Tax break for Arizona military retirees clears hurdles in House, Senate

By Howard Fischer Capitol Media Services Feb 6, 2018

PHOENIX - A tax break for military retirees has cleared a pair of significant hurdles.

Four days after the measure initially failed, the Senate on Monday voted 18-11 to exempt the first $10,000 of military pensions from the state's income tax beginning in 2020. Under SB 1167, about 55,000 people who have served at least 20 years in the military would save about $280 a year.

Separately, the House Committee on Military, Veterans and Regulatory Affairs on Monday gave its blessing to HB 2236 on an 8-1 vote. It also would create a $10,000 exemption, albeit on a different schedule.

Under current law, people who get pensions from any government agency need not pay taxes on the first $2,500. That includes local, state and federal workers.

Sen. Gail Griffin, R-Hereford, who is championing the Senate version, said raising that exemption should be seen not as a tax cut but as a "workforce development bill."

"Many of the retirees have professions we need in Arizona."

It also has the backing of Gov. Doug Ducey who promoted it during his State of the State speech. But SB 1167 still drew opposition from two Republicans who joined with eight Democrats concerned about the effects on the state's bottom line.

Sen. Steve Farley, D-Tucson, pointed out that perhaps only 10 percent of everyone who has served in the military actually will get the tax break. He argued that the loss of the estimated $15 million in tax collections will harm their interests.

One result, Farley said, will be "further cuts to their neighborhood public schools they depend on to give their kids a good education."

"Until we find the money to deal with our teacher crisis, to actually be able to pay teachers a decent salary when they're actually 7 percent away from 49th (in the nation) at this point, I don't believe we can afford to give away $15 million a year to a small fraction of the veterans in Arizona who would qualify for these benefits," he said.

That argument did not sway Sen. Sonny Borrelli, R-Lake Havasu City."If I'm renting a house, if I'm buying a house, I'm paying property taxes," he said. And Borrelli, a retired Marine, lashed out at those who were opposed. "I find it almost insulting to say that we're trying to get something for free," he said.

But that did not bring aboard Sen. Warren Petersen, R-Gilbert, who has argued against the measure all along. Petersen said giving tax breaks like this to a single discrete group interferes with his goal of eventually getting the state's overall income tax rates as low as possible.

In the House, Rep. Richard Andrade, D-Glendale,who voted against the measure, said his concerns go beyond the lost revenues to the state.

He noted that supporters of the measure are promoting it by saying it will bring more retired veterans to the state. Andrade said there will be implications for that if they're correct.

For example, he said, part of the reason veterans were having trouble getting prompt care at the Phoenix VA Medical Center was the facility lacked the staff to handle the workload. And Andrade said the state has fewer veterans' benefits counselors now than a decade ago.

HB 2236 still needs approval of the Ways and Means Committee before it goes to the full House. At that point it likely will be altered to match the Senate version putting the $10,000 exemption into effect in 2020.

ADVS State Veterans/Military Legislation Update

53rd Arizona Legislature, Second Regular Session

Friday, 2 February 2018

Inclusion of any legislation in this report does not constitute endorsement of that legislation by the Arizona Department of Veterans’ Services.

(Notations in Red represent latest or final action.)

                            SB = Senate Bill                                                         HB = House Bill
                            SCM = Senate Concurrent Memorial               HCM = House Concurrent Memorial   
SCR = Senate Concurrent Resolution              HCR = House Concurrent Resolution
                            SR = Senate Resolution                                          HJR= House Joint Resolution
                                            HR = House Resolution

To view bills, go to:  http://www.azleg.gov/bills/

Senate Bills

SB 1167 - veterans; increased income tax subtraction

The current Arizona tax deduction for military retirement is $2,500 per year. SB 1167, as amended, would increase that deduction to $6,250 in 2019 and to $10,000 in 2020.

Primary Sponsor(s): Sen. Gail Griffin, R-Dist. 14

Major Actions: 16 Jan 2017-First Read and assigned to Senate Finance Committee and Senate Rules Committee. Weds. 24 Jan 2018-Given a “Do Pass” recommendation in Senate Finance Committee 4-3. Mon, 29 Jan 2018-Out of Senate Rules Committee.  Thurs, 1 Feb 2018-Griffin floor amendment adopted to move back the effective dates of the tax deductions. SB 1167 FAILED in the Senate by a vote of 15-12-2 absent. 

House Bills

HB 2236 - military pensions; increase; tax subtraction

The current Arizona tax deduction for military retirement is $2,500 per year. HB 2236 would increase that deduction over the next ten years to $15,000.

Primary Sponsor(s): Rep. David Livingston, R-Dist. 22, et al

Major Actions: 17 Jan 2018-First Read and assigned to House Military, Veterans and Regulatory Affairs Committee (MVRA), House Ways and Means Committee, and House Rules Committee. Mon, 5 Feb 2018-Hearing scheduled in House Military, Veterans and Regulatory Affairs Committee (MVRA), 2pm, HHR 3.