- - Monday, August 12, 2019

ANALYSIS/OPINION:

Americans don’t agree on much of anything these days. The merits of hot dogs, apple pie and even baseball are probably divisive at this point.

There does tend to be one exception to the general climate of disregard and distrust, though: The military continues to command nearly universal respect and adulation from Americans of all stripes. Polls show that Americans hold Congress, the media, Hollywood and other institutions in low regard. (And who can blame them?) Not so the armed forces, however. If there is anything that can unify us, it is saluting our brave men and women in active duty.

Relatedly, Gold Star families are particularly respected in this country, and rightfully so. An American Gold Star family has the quintessential “honor that nobody wants:” the distinction of having a close family member who died while serving in active duty in the U.S. armed forces. Their loved ones made the ultimate sacrifice, and their Gold Star family members are left bearing the pain. The least the country can do is make sure that they’re well looked after.

That’s why it’s so infuriating — and yet another telling example of American political dysfunction — that the byzantine U.S. tax code is now busy punishing Gold Star families, levying ludicrous tax rates on the benefits provided to surviving children.

Last week, this newspaper had the story. “Sheryl Hood, whose husband was killed while on duty in Iraq 10 years ago,” reporter Gabriella Munoz wrote, has seen her “taxes for her two children’s survivor’s benefits [soar] from a combined $1,000 to $10,000.” Ms. Hood is far from alone. Thanks to changes in the tax code signed by President Donald Trump in late 2017, Gold Star children have seen huge percentages of their survivor benefits diverted to Uncle Sam.



“The higher taxes are the result of a confluence of laws,” Ms. Munoz reported. “Families that lose someone in the line of duty often receive benefits from both the Department of Veterans Affairs’ Dependency and Indemnity Compensation program and from the Pentagon’s Military Survivor Benefit Plan, which service members fund. In some cases, military families are better off designating their children rather than spouses as beneficiaries for survivor payouts. The children pay taxes on the money, usually on their parents’ returns and at their parents’ rates. But during the 2017 tax overhaul, Congress decided that too many wealthy parents in general were hiding estate money with their children, in effect lowering the taxes they paid.”

The effect? “The 2017 law applied the estate and trust tax rate to children’s inheritance income, which ended up snaring the payouts to Gold Star families.”

The tax snag was typical Washington incompetence. Nobody in Congress or the White House set out to punish Gold Star families; rather, the tax bill, despite its myriad salutary effects, was drafted so hastily and shoddily that these changes slipped through quite by accident. It was a careless drafting error with grave consequences.

It is therefore also easily fixed. “In May, the Senate unanimously passed the Gold Star Family Tax Relief Act, which would treat the children’s benefits as earned income rather than estate income, returning them to a lower tax rate,” Ms. Munoz reported. “A similar provision, introduced by Rep. Elaine G. Luria, a Virginia Democrat and military veteran, cleared the House as part of a broader retirement package. The vote on that bill was 417-3.” But the bills are — appallingly — currently stalled, victims of internecine squabbling and partisan battles on Capitol Hill.

This story is classic Washington, D.C., in the worst way: A bad law is passed by accident, and then politics prevents an easy fix from being made. But made, it must be.

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