There are some debatable issues that continue with both sides holding steadfast to defensible beliefs. There are others where that is how they began but time and changed circumstances have weakened or obliterated one or the other’s defense. Those backing the weakened argument often continue; but with volume, not reason. The issue of exempting military retirement pay from state income taxes is an example of the later.
Once upon a time states taxed military pensions as they would any other cohort. But that’s a practice that has been reversed in most states. Vermont is now one of seven states that does not exempt military pensions from state taxes. Whereas we were once one of many, we’re now an outlier. As such, those retiring from the military have every reason to ask why. What is it that 43 states see that we don’t?
It’s a particularly pertinent question to the Vermonters who will soon be returning from Afghanistan. Many will have put in their 20 years. Home is anywhere they would like. But, other than it being familiar, what is the incentive for them to return to Vermont if they are penalized financially?
That our legislators have refused to grant this full exemption is a puzzle. The Republicans, along with Gov. Phil Scott, are pushing for the exemption, the Democrats are opposed. Typically, it would be the Democrats anxious to bestow some benefits, with the Republicans opposed.
Why the opposition from Democrats?
A full exemption would cost the state roughly $3 million in revenue, which is a pittance in comparison to the $1.6 billion general fund budget — about a tenth of a percent. So it can’t be about the money.
Is the difference entirely political? Is it that anything the Republicans want the Democrats oppose? Or is it that military retirees are considered more conservative than liberal, thus personas non grata for Democrats?
If either, or both, are accurate, that’s thin gruel, something Democratic Lt. Gov. Molly Gray is not accepting. Ms. Gray and Gov. Phil Scott joined forces this week in favor of a full tax exemption. Their bipartisan stand had a central focus: this is a multi-faceted investment in our state, one with the potential for substantial returns.
Vermont is starved for anything that would help strengthen our workforce and returning military veterans — most in their mid-40s — have the skill sets our employers need, and can’t find. If we are willing to pay people $10,000 to relocate here, why wouldn’t we be willing to help those who already call Vermont home? And why wouldn’t we want to join the other 43 states in recognizing this cohort as a very desirable group to recruit?
The math is beyond persuasive. It wouldn’t take many new “recruits” to fill the tiny $3 million hole created by the tax forgiveness proposal.
Ms. Gray’s break with her party on the issue also has a progressive twist to it that other Democrats should consider, particularly with today’s intense focus on diversity and racial equality. As she and the governor noted: “Over 35 percent of active duty service members nationwide are members of the BIPOC community. Fewer than six percent of Vermonters are people of color. Let’s work to welcome more BIPOC veterans to Vermont, and ensure others come home after completing their service to our state and nation.”
In sum, the proposal to exempt military retirement pay is a nod to the years of service given to this nation, it helps attract a desirable sector of the workforce to Vermont, it addresses our demographic crisis, it deals with reduced school enrollment, it creates growth which means improved tax revenue, and, it helps a lily white state to become more diverse.
House and Senate Democrats should rethink their opposition. They are holding on to arguments that make them look petty, and, from a BIPOC perspective not inclusive. They are making the Republicans the ones with foresight. They should be following Ms. Gray’s lead.
by Emerson Lynn