Bills seek to exempt all military retirements from state income tax | Government and politics

Senate Bill 401, by Sen. Adam Pugh, R-Edmond, recently passed the full Senate by a 43-0 vote and is heading to the House.

A similar measure, House Bill 3693, by Rep. Kevin McDugle, R-Broken Arrow, awaits House action.

Eliminating remaining income taxes on military retirement benefits would cost the state nearly $5.7 million, according to the Oklahoma House.

But McDugle thinks the cost would be offset by reducing the number of military retirees leaving the state and attracting more military retirees to Oklahoma.

“Under current law, an income tax exemption is permitted for military retirement benefits of any component of the United States Armed Forces,” according to a summary of Bill 3693. “The amount of the The exemption is the greater of 75% of military retirement benefits or $10,000, but cannot exceed the amount included in the taxpayer’s adjusted federal gross income.

Oklahoma has approximately 36,000 retired military personnel.

Sen. Brenda Stanley, R-Midwest City, introduced the bill in the Senate. She said military retirees usually start a second career.

“They have years of experience in specialist areas. We can use these people in our workforce, and even though their military pension would be exempt, their second career earnings will pump more money into our economy,” Stanley said after the bill passed.

Oklahoma Department of Veterans Affairs Executive Director Joel Kintsel said veterans tend to be very strong and entrepreneurial citizens.

“I think it’s very important to Oklahoma and especially the Oklahoma veteran community,” he said.

Oklahoma is already at a disadvantage because several states like Texas, Missouri, Kansas, Arkansas and Louisiana have eliminated military retiree income taxes, Kintsel said.

Of neighboring states, only New Mexico and Colorado tax military pensions, according to Senate staff.

Michael Stevens, who is retired from the Air Force, currently lives in Victorville, Calif., but plans to move to Broken Arrow.

He’s never been to Oklahoma and has no family in the state, but waiving income tax on military retirement benefits would be a “huge savings for us,” a- he declared.

He also cited the state’s low property taxes, sales taxes, and cost of living as reasons he finds Oklahoma attractive.

He said Broken Arrow is low on crime, congestion and smog.

“So many people want to leave California, but they can’t,” he said. “We are lucky to be in a situation where we can do that.”

Pugh said he’s been working on the issue for five years.

“These are highly skilled professionals, typically in their 40s, looking to start a second career, with many skills that our workforce desperately needs,” Pugh said. “They can help fill the void in critical industries like aviation and engineering, which will be an incredible boon to our economy.”

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