Many families of fallen soldiers were surprised to learn that the Republican tax law passed in 2017 caused their tax bills to skyrocket.
Many Gold Star families are paying much higher taxes this year after the Trump-backed tax law caused their survivor benefits to increase substantially, CBS News reports.
Theresa Jones, whose Navy chopper pilot husband Landon died in Operation Enduring Freedom in 2013, told the outlet that survivor benefits allowed her to continue taking care of her two children -- until the new tax law.
Jones’ two children received about $15,000 in survivor benefits in 2018. Jones’ tax bill was for $5,400, a huge increase from $1,100 the previous year.
"When I saw that tax bill I was shocked at how much these boys owed on benefits that were given to them," Jones told CBS. "That's how they have a roof over their head. That's how they have food in their mouths. That's why the lights are on right now. That's how we survive every month.”
Because spouses of fallen soldiers cannot receive full benefits from both the Veterans Affairs Department and Defense Department, Gold Star parents typically sign over the DOD benefits to their children. Under the Republican tax law, Gold Star children are now lumped into the same bracket as a trust or estate, which is taxed at a much higher rate of 37 percent.
"We got lumped into that and somebody had said to me, 'Welcome to the top four percent.' I said, 'My 5-year-old is not top four percent,'" Jones told CBS, adding that she may be forced to sell her home to make ends meet. "For the boys, it's all they've known and I would hate to take that away from them. They've already had so much taken away from them,” she said.
The Treasury Department told CBS it is "evaluating what can be done to solve this issue."
The news outlet Task & Purpose, which first reported the Gold Star family tax increases, noted that there is something the government can do about the issue: Change the rule that prohibits spouses of fallen soldiers from collecting both VA and DOD benefits.
The VA’s Dependency and Indemnity Compensation provides about $1,300 per month to surviving spouses. The DOD’s Survivor Benefits Plan is an insurance annuity based on 55 percent of the fallen soldier’s projected retired pay after 30 years of service. Surviving spouses are barred from collecting both simultaneously. As a result, more than 65,000 surviving spouses are forced to choose just one benefit. While many, like Jones, sign over the DOD benefit to their children, those benefits disappear when the child turns either 18 or 22 (the latter if they are a full-time student). The benefit also disappears if the surviving spouse remarries.
Jessica Johns, whose husband was killed in Iraq in 2003, told Task & Purpose she lost her survivor benefits after remarrying and now has to pay much higher taxes on the Survivor Benefits Plan her 16-year-old son receives. Johns said the tax bill went up from around $400 last year to nearly $3,000 this year.
"I mean I was shocked first of all and then I started to get mad cause I'm like, ‘well first of all, the name of the annuity is Survivor Benefit Plans so I don't understand why they tax it in the first place,’ but if they are going to tax it, why are they all of a sudden taxing like we are trying to shelter money in our kid's names so that we don't get taxed on it?" she asked.
"That's really what they're doing and they're taxing it like we are rich people and pushing some of our income into our children's names so that we can shelter that from having to pay a higher tax bracket for us, but that's not what we are doing. It's a survivor's benefit. It's not a tax shelter for us."
Sen. Doug Jones, D-Ala., has introduced a bill that would allow Gold Star spouses to receive both benefits, and Reps. John Yarmuth, D-Ky., and Joe Wilson, R-S.C., have introduced a similar bill in the House. But even if approved, neither bill would alleviate the unexpected tax law fallout Gold Star families are dealing with this year.
Jessica Braden-Rogers, whose husband died in Afghanistan in 2012, told Task & Purpose her young son’s tax bill jumped from $1,100 last year to $4,600 this year.
"None of us knew any of this until we all started filing our taxes and had such a significant increase in our tax burden," she said. "We've always had a tax burden, but for me, quadrupling the tax burden of a Gold Star child is completely unfair. It's cruel. I mean why would you tax a nine year old?"
"It's so hard, and it's so exhausting,” added Jones. “How am I going to pay for this? ... What am I going to do when this child turns 18 and all this drops off? Am I going to have to sell my house, are we going to have to move?"