Report: End California’s Tax on Military Retirement Pay to Boost Economy

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A Navy retirement ceremony. Navy photo

Ending the state tax on military retirement pay would boost the California economy, creating 12,600 jobs and increasing economic output by nearly $1.3 billion, according to a new report.

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The study, sponsored by the San Diego Military Advisory Council and conducted by Pt. Loma Nazarene University, found that California’s tax is causing service members to avoid retiring in the state.

“These individuals represent some of the state’s best and brightest. They bring key resources, skills, and values to their jobs and communities,” the report concludes. “They are individuals that the state should strive to attract and retain.”

California currently is one of only nine states that fully tax the pay of its 146,000 military retirees, and between 2000 and 2016, the state’s military retiree population declined by 17 percent.

The report by Pt. Loma Nararene’s Fermanian Business & Economic Institute concluded that exempting military retirees from state tax would create 12,600 jobs and add $1.27 billion in economic output by 2025. In addition, state and local tax revenue would actually rise by $56.3 million annually.

Randy Bogle, executive director of SDMAC, said the study supports Orange County Assemblymember Bill Brough’s bill, AB 2394, that seeks to encourage more veterans to live in California by exempting their retirement pay from state income tax .

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