A bipartisan group of more than two dozen members of the U.S. Senate, including Wisconsin’s Tammy Baldwin, introduced a bill on May 8 to lower taxes on Gold Star families.
The Trump tax law made a change that resulted in children who lost a parent serving in the military paying more taxes on Survivor Benefit Plan benefits, an annuity administered by the Department of Defense.
“Wisconsin’s Gold Star families have sacrificed so much for this nation and the freedoms we all cherish,” said Senator Baldwin. “This bipartisan legislation is a much-needed fix to the 2017 law that unfairly raised taxes on these hardworking families.”
Before the tax law, survivor benefits were taxed at the rate of the child’s parents, but under the tax law signed by President Trump, they are now taxed at the same rate as a trust or estate, which increased the tax rate from no more than 15 percent up to 37 percent. That translated into hefty tax bills for many of those military families this spring.
“This bipartisan legislation helps those who lost a husband or wife, a father or mother, serving in the military to protect us. This legislation fixes an unintended problem and lessens the taxes of the surviving spouse,” said Dr. Cassidy. “The Tax Cut and Jobs act has helped millions. I thank Democratic colleagues for joining to improve the law and ensure more Americans benefit.”
This bill would fix the issue by taxing the survivor benefit at the child’s individual tax rate, rather than the higher rate. Outside advocate programs for survivors have noted that Congress could also avoid the tax issues by solving underlying problems with military death benefits. Currently that policy forces families to transfer everything into their children’s names.
“Gold Star families have given more to our country than most of us could ever imagine. While we can never repay their immense sacrifices, we do make a solemn commitment to care for them,” said Senator Jones, who co-introduced the legislation. “Unfortunately, thousands of these widows and widowers are currently denied the full benefits they’re due, which forces many to resort to putting some of these benefits in their children’s names. To significantly raise taxes on those children’s benefits is unconscionable, and I am proud to join with my colleague Senator Cassidy to propose legislation to correct this egregious mistake. It is a first step toward honoring our commitment and making these families whole financially.”
The issue affecting Gold Star families is one of several areas where there have been unintended consequences from the GOP tax law.
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