Missouri House repeals income tax on military pensions

JEFFERSON CITY, Mo. (AP) -- Military veterans would not need to pay state income taxes on their pensions under legislation approved Thursday by the House.

Lawmakers last year approved a bill that gradually repeals income taxes on Social Security and other retirement pensions by 2012. It is estimated to cost the state $154 million when fully implemented.

That bill applied to military retirees when they turn 62. This year's bill would apply to military pensions for people of all ages and make it kick in immediately.

The sponsor of this year's bill, Rep. David Day, said many states also don't tax retired military personnel's pension benefits. He said Missouri could persuade more retired veterans to move into the state, which would increase economic activity and generate more tax revenue.

"If there's anybody in this world we're going to give a tax break, it should be our heroes," said Day, R-Dixon.

The bill was approved 131-8 and now moves to the Senate. Lawmakers have three weeks before their session ends May 16.

Legislative staff estimate the tax cut would cost the state $17.5 million per year for the next three years.

Rep. Jeanette Mott Oxford said the bill is a bad idea because it uses tax policy to reward people who are popular with lawmakers, rather than using taxes to help those who need assistance.

She said tax breaks should be decided based on the amount of income and not how it's earned.

"Awarding tax benefits based on their status as good people who do good things for our society is not a sensible tax policy," said Oxford, D-St. Louis.

But Rep. Jim Avery, who has served in both the Marine Corps and the Missouri National Guard, said it's bigger than a tax issue.

"This isn't about good tax policy, this is about doing the right thing for people who for 20 years have done the right thing for you," said Avery, R-Crestwood.

Gov. Matt Blunt, who called for a tax cut on military pensions, issued a written statement praising the House vote.

"Ending the tax on their military retirement is another way we can honor the service and sacrifice of Missouri veterans," he said.

Last week, the House passed a proposed constitutional amendment that would create a dedicated one-eighth cent sales tax to pay for veterans services. A similar tax for the Department of Conservation brought in more than $103 million last year.

The veterans sales tax would expire at the end of 2016 but could be reauthorized every 10 years, though the rate would be dropped to one-tenth of a cent.

Normally tax-opposed Republicans, including House Speaker Rod Jetton, said the new tax revenue is needed to expand space in long-term care homes for veterans and open centers that help veterans sign up for benefits. That proposal is now in the Senate.

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Military pensions is HB1788

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