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PARRIS N. GLENDENING, Governor
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S.B. 399
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annual benefit payable under the Social Security Act ($17,300 for 2001) and is
reduced by the amount of any Social Security payment received. The current pension
exclusion is limited to income received from an "employee retirement system."
Individual Retirement Accounts and Keogh plans are not considered employee
retirement systems and income from these plans is not deductible.
From a policy standpoint, Senate Bill 399 adheres to the general principles behind the
State's pension exclusion. However, there are two concerns which prevent me from
signing the measure into law this year. First, the extent of any general fund revenue
loss from this tax change is unknown and cannot be reliably estimated. Under one set
of assumptions developed by the Department of Legislative Services, general fund
revenues could decline by approximately $1.7 million annually. This is not an
insignificant loss, especially given the challenges the State faces in funding its
commitments to public education.
Secondly, it is important to note that Senate Bill 399 represents only one of many
attempts to broaden the exclusion of retirement income from State taxation. During
the 2002 Session, bills were introduced that would increase the maximum pension
exclusion, exclude income from individual retirement accounts, and exclude the
retirement income of federal employees, military retirees, and teachers. The taxation
of all retirement income, including rollovers from IRA accounts, should be one of the
issues studied by the new Commission on Maryland's Fiscal Structure created by
House Bill 1 and signed into law on May 6, 2002.
For the above reasons, I have vetoed Senate Bill 399.
Sincerely,
Parris N. Glendening
Governor
Senate Bill No. 399
AN ACT concerning
Income Tax - Subtraction Modification for Retirement Income - Rollovers to
Individual Retirement Accounts
FOR the purpose of including income from certain retirement plans within a certain
subtraction modification allowed under the Maryland income tax for certain
retirement income under certain circumstances; providing for the application of
this Act; and generally relating to an income tax subtraction modification for
certain retirement income.
BY repealing and reenacting, with amendments,
Article - Tax — General
Section 10-209
Annotated Code of Maryland
(1997 Replacement Volume and 2001 Supplement)
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