Vermont examines military retirement benefits amid stable veteran population growth

During a recent Senate Economic Development meeting in Vermont, discussions centered on the state's growing population of military retirees and the implications for local economic development. The meeting highlighted a modest but steady increase in the number of retirees choosing Vermont as their home, with a reported 2.3% growth over the past decade, slightly below the overall state population growth of 3.6%.

Key to this discussion was the existing tax exemption policy for military pension benefits, which allows retirees to exempt up to $10,000 of their military income from state taxes. However, retirees must choose between this exemption and the exemption for Social Security income, which has raised questions about its impact on attracting more retirees to the state.

The meeting revealed that approximately 3,900 military retirees reside in Vermont, with around 3,600 actively receiving benefits. Collectively, these retirees contribute about $90 million in pension income annually, averaging $25,000 per retiree. This figure is notably lower than the national average of $31,000, indicating a potential area for improvement in attracting higher-income retirees.

The discussions also touched on the distinction between veterans and military retirees, emphasizing that while there are about 34,000 veterans in Vermont, only a small fraction are retirees eligible for pension benefits. This distinction is crucial as the state considers policies aimed at enhancing the appeal of Vermont to military retirees, which could bolster local economies.

Looking ahead, the committee acknowledged the need for better data to assess the effectiveness of current tax policies in attracting military retirees. They discussed the possibility of creating new tax forms to better track military retirement income separately from Social Security, which could provide clearer insights into the economic impact of these policies.

As Vermont continues to navigate its demographic challenges, the outcomes of these discussions could play a significant role in shaping future economic strategies aimed at enhancing the state's appeal to retirees and ensuring sustainable growth for local communities.