As massive reductions in military spending progress due to budget restraints, a large scale reduction in active duty servicemen and women is on the horizon as reported by U.S. News & World Report. Consequently, this reduction in personnel means that many recent veterans will be entering the civilian workforce in the immediate future. As noted in an Aug. 5th Deloitte webcast, these veterans bring with them years of valuable experience and training. Unfortunately, both businesses and veterans are unsure of how these skills will translate into the marketplace, it was further noted by the webcast. This disconnect between those who have served our country and the businesses that fuel our economy has led some states to use tax credits to bridge the gap.
Credits and incentives have been the champion of economic growth for years, as states have frequently used them to combat unemployment. For veterans, these incentives may be even more critical than ever before. The 2013 unemployment rate among post 9/11 veterans was 9 percent, with veterans between the ages of 18 and 24 suffering from a 21.4 percent unemployment rate as reported by PBS News Hour. Those rates look even worse when compared to the 2013 unemployment rate of 7.4 percent for the general population, according to PBS. That is why it is important that states, such as Utah and Delaware, continue to incentivize businesses to hire veterans. These states reward businesses for hiring veterans with a tax credit equal to a set dollar amount per veteran or a percentage of the qualified veteran’s salary. Some states, such as Alaska, even offer businesses an increased credit for hiring qualified disabled veterans.
Few states are courting the veteran population as passionately as Iowa however. Recently, legislation was enacted that will exempt military pensions from Iowa state income tax. Legislation expanding the homestead credit for disabled veterans was also recently enacted in Iowa giving the state another veteran friendly incentive. Although these new pieces of legislation don’t reward businesses for hiring veterans, they are the type of tax incentives that will make the state an attractive destination for a skilled veteran population eager to work.
Some other states that currently offer credits to businesses for hiring veterans include New Mexico and Alabama. In West Virginia, Vietnam and Korean War veterans, as well as any disabled veteran and unemployed member of either the United States reserve forces or West Virginia National Guard, are eligible for credits. Illinois has extended the sunset date of their credit originally set to expire in 2010 to Dec. 31, 2016, and beginning in 2015, New York will offer a veteran hiring credit as well.
Although the qualifications and requirements differ from state to state, the underlying purpose of these incentive programs remains the same: to ensure that veterans are given the opportunity to succeed upon their return to civilian life.
*Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Are tax credits and incentives the right approach to address unemployment among veterans?
For more information about veteran tax credits, check out Bloomberg BNA’s Credits and Incentives Portfolios by signing up for a free trial of the Bloomberg BNA Premier State Tax Library today.
By: Jason Plotkin
Follow Jason on Twitter at: @jplotkinSALT.
Follow BBNA on Twitter at: @BBNATax.
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