Exempting military retiree pay could boost California’s high-tech workforce
California – one of the richest states in the nation – is the only state in America that fully taxes military retirement income, giving its 146,000 military retirees no tax breaks whatsoever on their service retirement.
Why is California fully taxing its military retirees, defenders of our nation and hard-working citizens who often earned low pay from the armed forces (especially the enlisted personnel which comprises 73% of California’s military retirees) and who tend to have small retirement incomes?
Why is California turning its back on citizens who make up a skilled workforce, driving them to other states that exempt military retirement pay from being taxed and that offer a lower cost of living?
It’s time for California to end this nonsensical practice.
Assemblymember James C. Ramos of the 45th Assembly District, which includes portions of Los Angeles and Ventura Counties, introduced Assembly Bill 46 on Dec. 5.
The bill would exempt military retired pay, starting on the day of retirement as well as surviving spouse benefits, from state personal income tax. The Legislature has previously considered similar bills but failed to pass them.
A 2022 analysis conducted by the California Legislative Analyst’s Office found that the top issue for employers in California is their ability to draw a qualified workforce. In California, some 60,000 high-tech jobs are vacant, according to the California Council of Chapters Affiliated Military Officers Association of America (CALMOAA).
Passing AB46 would help California retain more skilled workers.
Military service members are eligible to retire after 20 years with many retiring in their 40s, leaving them with plenty of working years ahead.
Very few armed service retires can afford to live in California on their military retirement alone and most move on to start a second career.
The typical enlisted person earns only $30,000 to $35,000 in retirement pay annually, according to U.S. News & World Report.
In many California cities, that’s poverty wages when adjusted for the cost of housing. The median sale price for a home in California was $774,580 as of December 2022, according to the California Association of Realtors.
It’s not much better if you rent.
California has the fourth-highest rents nationwide, with the average rent for a two-bedroom home at $2,274 per month, according to Bankrate.
Military retirees represent some of California’s best and brightest workers, bringing technical skills, discipline, courage, a strong work ethic and leadership skills to the state’s workforce and communities.
They are a perfect fit for jobs in fields like engineering, computer science, information technology, cyber security, management, healthcare and education.
If organizations and companies want sophisticated, analytical, logistical and operational skills— and employees who can handle all of that under pressure – then military retirees are an excellent choice.
From my experience serving in leadership roles in four different industries and as both an enlisted sailor and a naval officer, I have found that many newly minted MBAs or even those with a few years of work experience lack real-world awareness and analytical skills that veterans and military personnel possess.
Veterans and military retirees are often the best-qualified candidates for a wide range of jobs. They know how to work with diverse groups, work well under pressure, focus on problem-solving, and understand teamwork. They bring valuable real-world experience to the table.
California is increasingly competing with other states like Texas for a skilled and disciplined workforce.
Yet California is allowing a lot of its talented workers to leave for other, more tax-friendly states with a lower cost of living, in part because California stubbornly refuses to offer any incentive for military retirees to continue their second careers here.
It’s time for the Legislature to honor California’s military retirees with this tax incentive while boosting the state’s skilled workforce as an added benefit. The Legislature should support AB 46 and the governor should sign it into law.
Ritch K. Eich, former chief of public affairs for Blue Shield of California, has authored five books on leadership and is a retired Naval Reserve captain. Eich has served on over 10 boards of directors and trustees including the Gold Coast Veterans Foundation. He is the past chairman of the board of trustees at Los Robles Hospital and lives in Thousand Oaks.
