Gov. Hutchinson signs Arkiansas Military Retired Pay Tax Cut Into Law

Gov. Asa Hutchinson signs bill removing income
tax on retired military pay effective Jan. 1, 2018

Dr. Bill Smith, ARRA News Service: Arkansas joins all its surrounding states and numerous other states in opting to not tax military retired pay. The Arkansas tax on military retirees has over the decades has been detrimental to the state.  Over the years, it precipitated many thousands of retired military and their families to leave the state upon military retirement or to not to return to Arkansas when they retired outside of Arkansas.

Arkansas tax policies have been a net contribution to its surrounding states all of whom do not tax military retirement by encouraging military retirees to retire near but not in Arkansas.

Retired military are already trained in critical skills and ready to go to work immediately. Many of them are trained in technical fields. Retired officers have at least a bachelors degree and most have earned advanced degrees including STEM, legal and medical degrees. A significant number of retired enlisted have an associate degree or a bachelors degree. Many enlisted and a majority of officers have advanced degrees. Studies shows that military retirees are skilled in specialty areas that are recruited by industry, education, medical and consulting firms, and many start their own businesses.

In addition, retired military who are already business owners or professionals in other states that do not tax military are often not willing to relocate their own businesses or to encourage businesses they manage to relocate to Arkansas and to suffer the additional tax on their military retirement.

There are retired military across the country who would like to relocate to the "natural" state and enjoy it's many lakes, rivers and Ozark Mountains but either do not do so or opt for a second home in Arkansas and remain out of the state a majority of the year to avoid the taxes. That means less sales taxes for Arkansas from retired military.

Yesterday, Governor Asa Hutchinson signed into law a bill to eliminate state income tax on military retirement pay. Hutchinson initially laid out this tax cut as a part of his package for the 2017 legislative session.

Governor Asa Hutchinson issued the following statement: “I am pleased that the General Assembly has approved this bill to eliminate state income taxes on military retiree pay. Arkansas currently exempts active duty military pay from state income taxes and beginning in January will also exempt military retirement pay.

“This initiative will make Arkansas a more military friendly retirement destination and will encourage veterans to start their second careers or open a business right here in the Natural State. I am confident that adding these highly skilled and educated veterans to our workforce will spur economic development and benefit all Arkansans"

House Bill 1162 passed through the General Assembly with wide bi-partisan support in both chambers. The law will go into effect in January of 2018.

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