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Published: Thursday, 12/13/2007

Ohio won't tax military pensions; Strickland vows exemption costing $30M

BY JIM PROVANCE
BLADE COLUMBUS BUREAU CHIEF

COLUMBUS - He's worried about the $30 million price tag, but Gov. Ted Strickland plans to sign a bill sent to him yesterday that would exempt the military pensions of roughly 39,000 Ohioans from the state's income tax.

"It's impressive that this made it through the House in 7 days and the Senate in 28 days," said Rep. Peter Uvjagi (D., Toledo), the bill's chief Democratic sponsor.

"When there's a will, there's a way."

The bill unanimously passed each step on its way to the governor's desk.

Ohio would become the 46th state to entirely exempt all military pensions from taxation, and there was talk yesterday of extending similar treatment to nonmilitary pensions.

"I believe we should view this action as an important step on a journey a journey that will lead as soon as possible to the complete exemption of all retirement income [taxation]," said Sen. Ron Amstutz (R., Wooster).

But while Sen. Dale Miller (D., Cleveland) said he strongly supports this step, he doesn't like where the journey is going.

"We have seen a succession of subtractions from the Ohio tax base over the recent years, most of them for good causes," he said.

"But we have seen hardly any additions, and I don't think this recent trajectory is sustainable in terms of maintaining and improving state services."

The current two-year budget did not take the military pension tax exemption into consideration, and the bill comes at a time when Mr. Strickland is making some unpopular decisions to rein in state spending as tax collections fall below expectations.

"He intends to sign this legislation, and he will determine how to pay for it in a very tight and challenging budget," said Strickland spokesman Keith Dailey.

Mr. Ujvagi said lawmakers must be careful as they consider future cuts affecting retirement income.

"Military pensions are delayed compensation," he said. "These folks made a lot less during their productive years in the military, and they put themselves at risk in a lot of ways. That's different from other pensions for people who earned full income for their skill sets."

The bill, sponsored by Rep. Ross McGregor (R., Springfield) and Mr. Ujvagi, has been largely characterized as an economic development measure designed to keep retired military personnel in Ohio after they return to civilian life. Generally, military personnel earn pensions after 20 years of service.

"Of equal importance, the legislation will attract other military retirees to relocate to Ohio to fill the highly specialized scientific, engineering, and medical professions," said Sen. Steve Austria (R., Beavercreek).

"With the 2005 base realignment closure gains, we have an opportunity to bring thousands of jobs to Ohio. But those jobs are coming from states like Texas, Florida, Massachusetts, all which have exempted military retirement pay."

Ohio, California, Vermont, Rhode Island, and Nebraska are the only states still taxing at least some portion of military retirement income.

Lawmakers are also expected to consider placing a possible bond package on next year's ballot that would provide cash bonuses to those who served in the 1991 Persian Gulf War as well as the current wars in Iraq and Afghanistan.

Contact Jim Provance at:

jprovance@theblade.com

or 614-221-0496.



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