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State Democrats propose eliminating income tax on military retirement pay

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Fox CT Investigates: Where’s The Money For Local Veterans?

HARTFORD–On the eve of Gov. Dan Malloy announcing his budget plan for 2015, a new bill was proposed by Connecticut State Senate Democrats that would provide a big tax break for veterans.

The proposal is to eliminate all state income taxes for military retirement pay that is federally taxable. Currently, that income has a 50 percent exemption.

“We need to be moving toward exempting more retirement and pension benefits in order to keep more people in this state, and one of the first places to start is with people who have served our country,” said state Sen. Mae Flexer (D-Killingly). Flexer also serves as the state’s Senate chair for the Veterans’ Affairs Committee.

According to state Senate Majority Leader Bob Duff (D-Norwalk), surrounding states like Massachusetts and New York already completely exempt military retirement pay from state taxes. In all, 13 states that have a state income tax provide a full exemption for military retirement pay.

“Passing this bill will demonstrate Connecticut’s great appreciation for the service and sacrifice of our nation’s veterans by providing a one hundred percent exemption from the state income tax for federally taxable military retirement pay,” said Senate President Martin M. Looney (D-New Haven). “I believe we can and should do better to help our veterans transition back into civilian life here in Connecticut.”

The veterans would still have to pay federal taxes, though the federal government does offer partial exemptions on retired military pay. The federal government does provide some full income tax exemptions for disabled veterans.

“In the next five years, through 2020, approximately 1.5 million combat veterans will leave active service,” said retired Lt. Col. Michael J. Zacchea of the U.S. Marine Corps. “I truly believe that increasing the state’s tax exemption of military pensions to 100 percent will serve to keep our state economically competitive and will be an important piece to articulating a comprehensive military-friendly strategy for retirees leaving active service through 2031.”


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