Pugh files bill to exempt military retirement from State income taxes

Oklahoma Senate Education Committee Chairman Adam Pugh (R-Edmond)

OKLAHOMA CITY – While Oklahoma has one of the highest active and retired military populations in the nation, it has been ranked as one of the least tax-friendly states for military retirees. Sen. Adam Pugh, R-Edmond, believes one way to help make Oklahoma more attractive to military veterans is to eliminate the income tax on their retirement. With Senate Bill 401, Oklahoma would join 30 other states in exempting military retirement from state income tax.

“A majority of states already exempt military retirement from state income, and if Oklahoma wants to truly be a pro-veteran and military-friendly state, we need to stop taxing the pensions of these brave men and women,” Pugh said. “Having these heroes retire in our great state will bring so much to our local communities, economy and workforce. Let’s join the 30 other states who are already honoring our military veterans by allowing them to keep all of their retirement that they sacrificed so much for.”

Currently, retired servicemembers in Oklahoma may deduct the greater of $10,000 or 75% of their retirement income from state income tax.

While nine states have no income tax including Texas, 21 others have exempted military retirement pay from state income taxes–among those are bordering states Arkansas, Kansas and Missouri.  The only other states in the region to tax military pensions are New Mexico and Colorado.

According to the Oklahoma Department of Veterans Affairs (ODVA), Oklahoma is home to more than 36,000 retired veterans.

Pugh, a strong advocate for workforce development and licensing reform, said this would be a great opportunity to bring in more highly qualified professionals in critical, much-needed industries.

“These retirees bring extensive high-level work experience from their military careers that could help meet the state’s needs in numerous industries. These are engineers, aviators, communication specialists and other professionals that companies are desperately seeking,” Pugh said. “The jobs are already here—we just need the highly trained professionals to fill them, and I think our military retirees can meet that demand and help attract more companies to Oklahoma.”

In November, Kiplinger ranked Oklahoma as being the eighth worst tax-friendly state for military retirees in the nation behind California, Vermont, Washington, D.C., Arizona, Montana and New Mexico.

SB 401 will be considered when the legislative session begins in February.