Raleigh, NC – North Carolina House lawmakers on Wednesday voted to give some retired veterans and their families an exemption from state income taxes.
House Bill 83 would stop collecting state income tax on pension payments by the military to veterans who have served for at least 20 years or who have received medical retirement. Also, payments under the Department of Defense’s Survivor Benefit Plan to a beneficiary of one of these veterans would be excluded.
Until 2014, the state granted a tax exemption for $ 4,000 of that income, but the tax break was lifted as part of a major legislative overhaul of the tax law.
If House Bill 83 becomes law, it would come into effect this tax year.
Sponsor Rep. John Szoka, R-Cumberland, said 32 other states are already not taxing veterans’ retirement benefits.
“Recruiting retirees is really important to our workforce here,” Szoka said at a press conference with several veterans on Wednesday. “The average military retirees are under 50, have over 20 years of work experience and have a desire to begin a second career. This type of employee profile is exactly what it takes to fill civil or contractor positions within the North Carolina military . “
“Honestly, I don’t think it’s really about the money from the veterans standpoint. I don’t think they’re even considering that,” added Rep Diane Wheatley, R-Cumberland. “It’s more the message we’re sending them that we value their service compared to the other places they might choose.”
The tax break would cost the state an estimated $ 31 million in the current fiscal year and $ 35 million in fiscal 2022-23. However, Szoka said studies showed the state would recoup these costs through the impact of more military retirees, many of whom would seek second careers and generate new sources of income that would not be tax exempt.
He said the bill had strong bipartisan support.
“This is not one of those partisan dogfights,” he said. “We are all just trying to do what we think is right and to promote the right policies.”
MP Verla Insko, D-Orange, said she would vote for the bill but expressed concern about its impact on the future availability of the state budget.
“Our public services are starving. Our schools are underfunded. The public services are underfunded. We are not keeping up with the demands,” Insko said in the lower house. “There are a lot of people who don’t pay their fair share. If we cut taxes, we should make up for it by finding a place where people can pay more.”
Two Republicans had proposed changes that would have given the bill much larger scope and a much higher price. One would have eliminated state income taxes for all state pensioners, and the other would have added exemptions for law enforcement and fire service retirees.
However, House Majority Leader John Bell, one of the bill’s sponsors, used a parliamentary maneuver to stall debates on the amendments.
The bipartisan vote was 100 to 5. The measure now goes to the Senate.