Witnesses urge committee to exempt some military retirement pay from Oregon income tax

Senate Bill 225 would exempt up to $17,500 from federal taxable income for taxpayers who have not reached 63 before the close of the taxable year; the exemption applies to retirement pay or pension for service in the armed forces of the United States and would not exceed the amount of the retirement pay received. The Department of Revenue would be directed to adjust the maximum exemption for inflation. The measure applies to tax years beginning on or after Jan. 1, 2025, and takes effect 91 days after adjournment sine die.

Senator Janine Solomon (sponsor) and multiple witnesses told the committee the exemption is intended to make Oregon more attractive to military retirees and to recognize veterans’ service. "This is forcing the potential of me taking my family and crossing over into Washington," Senator Solomon said, recounting a constituent conversation about tax pressure prompting relocation. Mayor Laci Beatty of Beaverton said Oregon’s taxation of military retirement pay drives retirees to neighboring states; "These are federal, basically making the money coming in more like tourist money," she said, arguing the state loses economic activity when veterans retire elsewhere.

Representatives of veterans organizations — including John Todd Swanson of United Veteran Groups of Oregon, Tom McCroskey of the Military Officers Association of America (Oregon chapter), and Colonel Patrick Harris of the MOAA Emerald Empire chapter — urged passage and noted many states already provide partial or full exemptions. Portland City Councilor Eric Zimmerman and other local officials supported the bill as a tool to retain veterans and attract retirees who bring workforce skills and civic participation. Committee discussion indicated sponsors plan to draft clarifying amendments after consultations with the Department of Revenue.