LINCOLN, Neb. (AP) - Gov. Pete Ricketts told lawmakers Thursday that his proposed tax break for military retirees was necessary to keep skilled, highly motivated workers in Nebraska.
Ricketts presented the proposal to the Legislature’s Revenue Committee along with dozens of veterans, including some he hired during his time as a TD Ameritrade executive.
The bill would exempt half of the benefits paid to military retirees who stay in Nebraska. It would apply to an estimated 13,000 retirees and cost the state an estimated $16.9 million in lost revenue in its first two years.
Ricketts said he views it as a workforce development bill to address Nebraska’s statewide employee shortage.
“This bill is about retaining those veterans in this state and making sure they contribute to this state going forward,” he said.
Ricketts said several managers he worked with at TD Ameritrade rose quickly through the company’s ranks because of the skills and work ethic they honed while serving at Offutt Air Force Base in Bellevue.
Nebraska already offers a smaller exemption to military retiree but gives them a complicated choice: They can choose between exempting 40 percent of their retirement pay over a 7-year period after their service ends, or 15 percent for the rest of their lives once they turn 67. It also excludes retirees who left the service before January 2015.
Ricketts has said the current law is “clunky” and his proposal would streamline the process and benefit all retirees.
Nebraska is already losing retirees from Offutt Air Force Base to neighboring Iowa, which exempts 100 percent of military benefits from taxation, said Sen. Tom Brewer, of Gordon, who introduced the bill on the governor’s behalf.
Brewer said Kansas also exempts all military retirement income, while neighboring South Dakota and Wyoming don’t impose an income tax. Missouri and Colorado provide greater tax benefits to military retirees than Nebraska currently does.
“This bill takes a substantial step toward solving a serious problem I believe we’ve had in Nebraska for a long time,” said Brewer, a military retiree who spent 36 years in the Army.
Some lawmakers questioned whether the bill would provide enough incentive to keep retirees. Even if the bill passes, Nebraska’s neighboring states would still provide more tax benefits.
“If we give 50 percent, is this going to stop them from going to Iowa?” said Sen. Mike Groene, of North Platte.
Brewer said the benefit could be one of many factors retirees consider when deciding where to move.
Two Nebraska tax-policy think tanks spoke neutrally on the bill, warning lawmakers that the tax break could divert money from other priorities such as broader tax cuts or funding for roads and K-12 public schools.
“Lowering the taxes for military retirees is just part of the equation,” said Sarah Curry, policy director for the Platte Institute.
Renee Fry, executive director of the OpenSky Policy Institute, said lawmakers should be mindful of the need to pay for existing state services.
“We’re concerned that as we continue to give a little bit here to this person and a little bit there to that person, we’ll continue to put those high-quality services in jeopardy,” she said.
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