Ways & Means opens extensive debate on amendment to exempt military retirement and survivor benefits from state income tax

The Ways & Means committee spent much of the session hearing an amendment to H.483 that would exempt U.S. military retirement and military survivor benefit income from Vermont personal income tax.

Representative Jed Lipsky introduced the amendment, saying it would remove the partial-exemption language in current law so that ‘‘all military retirement income will be exempt’’ and would exclude military retirement and survivor benefits from the definition of taxable income. Lipsky framed the change as recognition of the ‘‘uniqueness’’ of 20-year military service and said the exemption could help retain and attract veterans to Vermont.

Gary DeGasto, a retired U.S. Army colonel and chair of the Governor’s Veterans Advisory Council, testified in support and summarized Joint Fiscal Office figures the witnesses used throughout the hearing: about 34,000 veterans live in Vermont, roughly 30,900 are military retirees and about 750 are survivors; military retirees in Vermont receive roughly $90.8 million in benefits annually (about $25,269 per recipient), and survivors receive about $8.9 million (about $11,808 per recipient). DeGasto said the Joint Fiscal Office estimated a full exemption would reduce Vermont personal income tax revenues by about $3.9 million.

Brigadier General Hank Harder, deputy adjutant general of the Vermont National Guard, told the committee taxation of military retirement and survivor benefits ‘‘puts Vermont at a significant disadvantage when recruiting and retaining service members’’ and described a pattern of senior Guard members relocating out of state after retirement. He said retaining retirees and attracting prior-service members could help address Vermont’s workforce shortages and estimated the Guard’s pay and allowances bring roughly $152 million into the state annually.

Committee members pressed witnesses on fiscal trade-offs and precedent for other public-service professions. Witnesses acknowledged a fiscal note exists and that 47 other states currently exempt military retirement pay; they also stressed the potential economic and workforce benefits of retaining retirees and prior-service personnel. No formal committee vote on H.483 or the amendment was recorded during the transcript; committee members indicated they would continue deliberations and public testimony on related veterans issues in other forums.