SENATE BILL REPORT

SJM 8018

BYSenators Conner, Rasmussen and Saling

Requesting congress to pass legislation concerning taxation of pensions.

Senate Committee on Ways & Means

Senate Hearing Date(s):February 1, 1990; February 5, 1990

Majority Report:     Do pass.

     Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bailey, Bauer, Bluechel, Gaspard, Hayner, Johnson, Lee, Newhouse, Owen, Saling, Williams.

Senate Staff:Terry Wilson (786-7715)

                February 14, 1990

AS PASSED SENATE, FEBRUARY 13, 1990

BACKGROUND:

Many people who have retired to Washington from states with income taxes have discovered that they must pay income tax to their state of former residence on their retirement income.  Many times the retiree was unaware of any tax liability and is being assessed for back taxes.  Because improvements in computer technology have made it easier to find nonresident pensioners, many states, including California and Oregon, are now actively pursuing this source of income.

These income taxes are based upon a state's power to tax income that has its source within its borders, regardless of the state of residence of the recipient.

Under bills introduced in Congress recently, only the state of residence may tax pension income.

Because a state can constitutionally tax income that has its source within its borders, federal congressional action is the most effective means to deal with this problem.

SUMMARY:

The President and Congress are requested to support H.R. 1227, S. 434, or other legislation which permits the taxation of pension income only by the state of residency.

Appropriation:  none

Revenue:   none

Fiscal Note:    none requested

Senate Committee - Testified:   No one