Military 'widows’ tax' repealed in 2020 defense bill in exchange for Space Force

Military spouses could finally see relief now that Congress has repealed limits on survivor benefits.

Abbie Bennett
December 09, 2019 - 11:11 am
GoldStarFamily

Photo by Chip Somodevilla/Getty Images

This story originally published on Dec. 9, 2019. It was updated on Dec. 17, 2019 at 1:07 p.m. 

Thousands of military spouses could finally see relief now that the "widows' tax" is finally repealed. 

The widows' tax limits the amount of survivor benefits Gold Star spouses can collect. Military families and their advocates have pushed for years to have it repealed. 

Michelle Bartz is one of the widows affected by the tax and working to repeal it. She lost her husband, Lt. Col. Paul Bartz, when he was killed in action in Afghanistan nine years ago. He left behind a son, Logan. Since then, Michelle has had to fight bureaucracy to get her survivor benefits. But the widows' tax is still standing in the way and costing her family money they're owed for her husband's loss. 

"Having the phase-out of the offset included in the NDAA is huge," Bartz told Connecting Vets. "I'm feeling a bit reluctant to celebrate just yet until it is signed into law. Ending the offset fixes an injustice and I am profoundly grateful to all who helped get us this far." 

While Michelle and fellow spouses lobbied for quick repeal, Congress has spent months working largely behind the scenes on a compromise for the 2020 National Defense Authorization Act, the defense spending bill for next year. A repeal of the widows' tax was included in the defense bill earlier this year.  

Congress finally reached an agreement -- Republicans allowed for the widows' tax repeal and new parental-leave benefits for federal employees and Democrats allowed the creation of the White House's sought-after Space Force. The widows' tax repeal is planned in phases "over three years," according to bill.

Senators Doug Jones, D-Alaska, and Susan Collins, R-Maine, celebrated the widows' tax repeal Tuesday. The senators sponsored the original bill that was included in the NDAA earlier this year. 

Legislation to repeal the widows' tax has been repeatedly introduced in Congress for nearly 20 years. 

“When we introduced this legislation, we knew we were fighting an uphill battle on behalf of these surviving spouses," said Jones, a member of the Senate Armed Services Committee. "But together, we were undeterred by the task and committed to them that this was the year it would finally get done. There is no more noble cause than to do the right thing for military families who have lost their loved one in service to our country. We took up this fight for those surviving spouses and their families, and I’m honored to be standing with them as we finally put this injustice behind us."

“This provision we secured in the NDAA is a major victory for surviving military and retiree spouses to whom we are deeply indebted," Collins said. "This problem goes back decades, but this year we finally solved it once and for all. I appreciate the overwhelming support we received from our colleagues as well as veterans advocates who helped make this possible.”

The widows' 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 “widows' tax.”

“For 26 years, I have been denied the full benefits that my husband earned and paid for to help take care of his family in the event of tragedy," said Cathy Milford of Mobile, Ala. "The long fight to repeal the military widows' tax has been difficult and none of us want to talk repeatedly about the deaths of our spouses, but that has been necessary to inform our public officials and ask for their help. Though I will be 76 when my husband’s benefits are fully reinstated, I am happy to know that those who sadly become military widows and widowers in the future will no longer have to fight this battle year after year."

The defense spending bill now heads to the president's desk for final approval. President Donald Trump had already signaled that he planned to approve the package.

A repeal of the widows' 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 widows' tax, though a later unanimous vote in the Senate urged negotiators to include it in the compromise bill. 

Bartz and other surviving spouses said there's more work to do. 

More recently, Gold Star families were hit with a surprise Kiddie Tax that cost their children thousands in benefits.

"We still have the insanely high tax rates for children receiving SBP," Bartz said, "and a three-year wait to transfer eligibility back to the spouse, so still more work to do ... It's a bizarre and stressful situation for a family that has already had to deal with so much else." 

Reach Abbie Bennett: abbie@connectingvets.com or @AbbieRBennett.

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BartzFamily
Courtesy of Michelle Bartz