Sens. Janeen Sollman, D-Hillsboro, and Kim Thatcher, R-Keizer, said Wednesday they plan to revive a bill they introduced this spring to allow veterans aged 62 or younger to exempt up to $17,500 in military pensions from their taxable state income.
State fiscal analysts estimated this spring such an exemption would apply to about 7,000 veterans in Oregon and cost the state about $8 million annually. Oregon already exempts military pensions earned before 1991 from state income tax.
“Veterans have served our country and bring a rich work experience, professional training, strong work ethic and commitment to purpose to our workforce,” Sollman said in a statement. “In a time where many positions remain open and unfilled in Oregon, we should be doing all we can to make it easier for veterans to live, work and thrive right here in Oregon.”
Eight states, including Washington, have no income taxes. Another 25 states don’t tax military retirement income at all, according to TurboTax.
States that provide tax incentives for veterans do so to encourage them to retire there. Thatcher described the bill as a small step to making Oregon a better place for veterans to retire.
“It’ll help a lot of people and hopefully, help us attract and or retain some of these veterans that have chosen to live in other states because of our pension taxation,” Thatcher said.
Thatcher, Sollman and Sen. Mark Meek, D-Gladstone, backed the same bill in the 2023 session, but the session ended before it could receive a vote from the full Senate. The Senate Finance and Revenue Committee, chaired by Meek, approved the measure on a 4-1 vote just three days before the deadline for the Legislature to adjourn for the year and as senators worked through a backlog of hundreds of bills that piled up while Thatcher and other conservatives participated in a six-week walkout.
The only senator to vote against the measure, Sen. Jeff Golden, D-Ashland, said he supported veterans but didn’t agree with a blanket exemption that didn’t take into account financial need. State fiscal analysts estimated that one-third of the eligible veterans had an adjusted gross income below $80,000, one-third fell between $80,000 and $150,000 and the remaining third had an adjusted gross income above $150,000.
Oregon has four tax brackets, and they increase steeply. For 2023, single Oregonians are taxed 4.75% on their first $4,050, then 6.75% on every dollar earned up to $10,200. The third tax rate, 8.75%, kicks in at $10,200, and any income beyond $125,000 is taxed at 9.9%.
“I have constituents, I imagine we all do, who struggle to meet their income tax liability,” Golden said when he voted against the measure.
Thatcher said she’s not opposed to a broader look at the state’s tax system, but that the exemption for veterans is doable now.
“This is what’s been supported and this is what’s been vetted through the committees of the legislature as it exists right now, and it’s indexed to consumer price increases,” she said. “Hopefully, it’s something that can go through.”
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