Protecting Pensions
Arkansas law exempting military retirement pay from state income tax is a good idea
Most who retire after 20 years or so in the military are in their 40s and have experience and skills that often allow for a second career.
That means, in addition to retirement pay, they have the potential to draw another income that they can spend and pay taxes on.
That’s a benefit to any state or community. And don’t think they haven’t noticed. Some are going out of their way to attract military retirees.
So far, 13 states that have an income tax have exempted military retirement pay from that levy. Starting in 2018 Arkansas will be among them.
Recently, the Legislature passed Act 141 granting the state income tax exemption. Arkansas already has a tax exemption for active duty military and gives in-state college tuition to active-duty and their spouses, as well as those who were recently discharged and their dependents.
Pretty good deal. If the exemption attracts more military retirees to settle in Arkansas, the economic benefits to the state could be far more than the loss of revenue. And it will provide relief to military retirees already settled in the towns and countryside outside the Texarkana city limits.
Of course, when revenue goes down from one source, lawmakers look to other wallets to make up the cash. Act 141 increases sales taxes on candy and soft drinks and made some digital products such as ebooks, films and music subject to sales tax. It also extends state income tax to unemployment benefits.
We don’t see a problem with increasing or expanding the sales tax as outlined in the bill. One can choose whether to buy candy or soda or to download music and the like.
We do have qualms about taxing unemployment compensation. That affects Arkansans when they are hurting and have limited options. We wish that were not a part of the new law. And that’s the first thing we hope is repealed should the law fulfill its promise and result in even more revenue.
With that caveat, we see this as positive for the state and for those who dedicated a large portion of their lives to serving our country. We hope to see more military retirees settle not just in Arkansas, but in our area as well.