Do American Veterans Really Need Tax Breaks?

A US Marine Corps veteran (R) shakes hands with Lynda Mims (L), an admissions representative at a construction college - Source: Robyn Beck/AFP/Getty Images

Robyn Beck/AFP/Getty Images

An interesting idea has been circulating through state legislative houses across the country, all in an effort to spur local economies and boost workforces with well-trained and disciplined employees. Naturally, this is one of the goals of any local government — to increase the human capital and strength of the economy. But by looking at a new subset of the population to accomplish that goal, a possibly unforeseen debate has started.

The subset in question are military veterans, whose training and skills developed in the armed forces have grown increasingly attractive to employers. This has created competition for employable veterans between states, according to an article from The Wall Street Journal, which reports that several states are trying to figure out the best way to attract top veteran talent.

So far, it seems that most legislatures are looking at offering veterans generous tax breaks in exchange for moving to their respective states. The Wall Street Journal says that after two decade-long wars, there has been a surge of relatively young, skilled talent entering the private sector from the military, and many are hungry to start building a life for themselves after their service. Not only that, but older veterans are also sought after for their abilities in situations as diverse as the fabrication shop to the boardroom.

The WSJ reports that 65 bills are making their way through legislative houses in 19 different states, making it obvious that there is a demand for these former military men and women and the skills they bring to the table.

On the surface, it seems like a reasonable trade. These men and women did, after all, take up arms and fight for America’s interests on foreign soil. Many would think that a tax break would be the least that we could do to help reintegrate them back into normal American life and the private sector.

The idea, however, has been met with plenty of criticism.

First and foremost, critics of the proposed tax incentives point to one big problem: it’s expensive. These tax breaks would result in a significant hit to state revenues, which could lead to a cutback of government services, many of which are used by veterans and their families. While the specifics are a bit too broad to get into — again, we’re talking about as many as 65 different ways to incorporate these tax incentives — there is plenty of concern from legislators and constituents alike about what the lost revenue could mean down the line.

Secondly, many are protesting that the proposed tax benefits are inherently unfair. Unfair to other retirees, and also in a sense that some veterans would be eligible while others wouldn’t.

Most of the proposals circle around exempting military pensions, which are geared more toward veterans who have been in the military for a considerably long period of time and have achieved a high rank. That means that the economic gains for younger veterans may not be very effective anyway.

The problem, as a recent Slate article points out, is that politicians will likely be apt to vote in favor of these tax proposals even though it may hurt the overall economy to do so. “All politicians want to be seen as veteran friendly,” Peter Gudmundsson, a former Marine who now leads veteran recruiting service RecruitMilitary, told Slate.

“I often joke that veteran support is one of the few things that right and left can agree on,” he said. “The right wing likes the military and the left wing likes victim groups. As a basic rule, I have such confidence in veterans as a group, I don’t think they need as much special treatment as politicians think they need.”

With that, it’s clear that Gudmundsson is a member of a segment of veterans who do not support tax incentives. The reason why is because those who think like Gudmundsson know that just because, say, Kansas offers up some tax savings, it doesn’t mean that veterans are going to pack up their families and move there. All the while, residents of Kansas have to see government services cut.

The tax incentive idea is a tricky one. It has potential upsides, but is clearly riddled with problems. Even with those issues in mind, we could see politicians still go for it — contrary to what would be in the best interests of the remainder of constituents.

Follow Sam on Twitter @Sliceofginger

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