Ways & Means hears testimony on exempting military retirement pay and survivor benefits from Vermont income tax

The House Ways & Means Committee continued testimony Wednesday on legislation to exempt military retirement pay and survivor benefits from Vermont income tax.

Witnesses including Bob Burke, director of the Vermont Office of Veterans Affairs, retired Army Master Sgt. Christopher Cunningham and surviving spouse June Heston told the committee the change could help retain and attract veterans and their families and provide economic benefits to Vermont communities.

Supporters argued the exemption would directly increase local spending by veterans and their families and reduce incentives for retirees to leave the state. Bob Burke summarized Defense Department retiree data and state estimates made available to the committee; he described the number of retirees currently receiving pay and said the Joint Fiscal Office estimated the full exemption would reduce state revenue by about $3.9 million. Burke also cited a National Conference of State Legislatures multiplier used in testimony that produced an estimated annual economic impact for local economies in the low hundreds of millions of dollars.

"That's kind of gives you a flavor of what is existing right now with income that the Department of Defense is providing to retirees," Burke said during his presentation.

Retiree witnesses provided personal context. Christopher Cunningham, a retired master sergeant who now works in recruiting and community volunteer roles in Vermont, said financial pressure and the high cost of living have led some veterans and their families to relocate. "Retirement tax exemption is more than just policy. It's a lifeline support for our veterans, attracts skilled professionals, like Bob was talking about, and honors their service," Cunningham said.

June Heston, the surviving spouse of Brig. Gen. Michael Heston, told the committee exempting military pensions and survivor benefits can be "a smart strategy to support workforce development, bolster the state's economy, and address demographic challenges." She said survivor benefits often replace a two-income household with roughly 55% of a pension and that families may move for financial reasons. "I ask you now to do the right thing," Heston said in closing her remarks.

Committee members and witnesses discussed narrower or alternative measures short of a full exemption, including reductions in fees (hunting and fishing licenses, motor vehicle fees), municipal property tax options, and targeted supports for disabled veterans. Witnesses noted some existing benefits require a U.S. Department of Veterans Affairs (VA) disability rating — for example, testimony described property tax relief in some towns that requires a 50% VA disability rating for full relief; other proposals discussed a minimum exemption expressed as $10,000 up to $40,000 of assessed value before property tax is applied. Witnesses and members emphasized varying impacts depending on household size and local cost of living.

No formal committee vote or binding direction was recorded during this hearing. Members asked about longer-term fiscal risks such as potential changes in federal benefits and whether the state can sustain supplemental programs; witnesses urged the committee to weigh modest fiscal costs against retention and recruitment benefits and the civic value of recognizing military service.

The committee indicated it will continue consideration of the legislation; no final action was taken at this session.