Utah lawmaker’s bill would make military pensions exempt from tax

Utah lawmaker’s bill would make military pensions exempt from tax

OGDEN — A developing statute in the Utah Legislature would make military retirement pay exempt from state income tax.

Rep. Lee Perry, R-Perry, said he’s working on a bill that would keep the pensions of military retirees off the table when tax season rolls around in Utah. Perry and others sympathetic to the Top of Utah military community said the measure would entice retired service members to live and spend their money in the state.

“Besides the fact that these men and women served their country and this is the right thing to do, it will be good for the economy,” Perry said. “(By not making military pensions exempt from state income tax,) we’re discouraging military folks from retiring here.”

Richard Schaffert, a retired U.S. Navy captain who holds a doctorate in political science and a master’s degree in quantitative analysis and personnel management, has spent the past several years analyzing the costs and benefits seen by states that already exempt military pensions from state income taxes.

Schaffert said that if military pensions — which are awarded after 20 years of honorable service — were tax-free, more veterans would choose to spend their retirement years in Utah. Schaffert said that would mean new money circulating through the state and that money would more than make up whatever funds would be lost by not taxing pensions.

With just over 16,000 residents receiving a military pension, Utah ranks in the bottom third in military retiree population. 

“If we had (tax) policies that were more friendly for retirees, we’d have a lot more living here,” Schaffert said. 

Schaffert and Terry Schow, an Ogden resident and former executive director of the Utah Department of Veterans Affairs, both said veterans receiving pensions should be viewed by the state as “assets” because they have steady incomes and federally funded health care, and they buy homes and spend money and consume state resources at a low rate.

“I’m a veteran, but I’m not a retiree, so I think I can speak without any bias,” Schow said. “I think all the indicators show that (exempting military pensions) would be a good thing for Utah.”

Shaffert said he’s crunched the numbers to back up those claims.

Using data he gathered from the Department of Defense Office of the Actuary and the U.S. Census Bureau, Schaffert said the median annual military pension in the United States is more than $36,000. He said actuarial estimates indicate new retirees could live an average of 35 years and 8 months.

“During that time, they would be the recipients of $1.3 million in unrestricted federal pension funds,” Schaffert said during a recent presentation on his findings at Hill Air Force Base. “And most of that money is spent in whatever state they choose to live in.”

Schaffert said a simple expenditure multiplier effect means that the average military retiree represents a “$5.2 million bonanza to bolster the economy of their chosen state.”

“It’s a no-brainer,” Schaffert said.

Perry said his bill will be introduced in the 2016 general session of the Legislature. Perry, Schaffert and Schow said they are unaware of any serious opposition to the measure. In 2008, there was a similar bill in that year’s session. It passed the House with a 71 to 4 vote, but never came up for a vote in the Senate.

According to a Utah Department of Veterans and Military Affairs report completed earlier this summer, a 100 percent exemption on military pensions would result in a total yearly loss of $5.7 million in state tax revenue. 

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