Military retirement benefits exemption passes in the House

Rep. Bob Ballinger

 

A bill that would exempt military retirement pay and survivor benefits from state income taxes passed in the House 75-14, with 8 voting present. The Senate version of the bill also passed in the Senate Revenue and Tax Committee.

State law already exempts $6,000 of veterans' retirement income from state income taxes. This bill would exempt all military retirement income and pay for it by taxing candy and soft drinks at the full sales tax rate. It also would tax unemployment compensation benefits, levy a sales tax on certain digital products, reduce the tax rate on soft drink powder and syrup, and transfer general revenue to the state Medicaid trust fund.

Rep. Bob Ballinger (R-Hindsville), who voted against the bill, testified in opposition to it on the House floor.

“I don’t think we’re honoring vets by this bill,” Ballinger said, adding that he thinks the digital download tax, the unemployment benefits tax, and the syrup tax reduction should be discussed by a tax task force, and not passed in the military exemption bill.

“We’re going to use the veterans to do some hard things, because it gives us cover,” he said.

The military retirement tax exemption would affect 29,000 military retirees while reducing general revenue by $6.7 million in FY2018 and by $13.4 million in FY2019. This would be offset by an increase in the tax on candy and soft drinks, which would increase general revenue by $6.9 million in FY2018 and $13.8 million in FY2019, according to the Department of Finance and Administration's Legislative Impact Statement. Fiscal year 2018 begins July 1, 2017.

The bill also contains a reduction of the tax on syrups and powders used to make soft drinks, which would reduce revenue earmarked for Medicaid by $3 million in FY2018 and $5.9 million in FY2019. General revenue would be transferred to Medicaid to offset the reduction. To make up for the loss in general revenue, unemployment benefits and digital downloads would be taxed. Taxing unemployment benefits would increase general revenue by $1.6 million in FY2018 and $3.1 million in FY2019, while levying a sales tax on digital downloads would increase general revenue by $1.2 million in FY2018 and $2.4 million in FY2019, according to a legislative impact statement.

Later Monday afternoon, Ballinger filed a competing military retirement exemption bill, which does not specify how the exemption would be funded.

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