LINCOLN — Gov. Pete Ricketts unveiled a proposal Friday to provide more generous income tax breaks for retired military veterans, replacing a current exemption that he called “clunky,” inadequate and unjust.
The Republican governor, who tried and failed in 2015 to provide a better tax break for such retirees, said that the time is now to help Nebraska’s workforce shortage by retaining military retirees with high-tech backgrounds and helping enhance the state’s standing as a place to retire for veterans.
Five of Nebraska’s six neighboring states now provide more generous tax breaks for retired military, according to Ricketts. Twenty-nine states overall provide some kind of benefit, he said.
“We don’t want to provide disincentives for retired veterans to stay in our state,” Ricketts said.
He announced the proposal before about 60 veterans and their families gathered at the State Capitol. The idea will be introduced during the 2019 state legislative session, which begins Wednesday.
“This is a win-win situation for the State of Nebraska,” said Dan Donovan of Papillion, a retired Air Force colonel and local president of the Military Officers Association of America.
Ricketts emphasized that the $15 million tax break would fit within the state budget that he will unveil on Jan. 15, and that providing property tax relief for all Nebraskans remains his top priority in 2019.
Nebraska’s current tax exemption for retired veterans, passed in 2014, met immediate criticism that it was too little, too confusing and excluded too many military retirees. The state has sought, in recent years, better incentives for retired military members to remain in or relocate to Nebraska, particularly those with high-tech experience who worked at Offutt Air Force Base near Omaha.
The current tax break applies only to veterans who retired after July 18, 2012, and required veterans to choose, within two years of leaving the military, whether to immediately take an income tax break that lasted for seven years, or wait until age 67 to take a tax break that lasted for the rest of their lives. The immediate tax break reduced the taxable portion of a military pension by 40 percent; the later tax break provided a 15 percent reduction for life.
Under Ricketts’ new proposal, all retired veterans, National Guard members and military reservists would be allowed a 50 percent reduction in the taxable portion of their pension.
“What this does, it makes it easy,” the governor said. It also eliminates what Ricketts called “the injustice” of excluding many veterans who retired before mid-2012.
Ricketts said his new tax break would benefit 14,000 retired veterans and provide $15 million in tax relief. By contrast, the state’s current tax exemption provided $390,000 in benefits to retired veterans in 2017, according to state tax records.
The governor said his new 2019-20 budget will include the military tax break, as well as his proposal for property tax relief. In 2015, Ricketts’ first year in office, he set aside $23 million for more generous tax exemptions for military veterans, but the idea failed to pass.
State Sen. Tom Brewer of Gordon will introduce the veterans tax break bill. One co-sponsor, Bellevue Sen. Carol Blood, a Democrat, said Thursday that she is ditching her own proposal for a tax decrease for retired military in the name of providing bipartisan support for the governor’s bill in the officially nonpartisan unicameral Legislature.