New Law Exempts Military Retirement Benefits from State Tax

May 25, 2021, midnight ·

Governor Pete Ricketts and other lawmakers in front of the Governor's Mansion in Lincoln.
Governor Pete Ricketts and other lawmakers in front of the Governor's Mansion in Lincoln. (Photo from Facebook Live)

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A state law to make Nebraska more competitive in keeping military veterans in the state has been officially signed. LB 387 is a way to level the playing field when it comes to taxing military benefits.

In front of the steps of the Governor’s Mansion in Lincoln Tuesday, Governor Pete Ricketts made official an effort that has been in the works for five years by signing the legislation approved by Nebraska lawmakers this session.

LB 387 fully exempts military retirement benefits from state income tax, a move that supporters say will help Nebraska keep more veterans from moving away. Currently, 50% of military retirement benefits are exempted, a law that was signed just last year. Most of the states around Nebraska already exempt benefits from state income taxes.

“We can look at the data from states like South Dakota and Iowa and see they grow their veterans population two or three times faster than their normal population growth while here in Nebraska, our veterans population is only growing at half the rate of our normal population,” Ricketts said.

Senator Tom Brewer, a military veteran himself, was the lead sponsor of the bill and said its passage was a group effort by lawmakers who knew it was important.

“I think we came in here with a passion to try and right the wrong and figure out how to make sure that veterans aren’t forgotten and that we don’t lose our veterans out of Nebraska, especially the ones that are Nebraskans that want to be here but financially make it impossible for them,” Brewer said.

LB 387 won’t be cheap. It will cost the state $8 million in tax revenue this year and another $20 million next year. Supporters say keeping skilled veterans who still have long civilian careers ahead will help the bill eventually pay for itself.