In his budget speech today, Gov. Phil Murphy will endorse legislation that would exclude combat zone pay from the state income tax.

An excerpt obtained from Murphy’s speech says the governor’s proposals for the 2021 budget include “for the first time, exempting combat pay earned by our active-duty military men and women from taxes.”

New Jersey is currently the only state that imposes that tax, according to an administration source and Assemblyman Ryan Peters, R-Burlington, who has been a co-sponsor of the legislation.

“Forty-nine other states and the federal government do not tax this combat pay. New Jersey is the only state that does so,” Peters said.

Peters, a Navy SEAL commander who deployed to Iraq twice and Afghanistan once, said the additional combat pay isn’t significant – “all in all, for the ability of getting shot at, it isn’t a lot of money.” The average combat zone pay is $225 a month, on top of a service member's regular salary.

“The federal government said you can have that tax-free. And if you enlist in the military from any other state, they let you have it tax-free. But in New Jersey, we say: ‘No, that small little stipend you’re going to get, we’re going to tax that,” Peters said.

Peters said “it’s infuriating” and that New Jersey service members are essentially encouraged to change their address to another state. He said he hadn’t realized that New Jersey was an outlier when he was deployed, until a New Jersey National Guard brought it to his attention as a lawmaker.

“I think this sort of levels the playing field. And again, I just thought it was like everybody else when I was getting taxed. You look at it and you’re like, ‘Holy smokes, this is what I’m paying in taxes even in a war zone,” he said.

It wasn’t clear how much the change would save military members, and cost the state, though in the scope of a roughly $39 billion state budget, it’s not a significant amount.

The bill has kicked around since 2004. Last session, it was approved 37-0 by the Senate and by the Assembly Military and Veterans’ Affairs Committee, only to remain untouched by the Appropriations Committee for the final seven months of the two-year session.

Assemblywoman Annette Quijano, D-Union, the bill’s lead sponsor, said the bill is “something that we should have done years ago.”

“I think the bill is so important that we tell the men and women of the United States armed service that New Jersey cares about them,” Quijano said. “It makes sense for New Jersey to also follow and exclude the pay while they’re in a combat zone or if they’re in a hospital recuperating from that combat zone."

“I know some military members, and I know it’s rough. They have families, and they’re separated. And so this can give some relief to the household and to their families,” Quijano said.

Peters had recently worked with Murphy’s office to develop a series of ethics and government reforms that he agreed to sponsor.

“Philosophically we may not agree on a lot of things, but things, most recently, ethics reform, I had a lot of interaction with his office. And we were going back and forth and talking about the bill and different ethics reform we were going to do, and I said, ‘Hey, speaking of common sense things that should be bipartisan, have you looked at my bill?” Peters said.

The current version of the bill is A2481, although it doesn’t currently include the exemption for pay earned by active-duty military in other states, as had been added to the proposal in 2018.

It hasn’t yet been reintroduced in the Senate this session.

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