Veterans, retirees urge Vermont to exempt military retirement pay as lawmakers weigh S.51 amendment

Dozens of veterans told a joint hearing of the House Government Operations & Military Affairs and the Senate Government Operations Committee that Vermont should stop taxing military retirement pay and pass a broad exemption this session.

Supporters said exempting military pensions would help retain and attract skilled retirees to Vermont, boost local economies and address workforce shortfalls. ‘‘The income tax exemption for military pensions is long overdue,’’ said Bruce Roy, a retired Air Force colonel, during the hearing.

The push for a tax change centers on legislation discussed this session, including references at the hearing to "S.51" and to a proposed amendment that would add income caps and phased gradations. Several speakers urged lawmakers to pass an unrestricted exemption rather than a capped or conditional measure. ‘‘We have asked yet again for a clean bill with no restrictions, no income caps,’’ said Bob (last name not specified), who identified himself as a retired Navy veteran. ‘‘Do not support that amendment,’’ he added about the S.51 housekeeping amendment.

Why it matters: Witnesses framed the change as a workforce and economic development tool. Bruce Roy said military retirees ‘‘bring leadership, income and experience’’ and that removing the tax would make Vermont competitive with neighboring states that already exempt military pensions. Several speakers cited a Joint Fiscal Office projection mentioned at the hearing estimating marginal growth of revenues tied to proposed exemptions if retirees relocate to Vermont.

Details and debate: Testimony at the hearing highlighted competing views on legislative strategy. Some veterans and supporters called for a ‘‘clean’’ exemption with no income thresholds; others acknowledged that an amendment with phased caps might be a pragmatic path through the legislature. One participant described a proposed cap discussed in committee testimony as $125,000 of annual income with further gradations up to $175,000; another witness noted the existing, limited exemption of $10,000 that veterans must choose between and Social Security for tax purposes.

Speakers also described the broader stakes for retention: military families, veterans who return as older, second-career workers, and the effects on small communities and school enrollments. ‘‘Vermont doesn't need more taxes, we need more taxpayers,’’ Roy said, urging members to advance the bills.

No formal action was taken at the hearing. Committee members and advocates indicated S.51 and related proposals remain under consideration in the relevant committees and that further floor action would be required before any change takes effect.

What to watch next: Witnesses urged rapid legislative action this session and identified S.51 and companion measures as the vehicles to change Vermont’s tax treatment of military retirement pay. Committee members at the hearing noted the measure was being considered by Senate Economic Development, Housing and General Affairs and may be attached to workforce legislation as it moves through the Senate.