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Senate committee advances SB 1 to exempt up to $20,000 of military retirement pay from state income tax
Summary
The California Senate committee advanced SB 1, a bill to exempt up to $20,000 of military retirement and survivor benefits from state income tax for taxpayers under specified adjusted gross income (AGI) limits; supporters said the change aims to retain veterans amid competition from other states.
Senator Sciarto introduced SB 1 on behalf of veterans and military families, saying the measure would exclude up to $20,000 of military retirement pay and survivor benefit payments from California state income taxation for taxpayers whose adjusted gross income is under specified thresholds. "SB 1 exempts the first 20000 dollars from military retirement and survivor benefit pay and can only be applied to families with an adjusted gross income under 250,000 or an individual's AGI under 125,000," Senator Sciarto said.
The committee heard testimony from David Boone, a retired rear admiral in the U.S. Navy and president and CEO of the San Diego Military Advisory Council, who told the panel California is losing military retirees to other states. "Since February, California's population of military retirees has fallen by 27%," Boone said, adding that other states such as Texas, Florida, Virginia, Georgia and North Carolina are growing their veteran populations. He said SB 1, coupled with the governor's budget language, would provide a tax exemption up to $20,000 and place AGI caps to target lower-income retirees while aiming to attract more middle-income veterans if thresholds are increased.
Multiple veterans' organizations and government representatives voiced support. Russell Manning said he appeared on behalf of California State Treasurer Fiona Ma in support. Josh Baker, representing the California Enlisted Association of the National Guard, said the measure "is impacting your state's military service" because many retirees rarely retire in the state.
Supporters presented economic arguments and anecdotal evidence that exemptions in other states had contributed to veteran retention and state economic benefits. David Boone told the committee he provided a 2018 SDMAC study analyzing the hypothetical fiscal impact of a full exemption and said revenue losses would be offset by other taxes and economic activity from retained veterans.
The committee voted to pass the measure on to the next step. The roll call recorded Senators McNerney, Valadares, Ashby, Grayson and Umberg voting "aye," with the measure reported out of committee.
Votes at the hearing were procedural and unanimous on the measure before the committee; the bill now moves to the next committee assignment for further consideration.
