Helping California Keep Veterans in California: The Case for SB 1407’s Military Retirement Tax Exemption

California is home to one of the largest veteran populations in the nation. Yet in recent years, the state has seen a troubling trend: many military retirees are choosing to leave California after their service and build their next chapter elsewhere.

SB 1407, authored by Senator Bob Archuleta and co-authored by Assemblymember Pilar Schiavo, seeks to change that. Sponsored by State Treasurer Fiona Ma and the San Diego Military Advisory Council (SDMAC), the bill would fully exempt military retirement pay from California state income taxes.

By removing this tax burden, SB 1407 would help encourage veterans to remain in California — where their leadership, skills, and continued service strengthen communities, the workforce, and the state as a whole.

The proposal reflects a growing recognition that if California wants to retain the men and women who have served our country, the state must remain competitive with the incentives offered elsewhere.

A Growing Challenge

Over the past two decades, California has steadily lost military retirees to other states. Since 2000, the state’s military retiree population has declined by 27.4 percent, even while the national military retiree population has grown by 17 percent.

One major factor influencing where veterans choose to settle after service is tax policy. While California recently adopted a partial exemption allowing up to $20,000 of military retirement income to be excluded from state taxes, that policy remains modest compared to other states.

Today, 38 states fully exempt military retirement pay from state income taxes.

States such as Texas, Florida, and Georgia have actively positioned themselves as destinations for veterans who are transitioning into civilian life and second careers.

Veterans Strengthen Our Workforce and Communities

When veterans remain in California, their impact extends far beyond their retirement benefits.

Most military retirees begin second careers, bringing valuable leadership experience, technical expertise, and a mission-driven work ethic to the civilian workforce. Their continued participation in the economy generates tax revenue, creates jobs, and supports local businesses.

Research shows that retaining military retirees can lead to meaningful economic gains, including increased employment, higher personal income, and stronger business activity throughout local communities.

But the contributions of veterans are not measured by economic data alone.

Veterans often become community leaders. They coach youth sports teams, volunteer with nonprofits, support schools, and strengthen civic organizations. The values instilled during military service, such as integrity, discipline, teamwork, and commitment to others, continue to shape the communities where veterans choose to live.

Building a State Where Veterans Choose to Stay

California benefits tremendously from the leadership and service of its veteran community. Policies that make it easier for veterans to remain in the state after their military careers help ensure that California continues to benefit from their talents, experience, and dedication.

SB 1407 represents one approach to strengthening that environment by aligning California’s tax policy more closely with the majority of states that already provide full exemptions for military retirement income.

For the VetFund Foundation, an organization committed to supporting California’s veterans, service members, and military families, efforts that encourage veterans to stay, work, and lead in California are essential to building stronger communities across the state.