The Senate committee reviewed H.34 on the floor Tuesday, a bill that would exempt U.S. military retirement income from state taxable income and add workforce-related duties and reporting to the recently created Office of Workforce Strategy and Development.

Rick Sagle, Office of Legislative Council, said, "Section 2 begins the process of exempting military retirement income from state taxes." He outlined that the bill also shifts some duties so the new workforce office can co-lead workforce education, employment and training alongside the commissioner of labor and adds reporting requirements for the executive director of the Office of Workforce Strategy and Development.

The discussion focused as much on budget and timing as on policy. Patrick Denton, Joint Fiscal Office, told the committee that the full, unconditional military-retirement exemption would be roughly $3.9 million in annual tax expenditure, while an income-banded approach would cost about $2,500,000 annually. Denton said the conference-version proposal pairs a smaller retirement benefit with a refundable veterans credit aimed at lower‑income veterans.

The conference proposal currently under consideration would use means-testing consistent with other credits: the retirement exemption would phase out between roughly $125,000 and $175,000 of federal adjusted gross income for households; the competing veterans credit in the conference text would be fully refundable, pay up to $250 for households with adjusted gross income at or below $25,000, and phase out by about $30,000.

Committee members also discussed implementation and evaluation. The bill tasks the Agency of Commerce and Community Development to work with the Office of Workforce Strategy and Development on a report due Jan. 1, 2029, summarizing market and recruitment efforts to attract military personnel to Vermont jobs. Sagle said the retroactive tax provision in the text would apply to tax year 2025; other effective dates in the bill were set in statute language presented to the committee.

Several senators warned about procedure and timing. The committee chair said, "we might need to strike this section and send a note," referring to the military exemption, noting that leaving the provision in H.34 could send the bill back to Ways and Means and complicate passage. Senator Chen suggested removing the military exemption from H.34 and "keep the report in. Do the rest of the bill," to avoid duplicate or conflicting provisions while S.51 — already in conference — is fleshed out.

Committee members also cited research and comparisons to other states in the discussion. Sagle and other speakers referenced WIOA (the Workforce Innovation and Opportunity Act) as background for why the commissioner of labor remains the federally required workforce liaison even as the new office is assigned co‑lead responsibilities.

No formal motion or vote was taken. Committee staff and members agreed to continue discussion: the item will be placed back on the committee agenda for Tuesday, with committee members planning to coordinate with the members of the S.51 conference committee and consult fiscal and policy staff before deciding whether to remove the military exemption from H.34.

The committee also scheduled additional conference work and indicated it will try to finish committee business before later floor sessions next week.