Is Tax Relief Coming To Minnesota Veterans?

Proposal would mean tax break for military retirement pay.

Is Minnesota tax policy discouraging veterans to settle in Minnesota after retiring from military service? Absolutely, argues Rep. Bob Dettmer (R-Forest Lake) who says that Minnesota is among a small number of states where military retirement pay is subject to income tax. 
Dettmer has a proposal this session that would allow veterans to deduct $1,000 for every year of service – up to 20 years – from their total taxable military retirement pay.
“I’ve been working on this piece of legislation for about 10 years,” Dettmer said. “This is a tax we can get rid of.”
On Wednesday, Dettmer said that the language to make the change is currently in the House version of the omnibus tax bill, but not in the Senate version.
Dettmer, who chairs the Veterans Affairs Division committee in the House, said that he often fields phone calls from veterans who express concerns about moving to Minnesota because of the retirement pay tax policy. He argues that Minnesota’s economy would benefit from the tax relief because it would encourage more veterans to relocate to Minnesota as they start new careers. Dettmer served 25 years in the United States Army Reserve.
A March report from the House research department, which looked at the policies of 50 states and the District of Columbia, found that 35 states exempt at least a portion of military retirement pay. Another nine states have no general income tax. Only six states provide no exemption for taxes on the retirement income of veterans. Since 2009, Minnesota has given veterans a tax credit for military retirement income.
Political agreement is never a certainty in St. Paul. The Republican-controlled House and the DFL-controlled Senate continue wrangling over the state’s $900 million surplus and the balancing act among bonding, transportation and tax bills. Under the state constitution, the legislature must adjourn no later than May 23, which is now less than three weeks away.
A conference committee would sort out differences between House and Senate versions of bills. But Dettmer is optimistic that if the tax change for military retirement pay were in the final tax bill, Gov. Mark Dayton would not veto the provision.
“I think the governor will keep it in there,” said Dettmer. “The governor knows what I’m doing here and I just have the gut feeling that if it’s in the tax bill, he’ll leave it there.”
The governor’s office isn’t say what Dayton would do. But Matt Swenson, spokesman for Gov. Dayton, noted: “It wasn’t in the governor’s proposal.”
Since 2013, Twin Cities Business has taken an annual look at the employment outlook for veterans in Minnesota and how companies are adding veterans to their ranks.