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The Honolulu Advertiser

Posted on: Monday, March 22, 2004

U.S. lawmakers edging closer to phasing out 'widows tax'

By Tom Philpott

A quarter of a million surviving spouses of military retirees have moved two steps closer to seeing the phasing out over the next decade of a drop in survivor benefits that occurs at age 62.

As the House and Senate in mid-March set spending ceilings for fiscal 2005, surviving spouses won a key vote in the Senate, lost a partisan showdown before the House Budget Committee, but then won a promise of cooperation from the committee's chairman.

U.S. Rep. Jim Nussle, R-Iowa, citing strong support among lawmakers this year for enhancing Survivor Benefit Plan benefits, vowed that he would work with the House Armed Services Committee "to arrive at a financial fix" to the SBP problem.

The problem is that SBP benefits typically decrease at age 62, from 55 percent of the deceased member's covered annuity down to as low as 35 percent, a drop that disappoints and surprises too many survivors. The plan's design assumes that beneficiaries, at 62, can draw Social Security benefits.

Nussle's commitment to SBP gains was expected to deflect some of the political heat aimed at budget committee Republicans after a straight-party vote March 17 that killed an amendment from U.S. Rep. Chet Edwards, D-Texas, that would have paid for phasing out the SBP offset by rolling back a fraction of recent tax cuts to Americans earning more than a $1 million a year.

"Let's take a stand today that we are going to help military widows who sacrificed tremendously," Edwards said, urging the committee to tell "people making a million a year we're going to take away $7,000 of their $126,000 tax cut."

All 23 Republicans present voted to reject Edwards' amendment, yet 13 are co-sponsors of similar legislation to phase out the offset.

Edwards said he hoped a roll-call vote would highlight the hypocrisy. Republicans, however, stuck by their chairman and party.

Nussle is under pressure from the White House to stop growth in federal entitlements. But his promise to work on a financing solution for the SBP offset softened outside criticism.

"We're taking him at his word," said Steve Strobridge, co-chairman of The Military Coalition, an umbrella organization for dozens of military associations and veteran groups. They are fighting hard this year for survivor benefit gains. Coalition representatives attended the hearing wearing buttons that urged an end to the SBP "widows tax."

Though disappointed that the committee failed to endorse phase out of the offset up front or to approve Edwards' amendment, Strobridge said the coalition was heartened by Nussle's commitment to find the money.

Nussle said the House budget resolution would establish a reserve account for SBP improvements, to be financed by budget savings identified by the House Armed Services Committee.

Any SBP gains, explained Sean Spicer, spokesman for the committee, must be "deficit neutral. We're going to look for the money to help get this program off the ground."

The Senate gave military survivors a cleaner victory March 12, approving a floor amendment by U.S. Sen. Mary Landrieu, D-La., that earmarked $2 billion to phase out the age 62 offset over 10 years.

During debate, Landrieu said she had expected her amendment to fail but insisted on a roll-call vote to identify those opposed to improving SBP. She proposed paying for her amendment by raising taxes on U.S. companies that re-incorporate in foreign tax havens and by ending tax breaks for individuals who forfeit their U.S. citizenship.

The Senate, to avoid a recorded vote that either would show Republicans rolling back part of President Bush's tax cuts or opposing SBP increases, opted to pass Landrieu's amendment by unanimous consent. That means no recorded vote, but a single senator could have blocked it. None did. The Senate then passed the full budget resolution, 51-45.

Key action on the House budget blueprint occurred on St. Patrick's Day. Nussle and fellow Republicans stood firm against many Democratic amendments. In addition to SBP reform, Edwards sought an extra $1.3 billion for VA healthcare in 2005, on top of a $1.2 billion increase endorsed by the House Budget Committee and the full Senate.

Edwards said the House Veterans Affairs Committee concluded a $2.5 billion increase was needed to avoid a reduction in VA health services next year.

Nussle responded with charts that compared total spending on veterans in the decade before 1995, when Democrats controlled the House, and in the decade since, with Republicans in charge. Montgomery GI Bill benefits rose 35 percent in the first decade but by 133 percent under Republicans, he said. Total VA budget authority rose by an equal percentage in both decades.

The committee defeated Edwards' VA amendment by another party-line vote, 21-16.

Questions, comments and suggestions are welcomed. Write to Military Update, P.O. Box 231111, Centreville, VA 20120-1111, or send e-mail to: milupdate@aol.com. Or visit Tom Philpott's Web site.