State Lawmakers Have Taken Action To Help Veterans, And Congress Is Seeking To Follow Suit

Those who have sacrificed years of their time and agreed to put their lives on the line in defense of their country represent a numerically small segment of society. Of the U.S. adult population, 7% has served in the Armed Forces.

Federal and state lawmakers are understandably focused on addressing the unique needs and challenges faced by military veterans. The U.S. Department of Veterans Affairs (VA) is among the most expansive and complex federal agencies. With a budget exceeding $240 billion, the VA is comprised of 412,000 workers and contractors, 6,000 buildings (of which 1,500 are health care centers), 144 medical facilities, and more than 1,200 outpatient locations.

Yet, as large as the VA is, there are indicators the agency remains overwhelmed, struggling with service backlogs that force veterans to wait extended periods of time before they can receive assistance with benefits and disability claims. In fact, more than 36% of the nearly 520,000 disability and compensations claims now pending at the VA are older than 125 days.

The last two decades of foreign military operations have produced the largest number of veterans in the U.S. since the Vietnam war. In order to rectify what is expected to be a growing backlog at the VA, a number of reforms are currently under consideration in Congress that seek to streamline VA processes and procedures, with the goal of improving service to veterans. One way to do that could involve leveraging the companies and non-government entities that already assist veterans with their benefits claims.

The ecosystem of organizations that currently help veterans navigate the VA system include Veterans Service Organizations (VSOs) comprised of volunteers, accredited legal representatives, and private consulting firms that work on a contingency basis. Veterans can also try to navigate the VA process themselves. But the demand for and mere existence of private companies whose sole mission is to help veterans navigate the process underscores the complexity, convolution, and dysfunction of the VA system.

Reforms that would make the VA accreditation more difficult to obtain or that narrow the aforementioned ecosystem of private companies who assist veterans could result in negative unintended consequences that increase VA service backlogs. Additional reforms are under consideration in Congress. One proposal pending in the U.S. Senate, for example, would restrict veterans’ choice by effectively establishing a monopoly for accredited lawyers. Critics contend that in many cases these lawyers are incentivized to drag out the benefits appeals process for longer than a year rather than seek a quicker resolution.

Rather than limit the sort of private entities and actors who can help veterans navigate the benefits claims and appeals processes at the VA, many would prefer federal lawmakers instead look to empower the existing network of privately run veterans service providers. This could be accomplished through an expansion of the accreditation system that would increase the number of service providers available to assist veterans.

There is a long history of public-private partnerships serving as an effective way to construct more infrastructure at reduced cost to taxpayers. Public-private partnerships have also been used to improve other services typically provided by the government. Private ambulance providers, for example, have been utilized in California to ensure that emergency medical service is available to those living in unincorporated rural areas. Many believe an analogous leveraging of public-private partnerships with veterans service providers is a smart way for federal lawmakers to address the growing backlog at the VA, speed up the provision of benefits, and streamline the processing of disability claims.

It’s well documented how those who have served their country are currently subjected to a slow and deficient government bureaucracy. Enacting reforms to speed up the provision of veterans benefits and the processing of disability claims is needed from a policy standpoint. Additionally, it doesn’t require an expensive pollster for lawmakers, many of whom will be on the ballot this November, to know that such reforms and policy initiatives also make for great politics in the run up to the midterm elections.

State Lawmakers Are Helping Veterans With Tax Relief & Licensing Reform

While federal lawmakers have been considering reforms to help veterans, state legislators and governors have been taking action to help former members of the military. In particular, governors and state lawmakers have recently enacted reforms to provide veterans with targeted tax relief.

Of the 41 states that tax income, 26 exempt all military pension income from state taxation. Of the other 15 states with an income tax, nine of them permit partial military pension income tax exemption.

The number of states exempting military pension income will soon grow thanks to the enactment of new legislation this spring in several states. On April 18, Georgia Governor Brian Kemp (R) signed HB 1064, Georgia’s first military retirement income tax exemption.

“Until today, we were the only state in the region – and one of only a few in the entire country – that fully taxed our military retirees up to the age of 62, with limited provisions or exemptions,” Governor Kemp said the day he signed HB 1064. “By making this adjustment, we’re incentivizing these highly qualified individuals to continue working in their communities when they start second careers, helping Georgia remain the No. 1 state for business.”

Nearly one month after Governor Kemp enacted a full state income tax exemption for military pensions, South Carolina Governor Henry McMaster (R) followed suit by signing H. 3245, the Workforce Enhancement & Military Recognition Act.

“We’re doing everything we can to incentivize our nation’s heroic veterans to live, work, and raise their families here in S.C.,” said Gov. Henry McMaster. “For years, we have fought to eliminate all state income taxes on their retirement pay. I’m proud to have finally signed a bill into law that will make that a reality. This is just one more way we can thank our Veterans for their sacrifice, and it adds to the long list of things that makes South Carolina the most military-friendly state in the country.”

“35 states currently don’t tax military [retirement] income,” said Representative Bobby Cox (R), co-sponsor of H. 3245, which was approved with unanimous bipartisan support. “South Carolina will be part of that group and recruit some of those great work skills that we want to have with our veterans.”

Meanwhile next door in North Carolina, the new state budget enacted at the end of 2021 is phasing down North Carolina’s personal income tax rate for all workers from 5.25% to 3.99%. In that same budget, Governor Roy Cooper (D) and the Republican-run General Assembly also exempted military pensions from state income tax. That exemption applies to those who served for at least 20 years and was made retroactive to the beginning of 2021.

“We say that we’re the most military-friendly state in the union, and I think that passing this bill will truly prove that to military retirees not only in our state but across the nation, and hopefully we’ll get a lot of them moving here to help our economy,” North Carolina Representative John Szoka (R) said.

North Carolina was one of five states that passed legislation in 2021 to exempt military pensions from state income tax .The others were Arizona, Utah, Indiana, and Nebraska. This trend has been a bipartisan affair. In California, for example, where Democrats hold large majorities in the state senate and assembly, legislation has been introduced to exempt military pensions from state income tax.

“Military retirees bring benefits to our state such as stability, job skills used in second careers, and federal funding,” said California Assemblyman James Ramos (D), sponsor of the AB 1623, legislation that would exempt military pensions from California income tax. “These men and women have served our nation in a variety of valuable capacities, and they and their families have frequently done so at great personal sacrifice. California needs to acknowledge the contributions more fully they make.”

Reducing Barriers To Employment For Military Families

In addition to pension income tax exemptions, state legislators and governors have also taken action recently to remove the regulatory barriers to employment that occupational licensing requirements often serve as. With encouragement from the Department of Defense, recent years have seen more states pass legislation to provide some form of reciprocity for out-of-state occupational licenses of military family members, helping spouses earn income more quickly in their new state of residence.

Along with enacting his state’s first tax exemption for military income, in April Governor Kemp also signed HB 884, a bill that expedites the granting of occupational licenses for military spouses. HB 884 ensures such licenses are issued within 90 days. The same day he enacted HB 884, Governor Kemp also signed SB 87, which allows Georgia taxpayers to donate some or all of their annual tax refund to scholarships for disabled veterans.

Whereas South Carolina followed Georgia’s lead in fully exempting military pension income from state taxation, Palmetto State lawmakers eased occupational licensing requirements for military families two years before Georgia. In May 2020, South Carolina legislators and Governor McMaster enacted S. 455, the Armed Services Members and Spouses Professional and Occupational Licensing Act. That new law provides occupational licensing reciprocity to military families in order to ease and expedite the state credentialing process for members of military families who move to South Carolina.

“If we can cut through red tape to help our military families achieve financial security, we will do it every time,” said Governor McMaster. “This is a great piece of legislation and I’m proud to have had the opportunity to sign it.

“This law shows the commitment we all have to our military members, and it underscores the significance of the impact they have on our state,” said Emily Farr, South Carolina Labor Licensing and Regulation Director. Most states have now enacted similar legislation to expedite the licensing process or provide out-of-state licensing reciprocity for military families, which are particularly in need of a streamlined credentialing process given their mobility.

“34% of military spouses in the labor force are actually working in occupations that require a license, and we’re 10 times more likely to have to move across state lines,” Marinelle Reynolds, a licensed clinical social worker and military spouse, told National Public Radio. Reynolds notes that licensing reciprocity legislation and other reforms that expedite the licensure process for military families “reduces barriers to unemployment in a meaningful way that can have a major impact on well-being but also economic growth.”

Among those urging state lawmakers to pass occupational license reciprocity legislation has been the Department of Defense, which made occupational license reciprocity and credentialing expedition a priority in 2011. In 2018, the secretaries of the Army, Navy, and Air Force sent a letter to the National Governors Association to explain that state policies pertaining to military spouse licensure and education would be considered in future base location decisions. ”That got the attention of the states, and we saw a lot more activity happen in 2018 and 2019,” said Marcus Beauregard, DOD director of the Defense-State Liaison Office.

With the celebrations of Memorial Day and Independence Day, summer provides many occasions for people to think about and thank those who have served in the U.S. Armed Forces. As Americans honor those who sacrificed far more for their country than most, it’s a fitting time for lawmakers at the federal and state levels to reflect on reforms they have implemented to help veterans and what more can be done.