Military veterans in Utah will no longer be taxed on their retirement pay.

Utah Gov. Spencer Cox recently signed Senate Bill 11 into law, which means beginning in Fiscal Year 2022, military retirement pay collected by Utah residents will no longer be subject to state income taxes. The bill, which was sponsored by Sen. Wayne Harper, R-Taylorsville, also exempts survivor benefits from being taxed.

According to a fiscal note from the Governor’s Office of Management and Budget, the exemption will decrease taxes for the average Utah military retiree by $1,315 in FY 2022. Based on Utah’s current military retiree population who receive retired pay, the state will be out some $24 million per year with the new legislation, reducing revenues in the state education fund.

During this year’s general legislative session, lawmakers also passed a measure that exempts Social Security income. During a House Revenue and Taxation Committee hearing, Harper said military retirees can chose to exempt taxes on either their military retirement pay or their Social Security income, but not both.

“It is very responsive to what they have done to serve the country over the years,” Harper said of the bill.

An analysis of the bill by Voice for Utah Children, a nonprofit that advocates for Utah kids, says the bill is flawed because it helps almost none of Utah’s lowest-income retirees and is skewed toward people with larger incomes. VUC’s analysis says more than 90% of the tax break goes to retirees in the top two-fifths of the income distribution, most of which have six-figure household incomes.

But Terry Schow, Ogden-area veterans advocate and former director of the Utah Veterans and Military Affairs office, says the bill will be good for the state’s economy. Schow, who is also a Vietnam veteran but doesn’t receive a military retiree paycheck, said nearly 20 other states across the U.S. exempt military retirement pay. He said when military retirees move to a state, they typically bring a healthy disposable income and have their own medical benefits. He said the legislation is an important component in wooing military retirees to move to Utah.

“When they move here, they don’t overburden the system,” said Schow, who also noted that he’s long advocated for the very tax break that was passed with Harper’s bill. “It’s sort of a way to say thank you for your service, but I’ve also found that it makes sense from an economic standpoint too.”

According to the most recent U.S. Census Bureau data, there were just under 15,000 military veterans living in Weber County between 2012 and 2016. There were another 18,000 vets in Davis County and even more scattered in smaller counties like Box Elder, Morgan, Cache and Rich. At last count, the total number of veterans living in Utah’s six most northern counties was just over 40,000.

The U.S. Department of Veterans Affairs says Utah has around 152,000 total veterans.

To be a military retiree, a veteran must have worked at least 20 years in the armed forces.