Posted on 11/07/2014 8:01:25 PM PST by Jet Jaguar
When it came time for Maj. Gen. Lawrence Wells, who had been stationed at Shaw Air Force Base in Sumter, to retire last year, he and his wife had to weigh two things.
Stay in South Carolina with their extensive community connections and well-established base of friends, or move to North Carolina to be nearer their three grown children.
When they listed the pros and cons, the two states came out even -- except for one thing. South Carolina was going to tax his $120,000 annual military retirement pay at $8,400 a year. North Carolina wasn't.
"That was the deciding factor," Wells said from his home in Fuquay-Varina, a suburb of Raleigh. "... My view was, after 35 years of service, multiple moves and lots of combat time, it would be nice to keep all my retirement pay. One state recognized that. The other didn't."
Wells is not alone.
South Carolina has dropped from eighth to ninth in states with the most military retirees. It was overtaken by Alabama, which hasn't taxed military retirement since 1989.
And the state could drop further.
With the military sharply downsizing after 13 years of war in Iraq and Afghanistan, a flood of new retirees will start their search for a place to live over the next two years. Southeastern neighbors North Carolina, Georgia, Alabama and Florida all offer better deals when it comes to the retirees' bottom line.
To counter that, the S.C. legislature is considering House Bill 3112, which would exempt military retirement from state income tax. It unanimously passed the House in the past session, but arrived too late to the Senate to come up for a vote.
It also carries a heavy price tag: The tax generates $22 million a year in revenue, according to the S.C. Board of Economic Advisors.
But advocates for the bill say those dollars and more can be recaptured as the state grows its retiree base. The revenue would be made up by additional sales taxes paid by the retirees and income taxes paid by merchants and service providers who profit from them. The retirees themselves would pay income tax if they take a second job, which many do.
"There are a lot of military people who through the years have been in and out of this area and have grown to love it and want to retire here," said Beaufort lawyer Jim Wegmann, who serves on a local military committee and the S.C. Military Base Task Force, which was appointed by Gov. Nikki Haley to protect and expand missions at the state's six major military installations.
"If you think about it, most military retirees that do 20 (years) and get out are about 38 to 45 years old, and I have lots of friends that go to work when they leave," he said. "If they're looking for that second career, and they're not going to get that military retirement taxed, it's a pretty big draw to look at those other states."
VETS MIGRATE TO MILITARY TOWNS
There are currently 57,755 military retirees in the Palmetto State, according to the U.S. Department of Defense. Retirees are different from other veterans because they served at least 20 years in the military and draw a pension.
About half live around the state's four military communities -- Columbia, Sumter, Charleston and Beaufort, according to a study by the S.C. Department of Commerce.
They migrate to military towns to take advantage of benefits like shopping in tax-exempt commissaries and base exchange stores, having access to veterans' services and being able to associate with other military people and institutions.
Those veterans near bases pump more than $442 million a year into the economies of those four communities, the study showed. But when the numbers are expanded to include all of the retirees in the state, the annual economic impact to South Carolina is more than $1.1 billion. And that figure likely is low, according to the study.
S.C. STRIVES TO KEEP VETS' SKILLS IN STATE
Keeping retirees' skills in the state is another reason to become more attractive to veterans, said William Bethea, a Beaufort County attorney who chairs the S.C. Military Base Task force.
"It's not just a money issue," he said. "It's a workforce issue. They have skills that they have developed over 20 to 30 years. And we need those kind of people to attract industry."
One of the biggest factors that an industry like Boeing or BMW considers when they are choosing to build a plant -- aside from free land, tax incentives, no unions and low regulation -- is a trained workforce. For Boeing and BMW, the state's wealth of military trained vehicle and aircraft mechanics boosted the state's chances.
With South Carolina being a small state -- less than 5 million people -- building a skilled labor pool should be a priority, Gov. Nikki Haley said. While the governor said she supports tax relief for veterans and retirees, she did not throw her support behind a specific bill.
Other states already are taking action to make themselves attractive to military retirees. For instance, Iowa -- a state of 3 million people -- eliminated its state income tax on military retirement pay this year.
State Sen. Tom Davis, R-Beaufort, has been a primary sponsor of several bills to support military personnel pushed by the state task force that have been passed by the General Assembly.
However, there's more to do, including the retirement pay exemption and providing in-state tuition rates for military personnel and dependents, he said.
"It is important to view exempting military-retirement pay from the state income tax not only from an economic impact perspective ... but also from a competitiveness point of view," Davis said.
'THE RIGHT THING TO DO'
In addition to the end of the wars and an expected wave of retirees, the military also is facing BRAC, which stands for base relocation and closing, a process used by Congress and the Pentagon to realign or eliminate missions, personnel and real estate to cut the budget and become more efficient.
With the military set to cut more than $500 billion over the next 10 years due to the Budget Control Act of 2011, commonly called the sequester, a new round of BRAC is expected in 2017.
One factor the military will consider when realigning its assets will be the support a community or a state offers military members -- called quality of life. The tax exemption is one of a number of state initiatives that will build a state's quality of life score when cuts are being considered.
South Carolina already has passed six key initiatives pushed by the Department of Defense -- from allowing veterans' courts to lower property tax assessments for deployed military personnel. But enacting the tax exemption and passing other initiatives, such as allowing in-state tuition for veterans without a one-year waiting period, would help build the state's case, advocates said.
Those two pieces of legislation -- the exemption and tuition bills -- will be the task force's "top priority" when the legislature convenes in January, Bethea said.
The task force plans to offer to lawmakers a "dynamic analysis" that would show the benefits -- from fiscal offsets, to workforce development, to BRAC, to patriotism -- that would offset the $22 million cost.
And lobbying will start early, he said.
"What we want to do is be able to show that this is not just a negative issue" from a revenue standpoint, he said. "We have to paint a fair picture of the economic result."
But from Maj. Gen. Wells' perspective, there are things that are more important than money.
"It's something I have worked at throughout my career, to make communities more supportive of the military," he said. "They are people who have put their lives on the line. It's the right thing to do."
Read more here: http://www.islandpacket.com/2014/11/06/3417649/base-supporters-call-on-sc-to.html?sp=/99/257/266/#storylink=cpy
Even better if they just don't tax any retirement income. It's one of the things I like about MS. Now if we could only jump into the pool of States that don't tax income...
You flatter yourself. With no reason, I might add
It’s called being concerned. It’s bad enough that the Democrats wants protected classes, but not certain conservatives want it too.
We are losing what the country is supposed to stand for.
Abolish the IRS and the income tax.
As a matter of fact I do...
The people who sacrificed for this country by putting themselves in harms way or by being asked to live their lives moving from place to place and being away from their families for long extended periods of time, being in the service of our country for decades, damn sure should get special considerations...
Is that why America was founded, so certain individuals could get privileges not extended to others?
I agree with that.
Yes, when they earn them...
You might want to crack open an history book...
Civilizations for eons (pre-founding fathers) have bestowed special considerations on their military personnel for long service or service above and beyond the call of duty...
I’m talking about America, not other nations.
29 years in, we’ve been trying to figure out where to retire to... For us, there is no reason to retire to a state that will tax our retirement pay. But I would love to reconsider SC if they make this change.
I’m not former military, are you?
I also contribute enough to cover my fair share, as do the good people of SC.
Why should they be forced, essentially at the point of a gun, to pay the tax for others?
Is that how you want America to be, where certain citizens become privileged over time?
You’d rather have a king than a Constitutionally limited President?
This is where our small government coalition falls apart. It always seems it is “handouts for me, but not for thee.” Where does it all end. How about law enforcement, they put their live’s on the line, how do we know, they tell us every chance they get. Should we keep up their gold plated pensions starting at the age of 40. How about full pensions for the Department of Education’s SWAT team. How about Social Security, no need to change that. Every retiree pulls out more than they ever paid in, what could go wrong. I have no problem with the General’s pension, but his complaint about paying state taxes like the rest of us schlubs comes across to me as licking the plate.
The only silver lining is this is the reason the Democrats did not hold their stranglehold over Congress like they had thru the 30’s, 40’s, 50’s, 60’s and 70’s. Why, because over time the money slowly went from building bridges, roads, and dams into pensions, healthcare, and other benefits to government workers. Unlike the Democrats of yore, todays Rats have nothing to show for their spending. Where Roosevelt could cut the ribbon for the Hoover Dam, Obama could highlight the six figure pension with free healtcare for life the assistant secretary to the assistant secretary of Paperwork and Compliance will get for the next 40 years after he or she retires at the age of 52.
For starters, it should end right here.
Are you aware that unfair taxation was one of the main reasons America was created??
——Is that how you want America to be, where certain citizens become privileged over time?-——
I hardy think getting a break on state income tax is living a life of privilege....
Btw, we already have a King....or he acts like one...
Why did we (I) stay? It was a calling, a sense of being part of something greater than myself, to be proud of what I was doing in defense of this great nation.
So, when I retired we had a few places to choose from and we elected to come home to Texas, tax free Texas. If there was an income tax on our retirement we would have moved elsewhere.
Yes, it is a coincidence.
The decision to locate there was easy from an economic perspective (no union, primarily).
The decision was made nearly a decade ago. . .when the 787 was being moved from the concept to development phase and decision needed to be made regarding costing data. . .
From each according to their ability to each according to their need? Just need to spread it around. . .
;-)
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