In the May 28 edition of the Maine Sunday Telegram, there was a Maine Voices column by Steve Hewins of the Maine Innkeepers Association regarding the severe shortage of seasonal workers during the busy summer season. Mr. Hewins left out one factor that contributes to the problem: federal and state income tax laws that discourage retirees from working.
First, the federal laws. In 1986, a law was passed that imposed a tax on some Social Security benefits for higher earners. However, the threshold amount to trigger the tax has not been increased in 30 years. A married couple receiving $4,000 in Social Security and drawing $1,000 from an individual retirement account pays no tax. If one person starts working, it triggers a tax, so every $1 earned can trigger as much as $1.85 in taxable income.
The Maine state income tax is even worse. Nonresidents working in Maine will be taxed not only on in state earnings, but pensions and income received in other states become taxable as well. My tax adviser put it bluntly: The worst thing I could do is take a seasonal job in Maine.
In my seasonal community in Old Orchard Beach, there are many of us who summer here in Maine and winter down south. A lot of us would love to have a part-time job for the summer. Perhaps Mr. Hewins can rally some support in the business community for lobbying state and local lawmakers to fix this so that seniors who want to work and be productive can do so without the crushing tax penalties.
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