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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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Comments:

Pammy fuller

Finally! As we approach retirement age many we know are moving to MA to avoid income taxes on pension and property taxes. My husband wants to move but I don't want to have to leave my state. I left in the 70's and 80's for jobs. We are finally back! I don't want to leave again! Make this state livable!!!!

andrew vouras

People need to be aware of how polls are conducted. When the question of inheritence taxes come up, do the pollers ask only those whose might be affected or is it just a randon choice of people. If you have no assets, that tax is not going to make you move out of RI and the study numbers are meaningless. I've been polled on various questions and it's interesting how carefully the questions are put together. It is almost as if they want a certain result.

Pam Thomas

We're talking about retirement here, and people who are thinking about moving in retirement (downsizing the house, etc.) aren't necessarily thinking about continuing to work, as the professor suggests in why people move out of state. They're thinking about NOT working and trying to maintain a good lifestyle (especially if they have only a meager private-sector pension and their savings). The first thought is to move from a high-tax town (NK) to a low-tax one (Jamestown). Saving $6000 or $7000 in property taxes is nothing to sneeze at. But numerous couples in my neighborhood have moved in the past 5 years to Florida, Arizona and South Carolina. The cost of living in general is simply lower, but the taxes are a huge lure. Some have bought a condo to live there a few months of the year, and then they realize how easy it is to be out of RI 6 months and a day so they can pay taxes elsewhere, So they do it. And they take their charitable contributions, etc., with them.

Lorraine Botts

I don't blame retirees for leaving RI. They're being taxed right out of their houses. Even young people are moving for the same reason.

Lance Chappell

This story is so on point. The taxes are out of control in this state and need to be reigned in. The taxes in North Kingstown, which is the sixth highest in the state, forced me to sell out. Municipalities need to stop listening to the special interests and instead listen to the taxpayers. People are losing their homes to foreclosures and tax sales, which in turn lowers the tax revenue. The bottom line is a lowering of the bond ratings to these towns. People who have retired cannot afford to live here. This story is accurate and many do end up living in Florida or the Carolinas, where the taxes are much more affordable.

Real Clear

The story says in big letters:
"Study Suggests Taxes Don’t Play a Role in People Leaving"
Maybe the weather.
Maybe the pot-holes.
Maybe want to go places.

Gary Arnold

It is one of many problems of the tax structure in RI as well as the overall economic malaise that our ineffective political machine mandates for the residents of RI.
No Plan, No Leadership, No Change in our political culture and alignment with Unions and just No Future.
The young have to go; the old will follow over time, what is left that political quagmire that will put this state into the abyss.
But, there is hope if we jettison our existing affiliation to the political gang that runs our state and local politics. It is up to the voters to take charge of changing this state of RI, just look at the record of those in the GA and we are at where we are because of them.

Donald Galamaga

So let's cancel COLA's for retirees and see if that keeps them here....not. How about freezing taxes for the next 19 years and cancelling the Deep Wind COLA's guranteed over the next 35 years?

Donald Galamaga

Correction: The Deepwater Wind COLA is 3%/yr over the next 35 years. What a deal!! Especially as natural gas prices are coming down!!!

Donald Galamaga

Correction Again...I apologize...it is 25 years, not 35. So, that makes it OK??

Joyce Bryant

In my line of work I meet lots of people who have retired down south. And they all they say the same thing. "You wouldn't believe how much cheaper it is to live there than Rhod Island. I only come back her to visit." This governemnt is taxing us out of the state. TAXED ENOUGH ALREADY!

Max Diesel

Pam has hit it square on the head. We're talking retirement and it's not just public employees. My neighbor the postal worker moved to Mass because they don't tax his pension. Another to Florida, because they won't tax his private pension. Sometimes the over educated can't see the forest beyond the trees. Professor Thompson should narrow his scope to retirees and then let us know what the results are.

Virginia Burke

According to the 2010 U.S. Census, our state is first in the country with respect to the percentage of our population who are aged 85 and older. We are only eleventh with respect to the percentage of our population aged 60 or older. This suggests that retirees move to warmer, cheaper climes when they retire, but then return to R.I. when they are in need of long term care services -- probably because their adult children are here.
(Florida goes the other way -- first in the country with respect to people over age 60,over age 65, and over age 75, but drops to 7th with respect to people over age 85 -- the "old old" go back to their home states.)
In addition to the spending of state pensions outside the state, this pattern adds another strain to the state budget because so much of long term care is funded by the state.

Robert Neill

Here's a thought, take away public employees, active and retirees COLA's and reduce their benefits and moving out of state is very appealing! Then we can re-write this article to reflect the additional monies the State will lose.

Michael Trenn

Of course the state workers move out of state when they retire. Because they can. The rest of us taxpayers might leave when we get a chance. When there is nobody left in the state but illegals, welfare reipients, and state workers, who will they tax to pay for everything?

Michael Trenn

Recipients, sorry. And, Mr. Galamaga, where exactly did you work?

Will Collette

This article is about as slanted and irresponsible as it gets. Using teabaggers to set up the argument that we drive retirees away is not only a biased way to report this non-story, it also taints it with false information. I'm surprised you didn't resurrect the old OSPRI reports - long discredited from a "think tank" that couldn't think straight and went out of business.

Retirees leave for lots of reasons, few of them related to taxes. Top of the list is climate - warm vs. cold - and second is affordable housing.

One other glaringly omitted fact is that almost as many people move to Rhode Island to retire (as my wife and I did) as leave Rhode Island to retire elsewhere.

Dan – does becoming news editor mean you have to be as biased toward the right and indifferent to the truth as your predecessor?

Max Diesel

"One other glaringly omitted fact is that almost as many people move to Rhode Island to retire (as my wife and I did) as leave Rhode Island to retire elsewhere."

So that explains the zero increase in population? Keep drinking the Kool-Aid Will.




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