Bill to exempt military pensions from state income tax will go to Legislature

Bill to exempt military pensions from state income tax will go to Legislature

SALT LAKE CITY — A bill that would make military retirement pay exempt from state income tax has been drafted and numbered and will go before the Legislature in 2016.

House Bill 99, sponsored by Rep. Lee Perry, R-Perry, would fully exempt all retirement payments related to a Utah resident’s service in the armed forces. 

Perry said the bill would not only be a meaningful, tangible way to thank Utah’s veterans, but it would also entice military retirees to relocate to the state. The representative said the fiscal impacts of the bill are being analyzed and won’t be fully known until the 2016 legislative session begins Jan. 25.

A Utah Department of Veterans and Military Affairs report completed in August indicated that a 100 percent tax exemption on military retirement would result in a total yearly loss of $5.7 million in state tax revenue.

Perry said that while the state may see a short-term loss in tax revenues, it would make up for those dollars in the long run if military retirees migrate to Utah. With steady incomes and federally funded health care, Perry said, retirees pump money into their home states while consuming state resources at a relatively low rate.

“Part of my argument is that eventually, this will bring money into the state,” Perry said. “Who knows, we may find out it costs too much and may have to make some adjustments, but it’s something that we really need to discuss.”

According to the Department of Defense Office of the Actuary, Utah had 16,625 military retirees receiving a military pension at the end of 2014, which puts the state in the bottom third in military retiree population.

Utah is one of 21 states that offers a partial tax exemption, but the Beehive State doesn’t offer much.

According to a Military Officers Association of America report released in November, Utah residents below age 65 may take 6 percent of retired military pay as a tax credit, but only up to $288. Residents older than 65 can claim either $450 or $900 depending on marital status, but the tax credits are subject to income eligibility limits.

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 analyzed the issue for years and long pushed for the state to make military retirement tax exempt.

In an email to Perry, Schaffert told the lawmaker to be wary of “Legislative Staff Analysts who ‘score’ bills based solely upon estimated costs (loss of tax revenues) without any research or analyses of the fiscal benefits derived.”

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