- Associated Press - Wednesday, August 19, 2015

COLUMBUS, Ohio (AP) - A state income tax break intended to help Ohio attract military retirees has cost the state millions more than originally estimated.

Former Gov. Ted Strickland signed a bill in 2007 declaring military pensions exempt from Ohio income tax.

The state estimated it would cost up to nearly $22 million in tax revenue. But the Ohio Department of Taxation now says the exemption cost more than $29 million in fiscal year 2014 and over $31 million in the 2015 fiscal year, which ended June 30, the Dayton Daily News (https://bit.ly/1Pzrntd) reported Tuesday.

Legislation in 2013 expanded the exemption to include all uniformed services’ retirees, adding retirees from the National Oceanic and Atmospheric Administration and the commissioned corps of the Public Health Service to armed forces retirees, said Matt Chafin, chief legal counsel for the taxation department. Chafin said Wednesday it’s also not surprising that 2007 estimates for tax expenditures would have increased over time.

Rep. Rick Perales, a Beavercreek Republican and Air Force retiree, said the state recovers much of that money when retirees spend money in Ohio.

“All of that money that they get to keep, they’re going to spend in Ohio,” Perales said. “In terms of taxes, we’ll recover a lot of that when they go out and buy a new car, refrigerator or whatever. If they’re not here, that doesn’t happen.”

Chafin said military retirees do contribute to tax revenue in the form of sales and other non-income taxes, but he says the department has no way of calculating those numbers.

Perales also said the state also gets some of the revenue back through taxes on any new jobs military retirees get.

“Those people retire, but they have 20 years left and that second job is fully taxable,” he said.

The state is projecting it will lose more than $36 million for fiscal year 2017.

The nation has about 2 million military retirees. Together, they receive more than $50 billion in pension payments a year, according to the Department of Defense. More than 46,000 military retirees live in Ohio, and the federal government pays them about $1 billion annually.


Information from: Dayton Daily News, https://www.daytondailynews.com

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