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Rank-and-file lawmakers are ramping up pressure on Democratic leadership to move forward with Republican Gov. Phil Scott’s proposal to exempt military pensions from state income taxes.

During his first four terms in office, Scott tried and failed to convince Democratic lawmakers to enact the tax break, which he says would help recruit more working-age people to Vermont.

This year, however, a tri-partisan majority of state lawmakers has as co-sponsors to that would establish a full state income tax exemption on pension benefits for military retirees and their survivors.

At a press conference in the Statehouse Wednesday that featured dozens of lawmakers and military retirees, Dover Rep. Laura Sibilia said the tide in Montpelier is shifting.

“We are here with a simple urgent message: Vermont must stop taxing military retirement and survivor benefits,� said Sibilia, an Independent. “This is not a partisan issue. It is about fairness, recognition and doing what is right.�

The proposed exemption would cost the state about $4 million in foregone revenue. Maj. Gen. Gregory Knight, the adjutant general of the Vermont National Guard, said it’d be money well spent.

Knight said active-duty military personnel often retire from service in their early 40s. And he said a tax exemption on their pension benefits would make Vermont a destination for veterans looking to start post-military careers.

“This group typically falls into the exact age band we want to bring to our state. We want them to live here, work here and raise their families,� he said.

Vermont is one of the very few states that fully taxes most military pensions. (The state does offer a limited exemption of up to $10,000 on retirement income for income-eligible individuals, but they have to forego a limited exemption on Social Security income in order to be eligible.)

According to a 2021 published by the Legislature’s Joint Fiscal Office, the exemption would deliver an average tax benefit of about $732 annually to Vermont’s nearly 4,000 military retirees.

Democratic leaders in the House and Senate have been resistant to Scott’s proposal for a blanket exemption, in part because they worry it would provide tax breaks to Vermonters who don’t necessarily need them.

“That is still our major concern, especially in today’s time when there is so much need in Vermont and there’s about to be a lot more depending on what comes from the federal government,� House Majority Leader Lori Houghton said Wednesday.

Senate Majority Leader Kesha Ram Hinsdale said this week that she supports the governor’s plan.

“Folks who served our country in this way deserve to have this benefit at the end of their careers or lives, essentially regardless of income,� Ram Hinsdale said. “I think starting to question people’s income is not something we did when they were serving our country.�

But Ram Hinsdale said foregoing revenue that could be used for other services, especially in the face of potentially drastic federal funding cuts to state programs, is a real concern.

“I think we’re going to continue to have a conversation on not just the merit of the provision, but how we would pay for it when we have lots of other needs to take care of in a difficult budget,� she said.

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