Notes from the West Wing
By
State Representative Garey Bies
Tax Status of Retirement Incomes
The New Year and the new session are underway! I hope you all had a wonderful holiday season! For this first edition of Notes from the West Wing of 2007, I thought I would give an overview of legislation both passed and planned, affecting how certain retirement income is taxed for Wisconsin income tax purposes.
When I was first elected in the year 2000, I pledged to work on cutting taxes on retirement income. Success began right away with the 2001-2003 state budget and work continues this session. In the 2001-2003 budget, we passed a provision that would exempt all payments received from the United States military employee retirement system. This provision includes payments for service with the Coast Guard and the commissioned corps of the National Oceanic and Atmospheric Administration and the Public Health Service.
Work to provide our state’s retirees additional tax reductions continued and in the 2005-2007 state budget we passed a provision providing full Wisconsin income tax exclusion for social security benefits. This significant tax cut will take effect for tax year 2008. The reason for the delay in implementation until tax year 2008 was to allow for proper preparation in budgeting for the reduced tax revenue that will be collected.
I proudly supported both of the above provisions as I believe our state’s residents who live on fixed incomes deserve all the help that can be provided. While these two budget provisions are great accomplishments, we are not yet done. The third proposal in this series is a bill to provide a tax exemption for pension income. I will be a co-author of the Assembly version and a co-sponsor of the Senate version of this legislation once the two proposals are introduced. This legislation will, over a period of five years, establish an income tax exemption for up to $20,000 of retirement or pension income. Beginning for tax year 2007 the exemption would apply to the first $2,500 of pension income. This amount would increase to $5,000 in 2008, $10,000 in 2009, $15,000 in 2010, and $20,000 in 2011 and every year thereafter.
If passed, this legislation will provide a huge benefit to Wisconsin’s retirees. As a co-author, I am hopeful the bill can be passed by the legislature and signed into law by the governor, but the legislative process is only just beginning for this proposal. Rest assured I will keep the First Assembly District updated on the bill’s progress.
Again, I hope you all had a happy holiday season. I plan on providing a legislative update to the First Assembly District through this column every two weeks. In the meantime, if you have questions or comments on this column or any other topic you might see or read in the news, please do not hesitate to contact me. I can be reached by e-mail at Rep.Bies@legis.state.wi.us or by telephone, toll-free at 1-888-482-0001. I’m also on the web at http://www.legis.state.wi.us/assembly/asm01/news/.