Allows a modification to federal adjusted gross income for all public pension benefits administered by the Employees Retirement System of Rhode Island.

Rhode Island Public Pension Tax Exemption Bill

This bill would change how Rhode Island taxes retirement income for public employees. Currently, pension benefits received by retired state and local government workers may be subject to Rhode Island state income tax. This legislation would allow those retirees to subtract — or "modify" — their public pension income from the amount of income that gets taxed by the state, potentially reducing or eliminating their Rhode Island state income tax bill on that pension income.

The people most directly affected are retired Rhode Island public employees whose pensions are managed through the Employees' Retirement System of Rhode Island (ERSRI). This includes retired state workers, teachers, municipal employees, and other public servants who receive pension checks through this system. Under the bill, these retirees could keep more of their pension income without owing state taxes on it.

For the state of Rhode Island, this change would likely reduce the amount of income tax revenue collected, since pension income that was previously taxable would no longer be counted when calculating what retirees owe. The exact financial impact would depend on how many retirees are affected and how much pension income they receive. The bill has been introduced and sent to the House Finance Committee, where lawmakers will review its costs and merits before deciding whether to move it forward.