COLUMBIA (AP) — South Carolina’s military supporters are working to end the state’s income tax on military retirement benefits, arguing it will benefit the state in the long run.
Although an attempt to get rid of the tax was overwhelmingly approved by the House last session, it didn’t get out of the Senate.
This time around, backers think they will have a better chance for success.
“I do think we have a better opportunity this session,” said William Bethea, chairman of Gov. Nikki Haley’s Military Base Task Force, which was formed to support and protect the state’s six major military installations.
“We’re hoping to get started earlier this year and get focused so people can pay attention to it during a less hectic time,” said Bethea, a Bluffton attorney.
The state’s Board of Economic Advisors has estimated ending the retirement tax would cost the state about $22 million. However, Bethea said his group is working on a new estimate expected in the New Year.
He said he thinks the new study will show that removing the tax will attract more retirees to the state and help pump up the economy.
Depending upon a retiree’s income, the present tax could be as high as 7 percent, Bethea said.
The attorney said he has heard many anecdotal stories about military retirees who decide to go to other states in the region that don’t tax military incomes to the extent South Carolina does, such as Florida, North Carolina or Alabama.
The Department of Defense estimates there are about 58,000 military retirees in South Carolina.
By serving at least 20 years in the military, they have earned a guaranteed pension as well as a variety of other benefits. For example, the retirees have access to tax-exempt commissaries and base exchange stores on the major bases, as well as military-financed medical care and access to entertainment and recreation facilities on military sites.
Because of this, the state’s military retirees cluster near the state’s major military installations, such as the Army training center at Fort Jackson outside Columbia, Shaw Air Force Base near Eastover, the Air Force and Navy installations at Joint Base Charleston and the Marine Corps Air Station in Beaufort.
Sen. Thomas McElveen, a Democrat whose district encompasses the Shaw base near Sumter, said his bill would phase in the tax deduction and then end it after 2016.
“I think we would be penny wise and pound foolish not to approve this,” McElveen said in an interview.
“Retired military people are very employable. We want to attract such people to our state. They buy property that is taxed, they have a second income that would be taxed,” the senator said.
He said many retirees are in their 30s and 40s and would be a boon to employers seeking technologically savvy workers.
McElveen noted that opponents of such a measure have in the past not put up a public fight, given the military-friendly nature of the state.
The Democrat said he hopes both sides of the aisle will support their efforts in the House and Senate when lawmakers convene in January.
Sen. Larry Grooms, R-Charleston, said convincing people sometimes takes years. He has signed on to a similar bill, which would cut the tax in four phases starting after 2014.
“Every time we swing the hammer, we get that little crack bigger and bigger, and soon we will bust it open,” Grooms said.