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SC bill would exempt military retirement income from state taxes

By JEFF WILKINSON | The State (Columbia, S.C.) | Published: November 11, 2019

COLUMBIA, S.C. (Tribune News Service) — South Carolina military boosters are once again pushing a bill that would exempt military retirement income from state taxes.

The bill is intended to make South Carolina more competitive for retired veterans with the 31 other states who have already exempted the veterans’ income. But the bill is intended to do more than attract gray-haired seniors.

Because the most soldiers, sailors, airmen and Marines retire while they are in their late 30s to early 40s, they and their spouses would provide a bigger pool of disciplined, skilled workers in a state that desperately needs them, said Bill Bethea, who serves as chairman of the S.C. Military Base Force, which is charged by the governor with protecting and expanding the state’s military bases and missions.

“Military retirees are a great source of highly talented people,” said Bethea. a Beaufort attorney. “And their spouses work as teachers, nurses and many other disciplines. The families that come here can make significant contributions to our state, our economy and our communities.”

The General Assembly in 2016 allowed limited deductions for retirement income.

Currently in South Carolina, military retirees under 65 may deduct up to $14,600 off their income taxes. That amount will increase to $17,500 in 2020.

Individuals over 65 may deduct up to $27,000; $42,000 if filing jointly. These amounts will increase to $30,000 and $45,000 in 2020.

This year, a bill to exempt all income for military retirees passed unanimously in the House, but stalled in the Senate Finance Committee.

Currently, two bills (S. 179 and H. 3135) are pending in the legislature that would make South Carolina the 32nd state that does not impose a state tax on veterans’ pensions.

There is a caveat, however. Retirees under 65 must be employed and the deduction would be limited to the extent of that earned income.

For instance, if a retiree under 65 receives a pension of $40,000, he or she must be paid $40,000 in outside ages to claim the full deduction. If the retiree made $20,000, he or she could only claim a $20,000 deduction.

The caveat is intended to ensure that retirees under 65 contribute to the workforce and the state’s economy, Bethea said.

He said full exemptions would cost the state $29 million a year , which include the current cost of the limited deductions. But, he noted, the military has a $25.3 billion economic impact in the state, according to a University of South Carolina study.

“Is it worth $29 million a year to support and encourage a $25.3 billion economic impact to the state?” he said.

in addition to unanimously passing the House last year, the bills also have the support of Gov. Henry McMaster.

“South Carolina has a rich military tradition, and no state in the country is more committed to supporting our veterans than we are,” the governor said. “However, the time has come to redouble that commitment to our state’s men and women in uniform through a full retirement income exemption.”

More information about state military exemptions can be found on the Military Base Task Force website.

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