South Carolina

Military retirees tax breaks on the bubble in S.C. General Assembly

Malloy
Malloy

When Tom Robillard retired from the Air Force 12 years ago after 30 years of service, he had to decide where to put down roots. But at 58, like most military retirees, he still needed to work.

A big factor in where he would embark on his second career was which state wouldn’t tax his pension.

Robillard, a Connecticut native, favored Tennessee or Florida — neither of which have state income taxes. But he settled on South Carolina, because his daughter and grandchildren are in Columbia.

“Otherwise, I would be in Destin (Fla.) right now,” said Robillard, who went on to work as a biomedical consultant at Shaw Air Force Base in Sumter and later was supervisor of the biochemistry department at Moncrief Army Community Hospital at Fort Jackson. “When you get out of the service, there are a lot of people that are competing for you.”

The S.C. General Assembly is considering a bill that would offer state income tax deductions for military retirees. The plan would offer military retirees with at least 20 years of service a deduction of $17,500 a year for those under 65 or $30,000 a year for those 65 or older.

A caveat is that the military retirees under 65 must embark on a second job in the state with an annual salary of at least $17,500.

The bill unanimously passed the House in 2015 and was carried over to the Senate this year. It has passed the Senate Finance Committee twice, but has been held up mainly by state Sen. Gerald Malloy, D-Darlington.

Malloy has logged an objection to the bill, which means his presence is necessary before it can be debated and voted upon by the entire Senate. He was out of town Monday and said by text that the issue warranted further discussion, but didn’t elaborate.

The legislative session ends June 2. If senators don’t vote on the bill by then, it will have to be reintroduced next year.

About 58,000 military retirees live in South Carolina, according to the U.S. Department of Defense. The bill would cost the state about $18 million a year, according to the S.C. Department of Revenue.

But the bill’s backers — including the S.C. Military Base Task Force, which is charged with keeping military bases open and retaining and creating military jobs in the Palmetto State — said the benefits outweigh the cost.

The tax break would retain disciplined, skilled workers like Robillard, said task force chairman Bill Bethea of Bluffton, who was appointed by Gov. Nikki Haley. The cost would be offset by taxes on the retirees’ new jobs and those of their spouses.

“We’re very fortunate to have Boeing and Volvo and BMW and all these tire companies in South Carolina,” said Bethea, an 8-year veteran of the Marine Corps who fought in Vietnam. “They require good, dependable, reliable workers. Someone who has been in the military for 30 years makes an ideal employee.

“Keeping those people here strengthens our workforce,” he said. “It also brings in a replacement stream of income that exceeds their retirement income.”

The bill’s passage would also help cement South Carolina as one of the most military friendly states in the nation. That’s a distinction which will bolster the state’s standing with the Pentagon when new rounds of base closings and realignment, called BRAC, kicks in, perhaps in 2019.

Currently, the Military Officers Association of American rates South Carolina yellow — or average — when it comes to military issues. The rating is not green — the highest — primarily because of the income tax issue. Red is the lowest rating.

Currently, 26 states have no state income tax at all or exempt military retires from paying state income taxes, according to the S.C. Department of Commerce.

“Every retiree looks at that when they are making their decision to retire,” said Robillard, who is a state vice president of the national officers association. “ And that extends to enlisted retirees as well as officers. This legislation benefits all retirees.”

Boosters said another benefit of the bill is that it would say “thank you” to retirees for their lengthy service, which often includes combat.

“These are people who for 20 or 30 years moved every two years, lived like gypsies, put their lives on the line and weren’t able to put down roots,” Bethea said. “We feel this is a way that South Carolinians can give back to those veterans for the sacrifices they made for our freedom.”

South Carolina military by the numbers

58,000 - Number of military retirees in South Carolina

$19 billion - Economic impact of military in South Carolina

$1.5 billion - Pensions paid to non-disabled military retirees in South Carolina

$771 million - Annual state tax revenue linked to the military

$450 million - Economic activity in South Carolina by retirees

$66 million - Pensions paid to disabled military retirees in South Carolina

SOURCE: S.C. Military Base Task Force

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