OKLAHOMA CITY – A bill that would exempt veterans’ retirement pay from state income tax cleared the Oklahoma Senate last Wednesday on a 43-0 vote.
Senate Bill 401 would apply to Oklahoma’s 36,491 retired veterans, its author, Sen. Adam Pugh, R-Edmond, said. Pugh said current law allows service members to deduct the greater of $10,000, or 75 percent of their retirement income from state income tax.
Pugh’s bill would exempt veterans’ full retirement pay beginning the 2022 tax year.
“This is just one more way to support our veterans who have sacrificed so much for our nation. I’ve been working on this legislation for five years, and I’m very excited that the Governor, along with my Senate and House colleagues, have pledged their support to get it across the finish line this session,” Pugh said in a media statement about the bill.
The measure would eliminate income taxes on $186 million in military retirement pay, an analysis by the Oklahoma Tax Commission showed. That exemption would cost the state about $5.6 million in revenue.
The bill’s co-author, state Sen. Brenda Stanley, said the measure was good for retired veterans and economic development.
“Typically, when members of the military retire, they begin a second career,” Stanley, a Republican from Midwest City, said. “They have years of expertise in specialized areas—we can use those people in our workforce, and while their military pension would be exempt, their earnings from their second career will put more tax dollars into our economy. It’s a win-win for military retirees and the entire state.”
Records from the U.S. Department of Veterans Affairs show that Oklahoma is home to more than 300,000 veterans. Of that figure, 36,491 are retired. More than 96,000 state veterans also receive some type of disability compensation.
Oklahoma law does already provide some tax exemptions for veterans. Veterans who are 100 percent disabled can receive a sales tax exemption of up to $25,000 per year, provided they hold a veterans exemption card. The exemption also applies to motor vehicle excise tax and property taxes.
Currently 33 other states exempt veterans’ retirement pay from state income taxes. Senate Bill 401 is expected to be heard by the House Veterans and Military Affairs committee soon.