Military pensions would be exempt from California state taxes under pending legislation

ByLeticia Juarez KABC logo
Thursday, August 31, 2023
Bill would exempt military pensions from state taxes in California
A bill pending in the state Legislature would exempt retirees and surviving spouses from paying California income taxes on military pensions for the next decade.

GLENDALE, Calif. -- California is home to the largest number of active-duty military personnel and veterans in the nation, but when it comes to making the state a permanent home many are leaving when they retire from the armed forces.

"Military retirement is not the only source of retirement income for me but it is a substantial portion," said retired Brigadier Gen. Dan Pemberton.

Pemberton served in the U.S. Air Force and then the Air National Guard for a total of 24 years, earning a military retirement. Like any income in California it's taxed.

But a state Assembly bill working its way through the California Legislature aims to exempt retirees and their surviving spouses from paying state income taxes on military pensions for the next decade.

"Veterans have put their lives on the line for this country, have served their country in many cases in very dangerous environments and I think it is a good thing to give back to those who have served us," said Mike McNerney, director with Vets In Tech.

McNerney is a former Air Force captain and his veteran group is one of several that supports the bill introduced by Highland Assemblyman James Ramos.

California is one of three states in the nation that fully taxes veterans pensions. An exemption law on military pensions would bring the state in alignment with the rest of the nation.

"California supplies more active-duty service members than any other state in the country but we are ranked near the bottom when it comes to veterans who choose to make California their home after they retire from active duty," said McNerney.

McNerney says ending the tax on military pensions would encourage retirees to put down roots in the Golden State and in turn be an economic generator with retirees paying taxes in post-military careers.

"Studies have shown that reversing this tax would increase veterans' incomes by over $830 million a year and add over 12,000 additional jobs right here in the state of California for veterans and military families," he said.

Pemberton has plans for the extra money should the bill pass and he no longer has to pay taxes on his military pension.

"I am going to help my grandkids with college," said Pemberton.

Right now, the bill known as AB46 is in the Senate Appropriations Committee and due to be voted on this Friday. If it passes out of committee, it will then be voted on by the entire California state Senate. It would then go to Gov. Gavin Newsom to potentially be signed into law.