Senate Passes Bill to Provide Military with State Income Tax Exemption

For background see: Senate Finance Comm Passes Bill to Provide Military with State Tax Exemption

Tax relief could soon be on its way for Oklahoma military families following unanimous approval of legislation by the State Senate Thursday to provide an income tax exemption for serving military personnel. Sen Steve Russell, a retired Army infantryman and combat veteran, is author of Senate 881 and believes his bill would not only help military families, but the state’s economy.

“There are 32,000 who serve at our state’s bases and we have approximately 54,000 Oklahoma residents that were recruited from here and are serving somewhere. However, only 9,000 of them claim Oklahoma residency, so what that tells you is that the first chance they get to leave Oklahoma because of our tax burden they do and they become Texans, Floridians, Nevadans, or whatever it may be,” said Russell, R- Oklahoma City.

Oklahoma has the second highest military recruitment in the nation per capita, but as Russell pointed out during his debate many military personnel change their citizenship at the first opportunity because of the state’s tax rates.

There are currently 16 states including Nevada, Illinois and New York that exempt their military from paying income taxes.

SB 881 would only pertain to Oklahoman residents that are serving members of the armed services, including guardsmen and reservists. Therefore, military retirees or veterans would not qualify for the exemption.

The bill is estimated to cost the state $5 million the first year and $12 million during the second but Russell says the money gained through these individuals claiming Oklahoma residency will far outweigh the costs.

“If this bill became law, we’d actually be gaining revenue by being an acquiring state rather than a donor state. Currently, our serving Oklahomans, because they don’t have such tax relief, change their residency the first chance they get and, therefore, we don’t receive their motor vehicle fees, license fees, excise tax on automobiles that they purchase or any number of other fees,” explained Russell. “For every 10,000 soldiers that we lose there is an impact of approximately $6 million in just such fees that we do not receive because we are a losing state rather than an acquiring state. The flipside of that is that if we were an acquiring state we could have the potential to bring in 40,000 to 60,000 new Oklahomans, which would have a positive impact on the entire state.”

Russell’s bill now moves to the House for further consideration.