By Chad Blair 05/16/2011

Gov. Abercrombie with Tracy and Jeff Davidson, Kauai Chamber of Commerce luncheon, May 13, 2011.

Taxing pension income of government workers and eliminating Medicare Part B reimbursements were key proposals from Gov. Neil Abercrombie to help balance the state's budget.

But both plans failed to make it through the Hawaii Legislature, and Abercrombie blamed it largely on scare tactics from groups like AARP Hawaii.

Civil Beat spoke with the governor Friday on Kauai about the pension tax, Medicare Part B and the AARP. The interview came after a speech to the Kauai Chamber of Commerce.

Civil Beat: How are you going to counter the AARP if you come back next session with the same bills?

Neil Abercrombie: I'm not going to counter them, I am going to roll over them.

You're going to roll over them?

Yeah. Because "them" is really the hierarchy that's in there — the ones that are getting the salaries and their own pensions and represent the national AARP. This is not a democratic organization. They don't have votes. Who's the president? That's all settled inside with the big shots.

And take a look at their ads — in the small print on TV — they're representing these insurance companies. They made $300 million last year. Check it out. I give the insurance companies credit — they're smart, because they figure, "Why fight them? We'll join up with them, right? We'll collaborate with them and we'll all make money."

But you are still going to bring up the pension tax next year?

Oh, sure! Of course! These are structural changes. People are beginning to get it. They got it here (at the Kauai Chamber of Commerce meeting). We are just in round one. Don't worry, I'm still standing after 40 years. We'll see who's going to win the (next) round. And the winner is going to be the average taxpayer out there.

I asked everyone at my table right here, do you have a 401(k)? "Yeah." IRA? "Yes." You have something that's not a state pension? "Yeah." A retirement income of some kind? "Yeah." Is it taxed? "Yes." And they didn't know my state pension wasn't subject to taxation! And when I told them, well, we are going to exempt a portion of that — whatever the number comes out to be, I don't care, $50,000, $75,000 for a couple, whatever it turns out to be — and that isn't even subject to it!

So, you eliminate that as part of the overall income picture. And then when you take it into account it becomes a portion — the first $75,000 or whatever it is — of the adjusted gross income gets taxed. It's a proportion!

The AARP is a powerful lobby ...

No it isn't. No it isn't. But, so what, so is the average taxpayer a powerful lobby. When taxpayers find out that they are getting the short end of the stick, especially when somebody's fooled them, when somebody's conned them.

Do you think this leadership in the AARP is at Moiliili Community Center? Do you think they even know where Lanakila Community Center is? Adult day care and some of the churches and so on? They're not in it. They don't have to worry about it. They got the income to see to it that they never have to be there.

No, this is an angle they are trying to work, to try to justify their existence. They are a 501(c)(4), right? They're a business, is what they are. Everybody thinks, "Oh, they're like the YMCA or the Boys and Girls Club or something like that. Or the Lions Club or the Rotary Club." No, they're not. They're a business.

You are going to keep hitting that message?

I am going to keep hitting the message of fairness and equity, is what I am going to keep hitting. That's the whole point. Why should somebody who's got a retirement income by another name — aren't the dollars spent the same? aren't the economic pressures the same? — have to have their income from that IRA, from that retirement package, subject to taxation, and not the state pension?

It's the same thing with the Medicare Part B. ... and I am going to bring that back, too. Absolutely I am. Because I am going to keep taking the message to the average person, and I am going to say to them, are you paying a tax? And they are going to say "yes." And I'm going to say, I have a very simple question for you: Why should you pay and not the person sitting next to you with the same income? With the same income! It's a question of equity and fairness.

The other part of it is this: We're in a crisis now. We have to all pull together. So, when I went to my tax guys, I said, start with me, because I have a high income. I earned every penny, no question about that. But I didn't earn an exemption from everybody else. ...

Now, to have somebody like the AARP step up there and cry crocodile tears on behalf of people who planned their life this way — I planned my life a lot of ways, right? But things happen, don't they? And as a result adults adjust to that. Especially when there is a crisis, you can say, yeah, I've been getting a break all this time — that's me. Is it fair for me to keep getting the breaks and the benefits that I am getting right now? And my tax guys told me I should be including my pension income in the overall taxable income that other people do, and that this Medicare Part B thing is absolutely unjustifiable.

Are you a member of AARP Hawaii?

No. ... I caught on to these guys (the national AARP) a long time ago when I found out they were selling insurance. They say, you call the AARP and we'll give you counseling and instruction and I guarantee you the counseling will end up with them suggesting that you buy one of their insurance plans.

They have a selfish interest, is what you are saying.

Of course. This is when your special interest becomes a private interest at the expense of the public interest.