States try to exempt veterans’ pension from taxes
Chock Block sends us a link from Pew which talks about states’ taxes and military veterans’ pensions. It seems that some states want to appear more attractive to veterans by giving them a tax break. Of course, the big detriment to a tax break is that some people don’t realize that the money that we want to keep is ours and not the governments – we earned it in return for our service;
…David Brunori, deputy publisher of Tax Analysts, a specialty publication, says any tax exemption of retirement income is bad policy.
“Exempting military pensions from tax is good politics—everyone loves veterans,” he said. “But it is not targeted [to low-income people]. Some veterans go on to make a lot of money in the private sector and end up pretty well off. There is no reason in the world to exempt their income from tax.”
Well, low income earners don’t pay much in taxes, if they pay any taxes, so why do they need a tax break? I’m sure States don’t need to attract more low income workers anyway. If you let veterans keep more of their own money, they’ll spend it and states will recover what they lost in income taxes with sales taxes and everyone is happy.
Maryland voted to raise the threshold for the taxable portion of military pensions to $10,000, but it is still only half of West Virginia’s threshold. So folks can live in West Virginia and work in Maryland and cheat Maryland out of the whole enchilada completely. Or they can live in Virginia or Pennsylvania and work in Maryland still saving their own money.
I’m for cutting taxes on everyone, I’m not jealous when someone gets a tax break that I don’t. Veterans or veterinarians. People keeping their own money is always a good thing.
Eventually, the government will have to quit spending like drunken sailors on liberty what tax payers earn (apologies to drunken sailors on liberty). Tax cuts don’t have to be “paid for” like politicians say – the politicians should be cutting their wild spending instead of trying to make us feel guilty about wanting to keep more of our money.
Category: Taxes
Jonn,
I am in complete agreement. How can I be jealous that I make more money or pay more in taxes than some? Oh. My bad. That’s a liberal thought process, isn’t it? 😛
So Brunori doesn’t think it’s fair that folks put their civilian lives on hold for twenty-plus years to serve their country, and then put that training and experience to use in the civilian sector earning a decent wage all the while playing “income catch-up” with their civilian peers?
(talk about a run-on sentence)
Screw him.
“…David Brunori, deputy publisher of Tax Analysts, a specialty publication, says any tax exemption of retirement income is bad policy.
“Exempting military pensions from tax is good politics—everyone loves veterans,” he said. “But it is not targeted [to low-income people]. Some veterans go on to make a lot of money in the private sector and end up pretty well off. There is no reason in the world to exempt their income from tax.””
This is conflation, and a non-starter.
First, we’re talking Vets, who have stayed in long enough to receive retirement, or who are so banged up, that they receive disability.
Vets are a VERY small portion of the population. And Vets who receive pensions, are an even smaller portion of that. So what are we talking here? One percent? Five percent? of the total US wage earning population? Piffles and small stuff.
Second, it looks like Mr Brunori wants to conflate Military PENSION with after-military working wage INCOME. W-T-F?? Go back and re-read the entire quote. Separate the first sentence (up to “he said”), from the last two sentences.
Mr Brunori, you are a NO-GO at this station. Now go jump into the middle of a pineapple field, select a large one, and insert it, fronds first, into your talking asshole.
I say he can add a broken broomstick sideways after he wraps that and the pineapple in asbestos! Maybe one solution to their bawling would be what Mike Huckabee did while he was Governor of Arkansas, he had their Legislature pass a “Voluntary Tax” where rich liberals could add to the State Treasury as they saw fit. Only ONE rich liberal ever put any money into it, one thousand dollars.
Actually, a VA veteran’s pension is unrelated to disability. It’s granted to vets 65+ with low incomes who have at least one day of “wartime service”.
http://www.benefits.va.gov/pension/vetpen.asp
Essentially, it’s a welfare program. Here are the eligibility qualifications, from the VA website linked above:
Wartime service periods for Veteran’s pension purposes are defined here. Significantly, service in Lebanon, Grenada and Panama doesn’t seem to be qualifying service, since all occurred between 7 May 1975 and 2 August 1990.
http://www.benefits.va.gov/PENSION/wartimeperiod.asp
A little more checking indicates that the Vet Pension issue, while not huge, isn’t exactly insignificant.
The Veterans Pension essentially guarantees an indigent elderly or NSC disabled vet some level of income. It’s about $13k if the vet is single with no dependents and lives unassisted; it can be over $30k if the vet is housebound, requires assistance, and has multiple dependents. Any “countable” income is deducted from the applicable amount for which the vet qualifies, along with medical expenses above an allowable amount (which also varies).
Given all those factors, estimating the amount the VA spends on this program is difficult. However, there were around 304,000 vets receiving Veteran’s Pension at the end of FY2014. Assuming the average annual amount received is somewhere in the $6,600 to $10,000 range, that equates to somewhere around $2-to-$3 billion annually.
It’s unclear if the above includes Survivor’s Pensions – which are essentially the same thing, but paid to the unremarried surviving spouse of a veteran who has wartime service (though amounts and income thresholds differ). If they don’t, the amount is higher.
For comparison, $3 billion was nearly 2% of the VA’s FY2014 budget of a bit over $153 billion.
“Government always finds a need for whatever money it gets.”
“The problem is not that the people are taxed too little, the problem is that Government spends too much.” – Ronald Reagan
Still absolutely true today!
“I’m for cutting taxes on everyone, I’m not jealous when someone gets a tax break that I don’t. Veterans or veterinarians. People keeping their own money is always a good thing.”
Agreed John
Thank God for Texas and no state income taxes.
Property taxes are a whore though in most counties (especially DFW/Houston/SA/Austin). I thought about settling down at my old stomping grounds in El Paso after retiring, but did some number crunching, and changed my mind. Annual property taxes are a whopping 2% + on the appraised value of your property.
El Paso County Property Taxes:
Median Property Tax
$2,126 ± $29 (394th of 3143)
As Percentage Of Income
4.52 ± 0.09% (134th of 3143)
As Percentage Of Property Value
2.09 ± 0.04% (59th of 3143)
http://www.tax-rates.org/texas/el_paso_county_property_tax
You think that’s bad, check out NH.
In general, states with no state income tax make up the slack in property and/or sales taxes. Those tend to generally be high in such states.
Where I live, the county taxes your property at 33% of the market value, plus 5.502% up to 19.01% of that. So if your property including the land it sits on is worth $450,000, depending on the township you live in, you can pay as much as $29,000 in property tax. That can be appealed, but only about 10% of the people around here do that.
In my absence, a certain post disappeared. Was there an explanation given for its removal before it was removed?
I removed it out of an abundance of caution, it may be back if I don’t get what I want.
Thanks. I can wait. 100% is more than 1% better than 99% in these matters sometimes.
Jonn, you’re giving drunken sailors a bad rap!
Politicians spend tax money at a rate that makes a drunk Sailor on Shore Leave look like a Miser!
Drunk sailors (and Marines) on liberty usually stop spending money when they run out of their own (unless they can find a sucker {like a liberal})
Virgina taxes my military retirement.
It seems to me that, if you are retired from anything military or otherwise, and you choose to work during your retirement, the only things that can be taxed ARE earned income and ordinary income (dividends and interest). I did once ask a CPA about military retirement income and she said yes, it is taxable, but it is note earned income. It’s the same as any other pension – ordinary income. Tax rate is different. And social security is taxed after 50% of the annual payout is deducted, so if your taxable 50% is above the standard deductions, you either pay Uncle Sam or have it deducted from SocSec for you.
So if I choose to work (for me) in retirement, I’ll pay taxes on whatever I EARN (FICA and SE tax), in addition to whatever taxes are due on socsec after the standard deductions.
I think that’s how that works. But what do I know. I’d go see a CPA before I’d make assumptions.
You are correct that FICA taxes don’t come out of pension income. However, pension income still counts as income and is subject to income taxes. In particular, military retirement is fully subject to state and Federal income tax.
The Federal government taxes all of it as income. Some states do the same; other states exempt at least part of it from taxation.
Oh, and to make your day – if you’re self-employed, you’ll pay both parts of the FICA taxes (employer and employee shares) on any earnings you have as a self-employed individual. That means 15.3% vice 7.65% off the top.
Indeed we do pay both…
Oh, I know, Hondo. I have resolutely reviewed the IRS’s Wall of Confusion regarding self-employment taxes (socsec and Medicare) several times.
Since pensions are not considered to be earned income, they don’t bump up your Social Security, but earned income such as royalties will do that if you still work after full retirement age.
Missouri taxed my military retirement when I retired in 2010 but they did away with it and I am grateful. Some states treat the military retiree very well and Missouri is one of them. In return we offer a skilled work force, economic stability for many economically depressed areas, and in many cases, military retirees provide the back bone for volunteer civic groups.
States who do not seek to tap that potential are missing out.
Idaho taxes our military retirement pay. They even had put a bill through to make it non-taxable, but it was voted down due to this thinking: “If we exempt the retired military, then the retired police, firefighters, etc. will want to be exempted as well.” I’m not sure why I still live here, though the cost of living is nice.
Not to mention that the vast majority of retirees and pension receivers are from the enlisted ranks – we’re not talking quarter-mill a year figures here, but a tenth of that. Military typically start ‘way below the curve when they get out, as they are competing with civilians with years or decades more experience in most fields.
Re: drunken sailors- one key difference- drunken sailors stop spending when they’re broke. The government doesn’t.
Iowa exempts 100 % of state employees retirement from state taxes but military retirement is taxable. At least while I was living there. 1994-2011
I’d take a stab that Iowa state employees have a union and a fairly powerful lobby that gets them that kind of thing.
At this point, our military “leader” is kicking us to the curb, reducing raises, trying to cut the budget to pay for social programs, and so on and so on.
Iowa passed a law a couple of years ago exempting ALL military retirement from taxes. The state is trying to look better for military retirees. It works for me!!
Would favor a state taxing system which exempts ALL retirement income. Seems like retirees would flock to any state which did that, and spend that non-taxed income on things like housing, cars, medical care and lots of other stuff, to the benefit of said state.
Be careful what you wish for. Florida has no state income tax – but sales and other taxes are high. And in some areas, prices are high on most everything.
“Eventually, the government will have to quit spending like drunken sailors on liberty what tax payers earn (apologies to drunken sailors on liberty).”
Apology accepted. Hic!
ARKANSAS under Clinton only taxed military retired pay no other retirement pay. Clinton fought it to USSC after several other states had already been overturned, when Ar lost at that level the solution was to start taxing all retirement income. The Clinton method.
Last session some ppl said they should not tax VA disability pay, it was quickly pointed out that it was already non taxable. Pol’s live in their on universe.
No comment, I am living in a state where we don’t talk about Sales tax, we just pay and keep our mouth shut, would’nt do any good, our Governor is bullheaded.
Where the tall corn grows
All the more money for the False Commander Phil Monkress (CEO of All-Points Logistics) and his phony-supporting staff to get their dick beaters on through his (Phony Phil Monkress) false Native American, SEAL and LEO claims.
In Maryland, they tax your state income tax refund. So, in 2014, you overpaid your taxes by $2000. That is $2000 beyond what you owed, and the state held for one year at no interest. In 2015, you received $2000 from the state of Maryland, which has already been taxed. In 2016, Maryland will count that $2000 as new income for 2015, and you pay tax on that. So, that $2000 has run the tax gauntlet twice. I guess somebody has to pay to rebuild Baltimore after the next riots.
Dear Mr. David Brunor I strongly disgree with you.
Sir, everyone loves veterans because they give us our freedoms everyone today takes for granted.
I say that, “Exempting military pensions from tax makes perfect sense because they are veterans and made many sacrifices … they earned thier retirement incomes and it shouldn’t be taxed.
You know who do very well nowadays …better than veterans..its the low-income people on welfare. They get better heathcare and make more money than a veteran whose only income is thier retirment.
So it makes sense to you that people who never served our country should recieve these entitlements…I don’t think they should do without but I don’t think our retired veterans should also do without.
I’d never move to a state that taxes my military retirement simply because that state operates on “bad policies.”