Saluting those who served the country in the armed forces is about more than Veterans Day. Fostering their well-being in life after the military is a national duty. And one that states are increasingly taking on as they look to attract former military personnel as retirees and/or members of their work forces.
S.C. Gov. Henry McMaster has been a vocal proponent of South Carolina’s leading role in serving those having served the country.
Earlier this year, he signed legislation to create the South Carolina Department of Veterans Affairs, saying, “We’re changing a name, changing a focus, changing a context and promoting the vision of veterans' affairs to a full-fledged agency in South Carolina. It’s important that our veterans, through a cabinet agency, have the status, attention and focus they have earned through their service to our state and country.”
The mission of the cabinet agency also incorporates the South Carolina Military Base Task Force, which was established through executive order by former Gov. Nikki Haley to enhance the value of our state’s military installations, as well as the quality of life for military personnel and their families. The task force has coordinated efforts among public and private sectors to maintain a significant U.S. Department of Defense presence in South Carolina.
South Carolina is home to eight major military installations and more than 417,000 military veterans. That includes one of every 10 adults in the state, according to the U.S. Department of Veterans Affairs.
About a quarter of South Carolinians are directly related to the military. The economic impact to the state exceeds $24 billion annually, comprising more than 8% of the state’s economy.
Medal of Honor recipient M. Gen. James Livingston of Mount Pleasant, in his remarks at the bill signing, called it step one in encouraging veterans to settle in South Carolina. Step two would be passage of legislation to complete the full exemption of state tax on military retirement income, he said.
McMaster is pushing for the state to take step two, urging lawmakers to make South Carolina the 32nd state to approve an exemption on military retirement income.
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“South Carolina has a rich military tradition, and no state in the country is more committed to supporting our veterans than we are,” McMaster 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.”
In 2019 two more states joined the national trend of exempting military retirement benefits from state taxes. In April, North Dakota passed legislation fully exempting military retirement benefits from state taxes, becoming the 30th state to do so. In August, Indiana became the 31st state when legislation passed to phase in a full state tax exemption between 2019 and 2022.
Under present S.C. law, individuals under 65 who have military retirement income may deduct an amount of South Carolina earned income not to exceed $14,600. The amounts will increase to $17,500 in 2020. Individuals over 65 who have military retirement income in 2019 may deduct an amount not to exceed $27,000 ($42,000 joint). The amounts will increase to $30,000 ($45,000 joint) in 2020.
Two bills are pending in the South Carolina legislature to eliminate state tax on pensions of retired veterans with the caveat that the exemption for retirees under 65 is limited to the extent of earned income. H. 3135 passed the House unanimously on Feb. 1 and is pending in the Senate Finance Committee. Of note, National Guard and Reserve pensions or retirement income are not taxed by the state.
The national trend of exempting military retirement income from state taxes is a benefit to the veteran and the state.
Gov. Asa Hutchinson of Arkansas, where military retirement benefits are exempt from taxation, explains why the exemption makes sense: “The average new military retiree is 38-44 years old, with another 20-plus years in the workforce. The skills and experience our military retirees offer are invaluable resources to our state. This tax cut creates tax relief for Arkansas’ 22,000 military retirees and will encourage veterans to start their second careers in Arkansas.”
The bandwagon is not always the way to go, but when it comes to a military retirement income exemption, South Carolina has good reason to jump on.