieve some tax equity with Social Security recipients.

It is important that federal retirees, as well as the general public, throughout the state be informed about this bill and how the 7,000 federal retiree families would be affected by passage of this bill. If anyone would like more information on this issue or about NARFE, they should contact Walt Berwick at NARFE1690@Hotmail.com or (302) 436-4261.

Walt Berwick, president

Delaware Federation of NARFE Chapters

Selbyville

Originally published Wednesday, June 15, 2005