The Feb. 4 editorial "Don't lighten elders' income tax load" asserted that Minnesotans should reject military pension tax exemptions for retired service members because it goes against "the heart of shared citizen responsibility for this state." As the chairman of the Veterans Affairs Division in the Minnesota House, and as an advocate for all taxpayers in Minnesota, I think it's important to take a broader look into this issue.
First, I am chief author of a bill allowing a subtraction from military retirees' taxable income of $1,500 per year of service up to 20 years, for a maximum of $30,000 not considered as taxable income. Similar bills with varying exemptions for military retirement income have been introduced in both the House and Senate.
The Star Tribune Editorial Board suggests that a bill like mine exempting veteran pension income would not bring more military retirees to Minnesota and that it also would harm millennial taxpayers. Both points can be disputed.
First, from an economic standpoint, exempting military retirement pay makes a lot of sense. There has not been a fiscal cost calculated for my bill yet, but the Star Tribune claims a $25 million number from similar legislation introduced in previous sessions. Currently, Minnesota has around 370,000 veterans, 4.7 percent of whom are retired.
While millions from the state treasury in the form of tax exemptions would appear to be an expense to state government, that is only short-term thinking; it ignores the long-term impact.
For instance, our neighbor Wisconsin is one of 15 states to fully exclude taxable military retirement income. In 2013, according to data from the Department of Defense, $51 million more in such income flowed into Wisconsin's economy than into Minnesota's. That figure was aided by Wisconsin's tax exemption for retired, second-career military members. It represents hundreds of millions of dollars over the past decade that Minnesota has lost out on.
Moreover, it's important to remember that many people who have retired from the military are in their 40s, ready to start a second career. The military supplies a list of veteran-friendly states to people leaving the armed services, and it's unfortunate that our state is not on that list, sending many veterans with ties to Minnesota elsewhere.
Making Minnesota a more attractive prospect to return home to after service would mean that veterans would be buying homes here, paying income taxes here, sending their kids to college here and bringing their federal benefits with them. But if that's not enough, retired military members also bring a unique set of skills that are an asset to employers and our communities.
