President Donald Trump has long touted the advantages of his 2017 tax reform bill, but Republicans are now under fire for one of the bill’s overlooked consequences: A huge hit for families of fallen service members.
That’s due to a change in how the IRS handles survivor benefits paid out to children, which are now treated like stocks or other inheritances – driving up taxes by thousands of dollars.
“People are absolutely shocked that this happened, and they weren’t planning for it,” Ashlynne Haycock, deputy director of policy for the military families nonprofit Tragedy Assistance Program for Survivors (TAPS), told CNN in an interview. “It has been a severe hardship for surviving families.”
TAPS and several other large veterans’ service organizations are planning to “storm the Hill” right before Memorial Day to lobby members of Congress to change the way benefits are granted to Gold Star families, Haycock said.
It adds another issue to a pile of glitches and mistakes included in the hastily-passed tax bill that lawmakers have had to address after the legislation’s passage. Republicans are already mulling over how to rectify the survivor benefits situation, which drew attention earlier this week after Task & Purpose, a military-focused publication, first reported the increased tax bills.
Rob Damschen, the Republican communications director for the House Ways and Means Committee told CNN that hiking taxes for survivors benefits was an “unintended consequence” of the tax bill, and that analysts and lawmakers failed to recognize it would negatively affect children of fallen service members beforehand.
“Since the 1980s families have wanted Congress to simplify the way children are taxed, and we were happy to provide that help in the new tax code. Military survivor benefits, however, are very different than a gift of stocks and bonds to your child,” Damschen wrote in a statement to CNN.
“Now is the time to act, and House Republicans are committed to finding a solution that is both fair and retroactive so our Gold Star families keep what they have sacrificed so dearly for,” Damschen said.
But some argue the underlying problem is part of a long-running debate that Congress has chosen not to address for nearly two decades.
There are two benefits available to surviving spouses: a non-taxable monthly stipend of about $1,300 from the Department of Veterans Affairs’ Dependency and Indemnity Compensation, and an insurance annuity ranging in amount from the Department of Defense’s Survivor Benefits Plan. Yet under current law, military widows and widowers cannot receive the full amount of both.
For about 65,000 Gold Star families subject to this offset requirement, the government subtracts the amount of the VA benefit from the DoD benefit each month, a policy opponents have deemed the “Widows Tax.” This results in some recipients being left with just the VA benefit, which is about $15,800 annually, and a substantially reduced sum from the Defense Department.
In order to collect the full amount, some surviving spouses choose to designate the DoD benefit to their children.
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