Lawmakers and stakeholder groups are pushing for legislation to be enacted this year that would help families of deceased military members have more money in survivor benefits.
Members of Congress on both sides of the aisle are pushing to end a requirement that reduces the amount of money military families receive in survivor benefits. They’re also pushing to get legislation enacted that would fix a provision of President Trump’s 2017 tax law that inadvertently raised taxes on military survivor benefits received by children.
Both changes have overwhelming bipartisan support and have been included in separate bills that have passed the House. But it remains to be seen if they get enacted this year.
“We’re very hopeful,” said Candace Wheeler, senior adviser for policy and legislation at the Tragedy Assistance Program for Survivors. “We believe it is the intent of Congress to do both, and it’s just a matter of time.”
There are two programs that provide survivor benefits to the families of deceased military members.
One is a Department of Defense (DOD) program. Military retirees pay into this program so their spouses can receive benefits when they die. The program also provides benefits to the surviving spouses or children of service members who die in the line of duty. The second program, a Department of Veterans Affairs (VA) program, goes to the spouses or children of service members who die in the line of duty or of veterans whose death is related to their military service.
The amount that a spouse receives under the VA program reduces the amount that he or she receives under the DOD program on a dollar-for-dollar basis. For example, if someone is entitled to $2,000 under the DOD program and $500 under the VA program in a month, they would only receive $2,000, rather than $2,500. This offset is commonly referred to as the “widow’s tax.”
DOD has estimated that about 65,000 surviving spouses are subject to the benefit offset.
The offset for spouses has led many military families whose relatives were killed in Iraq or Afghanistan to choose to put the DOD benefit in the names of the surviving children, rather than the names of the surviving spouses. This allows the families to receive the full amount of benefits under the DOD and VA programs in the short term. However, the DOD benefits then disappear when the children reach adulthood.
“It’s already a tough life to be a widow and to have your spouse make the ultimate sacrifice,” said Traci Voelke, whose husband was killed in a vehicle accident in Afghanistan in 2012. “There’s no reason we should have to make these complex financial decisions in the wake of our grief.”
Military families argue that the survivor benefit offset is wrong.
Edith Smith, whose husband died in 1998 from a service-connected disability, said the families of career service members who die in active duty “lose what they earned through work.”
The House passed a version of the National Defense Authorization Act (NDAA) in July that included a provision, based on legislation offered by Reps. Joe Wilson (R-S.C.) and John Yarmuth (D-Ky.), that would eliminate the widow’s tax and allow surviving spouses who put the DOD benefit in their children’s names to reclaim the benefit as a spousal benefit.
The Senate-passed version of the NDAA doesn’t include the elimination of the widow’s tax. However, legislation on the topic from Sens. Doug Jones (D-Ala.) and Susan Collins (R-Maine) has more than 70 co-sponsors, and the Senate in September voted 94-0 to instruct the NDAA conference committee to include the elimination in the final version of the bill.
Democrats and Republicans, though, have hit a roadblock in conference committee negotiations on the NDAA over the use of military funds for a U.S.-Mexico border wall. That led Senate Armed Services Committee Chairman James Inhofe (R-Okla.) to introduce a “skinny” NDAA as a backup. That bill would extend necessary authorities to keep DOD operations going but doesn’t include the widow’s tax provision.
Inhofe told reporters Tuesday that he doesn’t know if there will be a House-Senate conference report on the NDAA, but that he would expect one to eliminate the widow’s tax. He told reporters that despite the price tag for the change, “it’s something that most people are in agreement with, certainly a majority.”
The Congressional Budget Office has estimated that the standalone House bill on the issue would increase direct spending by $5.7 billion over 10 years.
The widow’s tax isn’t the only issue involving survivors’ benefits.
On a separate track, lawmakers are pursuing legislation to fix an issue with the 2017 tax law that had the unintended consequence of raising the amount of taxes children of deceased military members pay on their survivor benefits.
The 2017 law made a change to a tax on children’s unearned income, known as the “kiddie tax,” that was created in 1986 in an effort to prevent wealthy people from avoiding taxes by shifting income to their children. Before the tax law, the children’s income was taxed at the rate of the children’s parents, but under the 2017 law, the income is taxed at the same rate as trusts and estates. The change ended up inadvertently increasing taxes on certain income received by children who are not wealthy, including military survivor benefits.
In May, the Senate passed by unanimous consent a bill that would fix the tax issue for the families of deceased military members. Soon after, the House also passed in a near unanimous vote a bipartisan retirement savings bill that would reverse the tax law’s changes to the kiddie tax.
The House-passed bill has faced obstacles in the Senate because a handful of GOP senators want votes on amendments unrelated to the issue impacting military families. Last week, Republicans sought to get senators to agree to put the bill on the floor with votes on amendments, but Democrats rejected the effort because they want to pass the House bill without any changes to it.
Rep. Elaine Luria (D-Va.), a leader in the House’s efforts to fix the tax increase affecting military survivor benefits, said it is an issue that lawmakers want to get resolved.
“I want to close the loop and make sure that we get it reconciled so that we can get that signed into law, because I’m still hearing from Gold Star families in my district that are affected by this, and I certainly want to be able to provide them the relief from the undue tax burden that they had,” she said in late September.
House Ways and Means Committee ranking member Kevin Brady (R-Texas), a key author of the 2017 tax law, said that the kiddie tax provision in the law was first proposed in 2014 in an effort to make it easier for families to file their children’s taxes. He said lawmakers have been working to fix the issue for Gold Star families since it was discovered.
“It’s time for the Senate to move quickly — these families are waiting and deserve this tax certainty,” Brady said in a statement to The Hill.