U.S. Sen. Mark Warner (D-VA), along with 28 other senators, introduced legislation to provide tax relief to the surviving spouses and children of military members killed in action.
This legislation seeks to correct one of the many unintended consequences of the Tax Cuts and Jobs Act of 2017 – legislation forced through by the GOP that, among other things, inadvertently treats military and VA survivor benefits as trusts or estates, subjecting these benefits to a much higher tax rate. The Gold Star Family Tax Relief Act effectively fixes this error by treating any military and VA survivor benefits as earned income, rather than at the trust or parent tax rate. Companion legislation was introduced in the House of Representatives last Thursday by U.S. Rep. Elaine Luria (D-VA).
“Gold Star families deserve our sympathy and gratitude, not an unfair tax increase thanks to a Congressional screw-up,” said Sen. Warner. “This bipartisan legislation fixes the mistake in the 2017 GOP tax legislation, ensuring surviving families aren’t unfairly penalized and paying back those families who have already been hit with this tax hike.”
“I’m glad so many Senators recognize the urgent need to right the wrong that Congress imposed on Gold Star Families,” said Rep. Luria. “This bill matches bipartisan legislation I am proud to lead in the House. Democrats and Republicans agree – we must fix a broken system and ensure Gold Star Families are not victims of a tax hike.”
Under current law, spouses of deceased service members are eligible to receive two different survivor benefits – the Department of Veterans Affairs’ Dependency and Indemnity Compensation, as well as the Department of Defense (DOD) Survivor Benefits Plan. However, surviving spouses are not currently able to receive both benefits simultaneously in full, and many of these spouses choose to sign the taxable DOD benefit over to their children. Prior to the Tax Cuts and Jobs Act of 2017, children receiving this benefit were taxed at the parent’s rate, but due to changes in the law, survivor benefits going to children are now treated as a trust or estate, and can be taxed up to 37 percent. This change has affected Gold Star families, who previously paid an average of 12 to 15 percent in taxes on this survivor benefit and have now been forced to pay significantly more without adequate preparation.
As a retroactive bill, the Gold Star Family Tax Relief Act would refund Gold Star families who were taxed the higher rate, going back as far as December 31, 2017.
Other Senate cosponsors of this legislation are Sens. Bill Cassidy (R-LA), Tammy Baldwin (D-WI), Michael Bennet (D-CO), Richard Blumenthal (D-CT), Sherrod Brown (D-OH), Richard Burr (R-NC), Bob Casey (D-PA), Catherine Cortez Masto (D-NV), Mike Crapo (R-ID), John Cornyn (R-TX), Tom Cotton (R-AR), Steve Daines (R-MT), Chuck Grassley (R-IA), Maggie Hassan (D-NH), Johnny Isakson (R-GA), Ron Johnson (R-WI), Doug Jones (D-AL), Angus King (I-ME), Amy Klobuchar (D-MN), Bob Menendez (D-NJ), Patty Murray (D-WA), Gary Peters (D-MI), Pat Roberts (R-KS), Tim Scott (R-SC), Kyrsten Sinema (D-AZ), Jon Tester (D-MT), Pat Toomey (R-PA), and Ron Wyden (D-OR).
As a strong advocate of Gold Star families, Sen. Warner also recently cosponsored the Military Widows Tax Elimination Act of 2019 – legislation that would allow more than 4,000 military widows in Virginia, and 67,000 military widows nationwide, to receive all the survivor benefits to which they are entitled. Currently, military families who qualify for payments from the Dependency and Indemnity Compensation (DIC) and the Survivor Benefit Plan (SBP), have their SBP amount reduced dollar for dollar by the amount of DIC received. This bill would remove the offset, alleviating an unnecessary financial burden and ensuring that military widows and their children receive the full support they deserve.
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