WASHINGTON, D.C. – U.S. Senator Pat Toomey (R-Pa.) on May 9 introduced bipartisan legislation to provide tax relief for children who have lost a parent while serving in the military.
“Gold Star families have all endured a terrible tragedy – the loss of a loved one in service to our nation – and deserve the gratitude of all Americans,” said Senator Toomey. “The Department of Defense has long provided for the economic wellbeing of children who have lost a parent in military service through survivor benefits.
Unfortunately, these benefits are currently being subjected to a higher tax rate than intended. Our bipartisan measure will correct this problem. I appreciate the work of Gold Star families who have led the fight to have Congress address this issue.”
“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 Senator Cassidy. “The Tax Cut and Jobs act has helped millions. I thank Democratic colleagues for joining to improve the law.”
“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. “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.”
“Gold Star families deserve our sympathy and gratitude, not an unfair tax increase thanks to a Congressional screw-up,” said Senator Warner. “This bipartisan legislation fixes the mistake in the 2017 GOP tax legislation, ensuring surviving families aren’t unfairly penalized and paying back those families who have already been hit with this tax hike.”
The legislation is supported by Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.). Other cosponsors include Senators Tammy Baldwin (D-Wis.), Michael Bennet (D-Colo.), Richard Blumenthal (D-Conn.), Sherrod Brown (D-Ohio), Richard Burr (R-N.C.), Bob Casey (D-Pa.), Catherine Cortez Masto (D-Nev.), Mike Crapo (R-Idaho), John Cornyn (R-Texas), Tom Cotton (R-Ark.), Ron Johnson (R-Wis.), Steve Daines (R-Mont.), Maggie Hassan (D-N.H.), Johnny Isakson (R-Ga.), Amy Klobuchar (D-Minn.), Bob Menendez (D-N.J.), Patty Murray (D-Wash.), Gary Peters (D-Mich.), Pat Roberts (R-Kan.), Tim Scott (R-S.C.), Kyrsten Sinema (D-Ariz.), and Jon Tester (D-Mont.).
Children of Gold Star families are eligible to receive Survivor Benefit Plan payments, an annuity administered by the Department of Defense that gives survivors an inflation-adjusted monthly income.
Prior to 2018, these benefits were subject to the parent’s tax rate, but as an unintended result of the Tax Cuts and Jobs Act, survivor benefits administered to children of fallen service members are being taxed at a rate typically used for investment income and high income families.
Senator Toomey’s bipartisan measure would fix this problem by taxing the child’s benefits at the child’s individual tax rate, rather than the estate and trust rate or their parent’s rate. This bill is retroactive for tax years beginning after December 31, 2017.