Senate Bill-1 Personal income taxes: exclusion: Military Services Retirement and Surviving Spouse Benefit Payment Act is in the Senate Appropriations Committee. 

We have days before they meet, please send your support today (5 minutes)!

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Mail or fastest email: sapr@sen.ca.gov

Honorable Members of the Senate Appropriations Committee

Senator Anna Caballero, Chair
State Capitol, 412
Sacramento, CA 95814

Subject: Support for Governor's Military Retirement Tax Exemptions SB-1

Senator Caballero,

We thank Senator Kelly Seyarto for introducing SB-1 – it is a critical step toward honoring our Veterans and strengthening California’s economic competitiveness.  Today, California stands alone as the only state in the nation that fully taxes military retirement pay and Survivor Benefit Plan (SBP) annuities. Is this the message we want to send to those who have served our nation with honor and distinction? And what is the true cost to our state?

I write in strong support of SB-1 which proposes a targeted personal income tax exemption of military retirement pay and Survivor Benefit Plan (SBP) annuities for eligible California residents. We recognize this Committee’s responsibility to carefully evaluate the fiscal impact of proposed legislation. However, rather than adding long-term cost burdens, this bill represents a strategic correction to an existing fiscal imbalance—one that is steadily undermining California’s economic competitiveness, eroding its revenue base, and weakening its national security workforce pipeline.

Eliminating the tax on military retirement pay is not a loss—it is an investment. California’s 140,000 retired Veterans are highly educated and trained professionals—ready to serve in critical fields such as STEM, healthcare, engineering, and public safety.   Their second career brings billions of dollars to our state. 

What does California stand to lose by maintaining this outdated tax policy?  Billions of dollars in:

• Income from Veterans’ second careers  
• Federal dollars tied to Veteran services (e.g., TRICARE, VA healthcare, education)
• Defense industry jobs—CA dropped from #1 to #3 in national defense contract awards
• Sales and property tax revenue
• Income from working spouses

SB-1 presents an opportunity to reverse course. Exempting modest military pensions—averaging $34,000—from state income tax would be more than offset by increased revenues from broader economic activity, income taxes, and federal funding. We are encouraged that Governor Newsom has included this exemption in his FY25–26 proposed budget.

This is not a giveaway. It is a smart policy that honors those who served at least 20 years and who continue to serve their communities in retirement, For the good of our Veterans—and the future of California—we urge your support of SB-1.

Thank you for your attention on this critical issue.

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