Indiana allows individuals receiving Social Security or railroad retirement income to be exempted from state income taxes. Yet individuals who receive federal civil service pensions are allowed only a $2,000 exemption.
In other words, 774,651 Social Security retirees pay no Indiana income taxes on their Social Security retirement income, 15,900 railroad retirees pay no Indiana income taxes on their retirement income. But 26,221 federal retirees in the civil service retirement program have their money taxed. This means federal retirees in Indiana who have the same retirement income as a neighbor under Social Security or a railroad retirement plan actually end up with hundreds of dollars less money to live on, and spend in their local communities.
To add insult to injury, under federal tax codes a family under Social Security is exempted $32,000, but the federal retiree's pension under civil service retirement systems is taxed fully as income.
My personal fear is our country will adopt a 1 percent income tax, again exempting Social Security and Railroad Retirees, but tax persons under the federal civil service pensions.
In the last five years, state Sen. Sue Landske, R-Cedar Lake, and other lawmakers have authored legislation to remedy this disparity but lacked the support of their colleagues to correct this injustice.
An organization called NARFE (National Association of Retired Federal and Active Federal Employees) will ask our legislators to correct this disparity, but they need help from our neighbors.
We can legislate tax breaks for business in the tens of millions, provide exempted inheritance tax in the tens of millions; surely our elected officials can resolve this dilemma for our federal civil service seniors.
NARFE membership will pursue the taxation of our federal annuities as our No. 1 issue, "Indiana's Tax Initiative of 2013". We need the help of others, such as the AARP and the general public, to put an end to this unfair taxation.