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Veterans Consortium Calls for Tax Break

By Christian Davenport
Washington Post Staff Writer
Thursday, March 10, 2005; Page GZ03

Home to Fort Meade, Andrews Air Force Base and the U.S. Naval Academy, Maryland has long, deep ties to the military that make the state a natural draw for those who retire from the service.

An even better draw, veterans say, would be a tax break that about 20 states, including neighboring Pennsylvania, provide.

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So the Maryland Retired Veterans Task Force, a consortium of nearly every veterans group in the state, is pushing a bill in the General Assembly that would exempt military retirement pay from state and local taxes.

That would make the state a more attractive destination for military retirees, who are typically the kind of established, financially stable residents any state would welcome, advocates say.

The measure has come as Gov. Robert L. Ehrlich Jr. (R) -- who has made the bill part of his legislative agenda -- has proclaimed 2005 the "Year of the Veteran" and as the country has become increasingly aware of military service and sacrifice because of the war in Iraq.

Ed Kreiner Sr., who helped create the veterans umbrella group four years ago, said that after years of pushing the legislation, he is confident it will pass this year. In addition to the governor, House Speaker Michael E. Busch (D-Anne Arundel) and Senate President Thomas V. Mike Miller Jr. (D-Calvert) support it.

"This is a no-brainer," Kreiner said. "Let's go forward and do it."

Military retirees are financially stable, he said, and pay more in income and property taxes than many residents. Because many leave the military in their forties and fifties, they often begin second careers, boosting the local economy. Former service members also often have security clearances, which are in increasingly high demand because of the global war on terrorism.

Maryland allows some military retirees to exempt $2,500 of their military benefits. The District exempts $3,000 for those 62 and older, and Virginia allows exemptions only in certain circumstances.

The bill, which George W. Owings III, state secretary of veterans affairs, called "an initiative whose time has come," would affect about 46,000 Maryland residents who retired from the military with at least 20 years of service and would be phased in over several years. For tax year 2006, retirees would have 20 percent of their military pay exempted. Forty percent would be exempted in 2007, 60 percent in 2008, 80 percent in 2009 and 100 percent in 2010.

By 2010, the exemptions would cut state revenue by more than $30 million, according to the Department of Legislative Services. Local revenue could decrease by $20 million in 2010.

In previous years, when money was tight, that was one of the main stumbling blocks, said Del. Mary Ann Love (D-Anne Arundel).

But Love and other supporters of the bill, which has 73 co-sponsors in the House of Delegates, say the measure could bring more retirees to the state. More retirees would mean revenue from more of the other taxes they pay.

"Our contention is you will attract enough people" to offset the costs, said Nicholas A. Sloan of the Maryland chapter of the Military Officers Association of America.

Ehrlich agrees.

"The governor believes that if Maryland does not attract military retirees, we will lose their skills," said spokesman Henry Fawell. "That's essential to economic growth, and the state would also lose considerable tax revenue."

Sloan said many former service members settle in Pennsylvania, which, he said, has a more "veteran friendly" tax code. About 20 states don't tax military retirement pay, according to the Maryland Department of Veterans Affairs.

"They move just over the Pennsylvania line, and many of them work in Maryland," Sloan said.

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