OGDEN — A bill in this year’s legislature that would exempt military pensions from state income tax has been dealt a pretty significant blow, the lawmaker who drafted it said.

But Rep. Lee Perry, R-Perry, says the legislation still deserves a debate.

The fiscal note on House Bill 99 has come back from the state’s Office of the Legislative Fiscal Analyst, and auditors say that the bill, which would fully exempt retirement pay tied to a Utah resident’s service in the military, would drain the state’s education fund.

The state analysis says that Perry’s bill could cut revenue from the state Education Fund by $16.95 million in 2017 and another $17.29 million in 2018. The analysis says the bill could cut income taxes by up to $1,020 per retiree.

“That’s going to make this a very difficult bill to get through,” Perry said. “It’s going to put our legislators in a position where they have to choose between our veterans and our students.”

Perry, though, says the bill should still move forward. The representative said the fiscal analyst office has only accounted for direct dollar impacts to current tax revenue, but fails to consider the indirect impacts of the bill.

“That’s not their responsibility,” he said. “So, we (independently) still need to look at other things. Are there other areas where we are currently giving tax breaks where we shouldn’t be? Can we move some of that around? This is a lot more complex of an issue than we normally deal with, but we owe it to the veterans to look at it.”

Perry maintains the bill would attract military retirees to move to Utah. He says those retirees have steady incomes and bring money into their home states.

“What would we get in new sales tax revenues?” Perry said. 

Roy resident 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 long pushed for a military tax exemption in Utah and supports Perry’s bill.

He’s also conducted years of his own analysis that he says confirms Perry’s premise: Tax-free retirement would draw veterans to the state, and the money they bring with them would recover any revenues lost by not taxing pensions.

Schaffert penned an open letter to the legislature on Jan. 26, demanding lawmakers give Perry’s bill some serious thought.

“You’re commencing a new session,” he said in the letter. “You’re in power right now because servicemen and women like me died to protect the democratic system that put you there. Are you going to seriously consider HB 99 this year?”