Vermont lawmakers propose full tax exemption for military retirees' pensions

Vermont lawmakers are pushing for a significant change to the state's tax policy regarding military retirees, aiming to exempt their retirement income from state taxation entirely. Currently, Vermont is the only New England state that does not offer such an exemption, which has raised concerns about attracting skilled military veterans to the workforce.

During a recent Senate Economic Development meeting, legislators highlighted the importance of military retirees, many of whom are young and possess valuable skills that align with Vermont's workforce needs, particularly in construction and healthcare. The proposed bill seeks to eliminate the existing partial exemption, which allows military retirees to exclude only up to $10,000 of their income if their adjusted gross income (AGI) is below certain thresholds.

Kirby Heating, legislative counsel, explained that the new legislation would mean military retirement income would not need to be reported at all, simplifying the tax process for veterans. Currently, retirees must choose between the military retirement exemption and a social security exemption, which complicates their financial planning.

The estimated cost of implementing this full exemption is approximately $3.9 million, a figure that lawmakers believe is a worthwhile investment in attracting and retaining military talent in Vermont. The committee emphasized that this initiative not only aims to bolster the workforce but also serves as a gesture of gratitude for the service provided by military personnel.

As discussions continue, the focus remains on how best to implement this change and its potential impact on the state's economy and veteran community.