SACRAMENTO — Veterans’ pensions would no longer be taxed in California under a bill introduced by state Sen. Scott Wilk.
Senate Bill 1071 is bipartisan legislation would exempt military retirement pay from gross income considered for income tax purposes.
“They’ve earned every cent of that pension,” Wilk, R-Santa Clarita, said. “For the state of California to take it, to me, is just wrong.”
California is one of seven states to fully tax military retirement pay under their income tax laws. Other states either partially or fully exempt the pensions as income, or do not collect income taxes.
The state can afford to forgo the revenue from taxing retirement pay, Wilk said, and could benefit from what these veterans bring.
In addition to the stated goal of honoring veterans for their service to the country, the bill is intended to remove a disincentive for military retirees, with the skills they bring to civilian life, to retire in California.
As the majority of military retirees are in their mid-forties and often move on to a second career, they present a skilled workforce.
Wilk said the state’s high cost of living is an issue he hears regularly from veterans seeking relief.
According to Wilk, the nation’s military retirement rate has increased a full 17% between 2000 and 2016, yet California’s military retirement population has declined by 17% during that same period.
Joining Wilk as co-authors are senators Bob Archuleta, D-Pico Rivera, and Patricia Bates, R-Laguna Niguel.
Archuleta chairs the Senate Veterans Affairs Committee.
The exemption would be phased in over several years. For the first year, only 50% of the retirement pay would be exempted, then 75% the next two years, before reaching a full exemption in the fourth year after the bill is in effect.
“California’s military veterans deserve better from Sacramento than having their retirement pay that they worked so hard for to be taxed. That is why I am proud to jointly co-author Senator Wilk’s common sense measure to provide tax relief to our veterans. It will help keep more veterans in California by giving them an incentive to pursue a second career here, instead of in other states,” Bates said.