Vt. lawmakers to revisit military pension tax-break

By  | 

MONTPELIER, Vt. (WCAX) Vermont is one of just a few states which doesn't give tax breaks to military retiree pensions. Lawmakers have tried for several years to change that, but there are lingering concerns about the potential impact on the state's tax revenue.

Vermont has about 3,900 military retirees eligible for a pension after having spent over 20 years in the military. Every pension depends on the length of service and rank, but the legislature's Joint Fiscal Office says the average annual pension in Vermont is about $22,300. State income taxes can take up around 4 percent of that figure.

Doran Metzger is president of The National Guard Association of Vermont and has served in the Guard for 22 years. He's getting ready to retire and says that he might leave the state to avoid taxes on his pension.

"I have a wife who's from down south, the Kentucky-Tennessee area. Tennessee is a state that doesn't tax retirement. It is definitely a possibility that I could find myself leaving the state," Metzger said.

Vermont is just one of a handful of states that taxes military retiree's pensions. But a study says giving tax breaks could make a dent on state revenue. The legislature's joint fiscal office says tax cuts to military pensions would create a $2.8 million dollar hole in revenue.

House Ways and Means Committee Chair Rep. Janet Ancel, D-Calais, says lawmakers need to be careful how incentives are allocated. "I wouldn't say that it'll never happen, but there are competing interests and investments that people are looking at," she said.

For the fourth year in a row, Governor Phil Scott is pitching the exemption of the tax in his budget proposal. He says most of the retiring veterans are in their 40s and have a wide variety of skills that can help the state economically.

"If we can have more of those retirees come back home that have left Vermont after a career in the military and want to come back home and are prevented or don't come back because we tax their pensions. And when we have a workforce shortage, it just doesn't make any sense to me," Scott said.

The bill's sponsor, Representative Daniel Noyes, D-Wolcott, is trying something new to get it passed. He wants to include it in a package of measures in the House Committee on Commerce and Economic Development. He says it would be handled differently than if it went through House Ways and Means.
"I looked at it and thought, maybe this should be part of Commerce's way to attract people to Vermont," Noyes said.

He share Scott's viewpoint that such a measure would be a great incentive and would be a boon to the state's workforce. "A lot of people that retire with a military pension are younger and are still working. They're volunteering or serving in public safety or on a fire department. There's a lot of community service there as well," Noyes said.

But until a decision is made in Montpelier, Metzger says vets like himself face uncertainty. "It'll be hard but it's definitely something that I can't ignore. You can retire with 'X' amount of dollars or with 'X' amount of dollars minus the tax. It's simple math for a lot of people," he said.

The Committee on Commerce and Economic Development is expected to take up the bill up after lawmakers return next week.