The South Carolina General Assembly has passed a bill offering state income tax deductions for military retirees.
The plan would offer military retirees with at least 20 years of service a deduction of $17,500 a year for those under 65 or $30,000 a year for those 65 or older.
A caveat is that the military retirees under 65 must embark on a second job in the state with an annual salary of at least $17,500. An amendment requires the tax break to be phased in over five years.
Also, the benefit would be extended to the surviving spouses of service members who have passed away.
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The amended bill passed the Senate and House Thursday with 18 minutes left in the session.
“This is the first step in what needs to be a continuing process to make us competitive with other states,” said Bill Bethea, chairman of the S.C. Military Base Task Force, which is charged with keeping military bases open and retaining and creating military jobs in the Palmetto State
Bethea, a Bluffton attorney, noted that 26 states levy no state tax on retirees’ pensions. Also, some other states that tax pensions still have more competitive benefits.
About 58,000 military retirees live in South Carolina, according to the U.S. Department of Defense. The bill would cost the state about $18 million a year, according to the S.C. Department of Revenue.
The bill’s backers said the benefits outweigh the cost.
The tax break would retain disciplined workers, according to the task force, which was appointed by Gov. Nikki Haley and chambers of commerce in the state’s four military communities. The cost would be offset by taxes on the retirees’ new jobs and those of their spouses.
The bill’s passage would also help cement South Carolina as one of the most military friendly states in the nation. That’s a distinction that will bolster the state’s standing with the Pentagon when new rounds of base closings and realignment, called BRAC, kicks in, perhaps in 2019.
Currently, the Military Officers Association of America rates South Carolina yellow – or average – when it comes to military issues. The rating is not green – the highest – primarily because of the income tax issue. Red is the lowest rating.
Boosters said another benefit of the bill is that it would say “thank you” to retirees for their lengthy service, which often includes combat.