For many Americans, President Donald Trump’s Tax Cuts and Jobs Act resulted in lower income and corporate tax rates. But an unintended consequence of the 2017 overhaul was a significant tax hike for families whose loved ones lost their lives while serving as active-duty military members.
Gold Star families, as they are commonly referred to, are eligible to receive two forms of compensation for their losses. One is a monthly stipend from the Department of Veterans Affairs, and the other is an insurance annuity from the Department of Defense. Because current law bars military widows from receiving the full amount of both benefits, some recipients choose to transfer the insurance annuity to their children to circumvent the rule.
Before the new tax code was implemented, children whose surviving parent put the benefits in their names were taxed at their parent’s rate. But after the tax code changed, the IRS began to tax the benefit as a trust or estate, which led to significant tax hikes. Gold Star families who previously faced 12% to 15% tax rates on the benefit started to report rates that were up to three times higher, according to Task and Purpose, a military-focused publication.
Legislators from both sides of the aisle, at the urging of Navy veteran and Democratic Congresswoman Elaine Luria, sought to fix the glitch before Memorial Day with the Gold Star Families Tax Relief Act.
They came very close. On Tuesday, the Senate unanimously passed a fix that would change the category of the benefit from unearned income to earned income. The House of Representatives followed suit, and passed a solution that was wrapped into a retirement savings package, 417-3.
If the House had passed the same version of the bill, it would have gone to the President’s desk for signature; but because the House attempted to encase it in a larger bill related to retirement savings, the Senate had to unanimously vote to approve the House version and failed to do so.
Sen. Ted Cruz, a Texas Republican, opposed the language of the retirement savings measure, according to CNN. He reportedly wanted the bill’s language to extend the use of 529 plans to homeschooling expenses, tutoring and test prep, among other things.
Members of the new “For Country” bipartisan congressional caucus helped lead the charge to make the Gold Star bill a priority in the first place. After the group’s endorsement of the Act, the list of co-sponsors in the House grew to 155 — a big feat in a Congress that has only passed 18 laws since January.
Rep. Van Taylor, a founding member of the caucus, says his experience in the Marines taught him how to work with people from various backgrounds. “In the military, you don’t get to pick your peers, or your superiors, or the people that work for you. Those are assigned to you, and you’re there to get a job done. So you work with whoever’s there,” the Texas Republican told TIME.
Congress isn’t that different, and members of the caucus hope to teach that lesson to their legislative peers. “I’m truly hopeful that we can solve this problem,” Taylor says of the Gold Star family tax issue. “But what I will say is, there’s no doubt in my mind For Country is making an impact in the U.S. House, because you’ve got members that are focused on getting things done rather than scoring partisan political points.”
Rye Barcott, the co-founder and CEO of the cross-partisan organization With Honor, started a movement to get more veterans like Taylor elected to public office. He says the congressional caucus is off to a great start. “From tax hikes on Gold Star Families to fighting for safer routes for logging trucks, these members from both sides of the aisle are leading the charge to get things done in Congress,” he said.
Legislators from outside of the caucus haven’t given up on the tax fix, either. Though it won’t be rectified in time for Memorial Day, Cruz told CNN “it’s the right thing to do, and I’m confident we will get it done.”
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