NC House approves tax breaks for some retired veterans

North Carolina House lawmakers voted Wednesday to give some retired veterans and their families a break on state income taxes.

House Bill 83 would stop collecting state income tax on military retirement pay to veterans who served at least 20 years or were medically retired. Payments from the U.S. Department of Defense's Survivor Benefit Plan to a beneficiary of one of those veterans would also be exempted.

Until 2014, the state provided a tax exemption on $4,000 of that income, but the tax break was rescinded as part of a major tax code overhaul by the legislature.

If House Bill 83 becomes law, it would take effect in the current tax year.

Sponsor Rep. John Szoka, R-Cumberland, said 32 other states already don't tax veterans' retirement pay.

"Retiree recruitment is really essential to our workforce here," Szoka said at a news conference Wednesday with several veterans. "On average, military retirees are under 50 years of age, with over 20 years of work history and a desire to start a second career. This type of employee profile is exactly what's needed to fill civilian or contractor positions within North Carolina's military."

"Honestly, I don't think it is even really about the money from the veterans' standpoint. I don't think they even consider that," added Rep Diane Wheatley, R-Cumberland. "It's more the message we send them about we value their service compared to the other places they could decide to live."

The tax break would cost the state an estimated $31 million in the current fiscal year and $35 million in fiscal year 2022-23. But Szoka said studies show the state would recoup that cost from the impact of more military retirees, many of whom would go on to second careers and earn new income streams that wouldn't be exempt from tax.

He said the bill has strong bipartisan support.

"This is not one of these partisan dogfights," he said. "We're all just trying to do what we believe is the right thing, and to advance the right policy."

Rep. Verla Insko, D-Orange, said she would vote for the bill, but expressed concern about its effect on the state's budget availability in the future.

"Our public services are starving. Our schools are underfunded. Public services are underfunded. We're not keeping up with the demands," Insko said on the House floor. "There are a lot of people who aren't paying their fair share. When we cut taxes, we ought to balance it out by finding a place where people can pay more."

Two fellow Republicans had proposed amendments that would have given the bill a much wider scope and a much higher pricetag. One would have phased out state income taxes for all government retirees, and the other would have added exemptions for law enforcement and fire retirees.

However, House Majority Leader John Bell, one of the bill's sponsors, used a parliamentary maneuver to keep the amendments from being debated.

The bipartisan vote was 100 to 5. The measure now moves to the Senate.