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RI’s Out-of-State Pension Tab: $142 Million

Monday, October 31, 2011

 

Every state in the country has a Rhode Island retiree collecting a pension earned while working in the Ocean State, accounting for more than $142 million that left the state in 2010, according to RIOpenGov.org, the website constructed by the Rhode Island Center for Freedom and Prosperity, a conservative think tank.

In total, $142,159,475 of $826,053,112 in pension payouts went to people now living out-of-state. After Rhode Island, Florida, Massachusetts, Connecticut, New Hampshire and South Carolina are the next most popular destinations for Rhode Islanders collecting a pension, according to 2010 data.

Just over $100 million went to Florida and Massachusetts alone.

There is No stopping it

While retirees are entitled to live anywhere they would like, the fact that more than 17 percent of all pension money earned in the state is being collected elsewhere is a point of concern for some state lawmakers.

First-term State Representative Doreen Costa said she would like to see that money help the state’s struggling economy, but noted that there is nothing anyone can do about a person who wants to retire in another location. Costa said her biggest concern is people who register their cars out-of-state rather than in Rhode Island.

“I wish the money was able to stay in the state and put back into the economy here in Rhode Island,” Costa said. “However, when one retires and collects a pension there is nothing stopping them or anyone to leave the state. I would rather see how many cars are registered to people that go to Florida a few months out of the year, register their cars in Florida to avoid paying the taxes here. That is a huge issue as well.”

Tea Party Leader: State has Weak Tax Policies

Lisa Blais, who heads up the Ocean State Tea Party in Action, agreed with Costa. She said people are clearly entitled to live anywhere they would like, but suggested that Rhode Island’s taxes are driving people away.

“I don't think that it is a question of fairness given that we do have a right to live wherever we choose in our country,” Blais said. “With that said, it is highly likely most are moving to Florida, a tax friendly state to live and die in, unlike Rhode Island. Ironically, Rhode Island public-sector retirees who do leave the state provide yet another example of Rhode Island’s inherent weaknesses in its tax policies.

Rising property taxes and a car tax system that has slashed exemptions in almost every community in the state have been the focal point of Tea Party members, who blame the taxes for driving residents out of the state. But most of the focus has been on the wealthy, with anti-tax groups arguing that the rich are fleeing the state in record numbers and those on the left questioning the validity of those statements.

But retirees receiving a pension, which only in the rarest of instances have them earning above $100,000, do seem to enjoy the states with no income tax. About $75,758,711 goes to people living in Florida, New Hampshire, Texas, Washington, Nevada, Tennessee, Wyoming, South Dakota and Alaska, the states that do not have an income tax.

Study Suggests Taxes Don’t Play a Role in People Leaving

There is, however, some debate as to whether people actually leave the state in search of locations with friendlier tax policies. According to a study conducted earlier this year by the University of Massachusetts Amherst’s Political Economy Research Institute, the economy and family-related matters tend to be to the top reasons people choose to migrate elsewhere.

“The results show that taxes have no measurable impact on people’s decisions to leave a state,” Jeffrey Thompson, a UMass professor, said. “Once households have decided to relocate—because of job loss, divorce, or whatever other reason— they seem to be slightly influenced by the taxes in their potential destination states. Even in choosing a destination state, though, the impact of taxes is relatively small and outweighed by job opportunities and other conditions.”

Thompson said it might shock politicians that taxes don’t play much of a role in migration, but that researchers have always know that was the case

“People concerned about attracting people to a state and keeping them there should really focus on creating jobs, and even be willing to raise taxes to do it,” he said. “People are not going to leave a state because of some modest change in taxes, but they will leave if public safety deteriorates and if there are no jobs.”

Do More for Retirees

The key to retaining more Rhode Islanders with a pension is simple, according to GoLocalProv MINDSETTER™ and former General Treasurer candidate Tom Sgouros: do more for retirees.

As Rhode Island’s population grows older, the state needs to give those people a reason to remain in the state. But slashing funding for affordable housing and constantly raising property taxes is not the answer, according to Sgouros.

“If we want retirees to stick around here, maybe we could spend some attention on affordable housing, or on controlling property taxes,” he said. “But instead we encourage high-end construction, allow rampant real estate market speculation that drives up prices, and push expenses onto towns, driving up property taxes.”

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