I love my state, but I have to say it: Maryland is not the best place to retire. Considering factors like affordability, health care, and quality of life (think weather, crime, cultural opportunities, road congestion, etc.), MoneyWise, Bankrate, Kiplinger's, and WalletHub all rated Maryland as the worst, or nearly the worst, state to retire in.
Admittedly, it's hard to compete with the warmer winters in Florida and the Carolinas. Florida, though, does not have income tax. And climate doesn't explain the droves of former Marylanders who retire just across the state line in Delaware, with no sales tax and more favorable income tax rates.
The statistics say it all. According to the National Movers Study conducted by United Van Lines, in recent years retirement is the second-highest reason for leaving Maryland, accounting for one-fourth of people leaving in 2019, and over 20% in 2018 and 2015. That same study shows that in 2018 and 2019, retirement was the No. 1 reason for moving to Delaware, with 40% of the people moving to Delaware in 2019 doing so in retirement.
The flight of retirees from Maryland has been a concern at least since the turn of the century, according to a 2013 study by the Maryland Public Policy Institute. That same study notes that tax policy changes between 2007 and 2013 under Governor Martin O'Malley led to a “perception of a toxic tax environment, which businesses and wealthy individuals are eager to leave.”
Governor Larry Hogan has been trying to ease the tax burden on retirees since taking office in 2014. In 2017, Governor Hogan introduced — and the General Assembly passed — the Hometown Heroes Act, which exempts law enforcement and first responders from paying state income tax on the first $15,000 of their retirement income. This year, Governor Hogan has introduced legislation to expand the Hometown Heroes Act to eliminate state income taxes on retirement income resulting from their service for law enforcement and first responders, and reducing the eligible age to 50. This year, the governor has introduced House Bill 361, which I co-sponsored, to eliminate all state taxes on retirement income received as a result of military service.
In 2015, the governor enacted legislation to increase the tax exemption on military retiree pensions from $5,000 to $10,000 for retirees 65 years or older, and in 2018, he again enacted legislation that increased the exemption by 50% to $15,000 and lowered the eligibility age to 55.
On a bigger scale, this year Governor Hogan introduced House Bill 342, also known as the Retirement Tax Reduction Act of 2020, which I co-sponsored. This act would reduce the tax burden on Maryland's 230,000 retirees, especially those on a limited income, by more than $1 billion over five years. Maryland already is one of the 37 states that don't tax Social Security benefits. The Retirement Tax Reduction Act would eliminate state income tax for retirees who make less than $50,000 annually, and would reduce the state income tax burden on those who make between $50,000 and $100,000 annually. That's a lot of incentive to stay - and spend - in Maryland.
If the act is passed, the cuts would be phased in over five years starting in July 2021. Why the delay? Unfortunately, the Democrat-controlled General Assembly has a history of, when a proposed tax cut is included in the proposed budget, voting down the tax cut and redirecting the money.
Maryland, with its beaches, crabs, lakes, mountains, history and rivers is a beautiful place to live. With our proximity to Washington D.C. and multiple military bases, we are home to many federal, state and local government employees and servicemembers with many years of retirement ahead. Let's make Maryland a better place to retire, and let’s pass the Retirement Tax Reduction Act.