Sacramento Snapshot: California bill would exclude military retirement pay from taxable income

"Veterans staying in California will pay sales, property and use taxes, benefiting local governments. But exempting military retirement pay for retirees will ensure California retains these highly skilled professionals and keeps the reinvestment of federal dollars and wages from second careers."

"For too long, our veterans have been faced with a difficult decision: Stay in this beautiful state while struggling to make ends meet with rising costs of living or move to a state that financially incentivizes them to join their labor force and feed federal dollars into their economy."

"California lost more than 24,000 military retirees between 2010 and 2022. But during that same time period, the veteran retiree population grew by 17% in the U.S., while California saw a 14% reduction, one of only five states to see a decrease in that population."

California legislators are advancing Senate Bill 1407 to exempt veterans' retirement pay and survivor benefits from state income tax. The measure aims to retain military retirees and their federal wages in California, where the veteran population declined 14% between 2010 and 2022 while growing nationally by 17%. Current law allows only a $20,000 annual exclusion; the bill would remove this cap entirely. Proponents argue veterans would still pay sales, property, and use taxes, benefiting local governments. The legislation has bipartisan support and builds on Governor Newsom's February 2024 signing of initial military retirement tax relief.

Read at The Mercury News