Archuleta proposes full tax exemption for military pensions

SACRAMENTO — Sen. Bob Archuleta has introduced legislation that would fully exempt military retirement pay and survivor benefits from California personal income tax, arguing the change is necessary to retain veterans and strengthen the state’s economy.

Senate Bill 1407 would exclude military retirement pay and survivor income from personal gross income under the state’s Personal Income Tax Law. The measure is co-authored by Assemblymember Pilar Schiavo and Sen. Steven Choi and is co-sponsored by State Treasurer Fiona Ma and the San Diego Military Advisory Council.

Archuleta, a U.S. Army veteran and chair of the Senate Committee on Military and Veterans Affairs, said rising living costs have forced many veterans to consider leaving California for states that offer tax exemptions on military pensions.

From 2010 to 2021, the veteran retiree population nationwide grew by 17 percent. During that same period, California was one of five states to experience a decline, with a 14 percent reduction in military retirees. Between 2010 and 2022, the state lost more than 24,000 military retirees, resulting in an estimated recurring loss of more than $700 million annually in federal retirement and survivor payments that could otherwise circulate through California’s economy.

Supporters of SB 1407 say the bill is intended to incentivize veterans to remain in California and pursue second careers, bringing leadership experience and technical skills into the civilian workforce. The press release notes that retiree households, in addition to receiving federal retirement benefits, can contribute between $50,000 and $100,000 in annual taxable income.

Schiavo said the state previously approved a partial exemption that will exclude the first $20,000 of military pension income from state taxes beginning in 2026. She said SB 1407 would complete that effort by fully exempting military retirement and survivor pay.

Treasurer Ma said exempting retirement and survivor pay would recognize military service while encouraging retirees to build careers and raise families in California.

Rear Adm. David Boone, president and CEO of the San Diego Military Advisory Council, described the bill as a measure that honors military service members and allows them to participate more fully in California’s economy.

Archuleta’s office also cited broader policy concerns, noting that California’s current tax structure may discourage long-term service and contribute to retention challenges, which can affect homeland defense, wildfire response, disaster relief and other civil support missions.