Senators push to repeal Military 'widow's tax,' give Gold Star families full benefits

Abbie Bennett
September 25, 2019 - 2:40 pm

Courtesy of Michelle Bartz

Michelle Bartz lost her husband, Army Lt. Col. Paul Bartz when he was killed in action in Afghanistan nine years ago.

He left behind an 8-year-old son, Logan, and was just a few months away from celebrating his 20th wedding anniversary. 

Bartz, then 43, died May 18, 2010, of wounds he received when in a suicide car bombing in Kabul.

Since then, Michelle has had to transfer part of the survivor benefits -- 55 percent of Paul's retirement pay each month -- to her son, to avoid losing a portion of their benefits altogether because of the so-called "widow's tax."

But because of federal penalties and later a tax change referred to as the "Kiddie Tax," Logan's benefits are severely reduced. 

Michelle has now dedicated herself to ending the hardship she and so many other surviving families face.

The tax affects more than 65,000 military families nationwide, costing each an average of about $11,000 per year. 

Those 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-connected 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 often referred to as the “widow’s tax.”

A repeal of the widow's tax was included by Democrats in the $733 billion House version of the National Defense Authorization Act earlier this summer, among hundreds of other amendments. Republicans were largely critical of the decision, arguing that repealing the tax on Gold Star families was potentially expensive and there was no plan to offset those expenses. 

The Senate's version of the NDAA did not include a repeal of the widow's tax. 

Members of both chambers are now working to reconcile the Senate and House draft defense spending bills into one that can pass out of Congress and onto the president's desk. 

On Wednesday, the Senate voted unanimously to approve a "motion to instruct" 'the conference committee working on the NDAA, a non-binding instruction to those members to include the widow's tax in their final bill. Senators voted 94-0 and several did not cast a vote. 

Because the motion is non-binding, it remains to be seen if the conference committee will follow the Senate's instruction. 

"I have spent my morning calling each and every senator's office asking them to vote 'yes' on Sen. Jones and Sen. Collins' motion to instruct to include repealing the widow's tax in this year's NDAA," Michelle told Connecting Vets. "I know many other military widows and supporters are doing this as well."

Surviving spouses with young children are "encouraged to sign away their rights" to SBP, Michelle said, and the benefits passed on to children are heavily penalized or taxed. Most recently, Gold Star families were hit with a surprise Kiddie Tax that cost their children thousands in benefits, which Michelle described as "crushing." 

Jones said the vote was the Senate's opportunity to "correct a long-held injustice ... that has caused significant pain to military families. Now is the time (to show veterans) with our actions and not just our words ... that we support them." 

Sen. Jim Inhofe, a co-sponsor of the measure, said "the one problem with this is it's not paid for ... we'll have to get busy to figure out how to pay for this thing." 

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Reach Abbie Bennett: or @AbbieRBennett.