Lawmaker tries to end military ‘widow’s tax’ but is blocked by Senate leadership

Abbie Bennett
June 27, 2019 - 2:56 pm
GoldStarSpouseatFuneral

Photo by Elizabeth Fraser/Arlington National Cemetery

An attempt to end the military’s so-called “widow’s tax” was blocked in Congress Thursday when Senate leaders refused to include it in defense spending debate. 

Sen. Doug Jones, D-Ala., headed to the Senate floor “again” to attempt to repeal the tax. 

“Gold Star families deserve better,” he said before heading to the floor. “We obviously can never repay these families for their loss ... but we can dang sure stop the government from robbing them of the benefit they have paid for and earned.”

The “widow’s tax” affects more than 65,000 military families across the U.S. and costs an average of about $11,000 per year for each of them. 

Gold Star families are entitled to receive two types of compensation -- the Dependency and Indemnity Compensation (DIC) program which provides about $15,000 per year to families of service members or veterans who die of service-related causes. 

The second compensation type is the Survivor Benefit Plan (SBP) which service members can enroll in to give families of retirees up to 55 percent of their veterans’ retirement after their death, similar to private life insurance. While the Department of Defense subsidizes the payments, the service members pay into the program using part -- up 6.5 percent -- of their retirement benefits in order to be eligible for the program. 

But when a service member or veteran dies of service-connecting causes, current law says their families can’t get the full amount of both payments -- every dollar paid out under DIC reduces the SBP payments by a dollar. The inability to collect both sets of benefits is popularly referred to as the “widow’s tax.” 

"It is out-and-out unfair and harms the survivors of our service members and military retirees," co-sponsor Sen. Susan Collins. R-Maine, said on the floor Monday. "The average offset (of $925) is a significant amount of money that the widower or widow needs to support themselves and their families in the absence of their service member."

Some families have tried to skirt the loss of as much as $1,000 per month by transferring one of the sets of benefits to their children. But those benefits in 2018 were suddenly subject to surprise higher tax rates known as the “Kiddie Tax” under 2017 tax law -- with rates more than doubling in some cases to as high as 37 percent. Bills to overturn the Kiddie Tax have passed both the House and Senate. 

It was the cost of repealing the widow’s tax that tripped it up in the Senate, though 74 other senators joined Jones in supporting the legislation. The measure is expected to cost as much as $5.7 billion over a decade. This latest delay is one in a long line of endeavors to fix the widow’s tax, but the cost is consistently cited as an issue. 

One of the co-sponsors of the bill to fix the tax, Senate Armed Services Committee Chairman Jim Inhofe, R-Okla., blocked Jones’ attempt to put the measure to a unanimous consent vote because of the cost, he said. That vote could have included the measure as an amendment in the National Defense Authorization Act (NDAA). 

“I support and will continue to support the permanent fix,” he said. “It's going to happen. We're going to do it … but it can’t be on this bill.”

Joyce Wessel Raezer, executive director of the National Military Family Association, thanked Jones for his attempt, but wanted to know “Where are the other 73 bill co-sponsors in saying now is the time to end the Widow’s Tax?” 

Getting the measure included in the House version of NDAA could be the final chance to get the fix passed this Congress, though. Advocates said they’re hopeful it makes it in. Jones said he plans to “keep fighting.” 

“We’re incredibly disappointed that there’s not going to be a Senate amendment on this,” said Ashlynne Haycock, deputy director for policy and legislation at the Tragedy Assistance Program for Survivors (TAPS). "But we’re still hopeful we can see it on the House side.”

The Senate passed its NDAA Thursday in an 86-8 vote. The House is set to begin considering its version after the July 4 break. 

Want to get more connected to the stories and resources Connecting Vets has to offer? Click here to sign up for our weekly newsletter.

Follow Abbie Bennett, @AbbieRBennett.