Raleigh, N.C. — The state Senate on Wednesday approved a proposal to exempt retired members of the military and their survivors from state income tax on their retirement or survivor benefits.
The measure, Senate Bill 153, initially included all members of the military, active and retired. But that change would have cost the state $113 million in lost revenue for the fiscal year that begins July 1.
So, the proposal was scaled back in the Senate Finance Committee on Tuesday to apply only to retirees and survivors, which is expected to cost $22.7 million next fiscal year, growing to $32.2 million by 2021-22.
The bill is sponsored by Sen. Ron Rabin, R-Harnett, himself a veteran and a member of the state's Military Affairs Commission. He said the exemption would put the state in line with many other states with high numbers of military retirees.
Sen. Don Davis, D-Pitt, reminded the committee that the exemption is part of the Military Affairs Commission's strategic plan to help North Carolina compete as the Department of Defense eyes its next round of base closures. .
The measure passed Finance unanimously and then moved to Senate Rules, where it also received a unanimous vote Tuesday evening.
It still must be approved by the House before it would take effect. Legislative leaders are saying they plan to finish session by the weekend, so it's not clear whether the measure will have enough time to clear both chambers this year.