AARP has ‘serious concerns’ about Senate version of Social Security tax elimination bill

The Senate Finance Committee amended a bill that would eliminate the state's tax on social security, tying it to triggers that affect the state income tax. (Will Price | West Virginia Legislative Photography)

An organization that advocates for the interests of older West Virginians says it has “serious concerns” about the Senate version of a bill that would eliminate the state income tax on Social Security.

House Bill 4880 is up for a vote in the Senate Thursday.

As the legislation passed in the House of Delegates last month , the tax on Social Security would be phased out over three years, starting with a 35% deduction for 2024, 65% for 2025 and 100% for 2026.

The Senate version of the bill, as amended by the Senate Finance Committee this week, would tie the income tax reduction to triggers already in place that reduce the state’s income tax by as much as 10% depending on if the state’s economic growth outpaces inflationary costs.

Tom Hunter, a spokesman for AARP West Virginia, said the Senate version has caused a lot of confusion and uncertainty.

“We just have some very serious concerns about the Senate Finance amended version of the bill,” Hunter said. “I think we’re hopeful at the end of the day the House and the Senate can come together and work something out, but we have some very serious concerns about what happened with the Senate Finance Committee amendments on this bill, the strike and insert amendment.”

Finance Committee Chairman Eric Tarr, R-Putnam, said if the income tax reduction is not triggered, 100% of the Social Security tax will be eliminated. If there’s a partial reduction in income tax, whatever is left can be put toward “knocking out” the Social Security tax, he said.

“So you could feasibly knock it out in one year,” Tarr said. “You can knock it out in three years because the other part of it is that if there’s less than 35% on Social Security tax that would be remaining. Say you get an 8% cut in your income tax across the state. And you got a couple percentage left then it would go to 35% on Social Security.”

Tarr said the point of the triggers in the Social Security tax elimination bill is to have certainty on how much revenue the state has to work with for spending or reducing revenue.

Angela Vance, associate state director for AARP West Virginia, called the House version of the bill “a measured and reasonable approach that will provide certainty and planning for both older West Virginians and lawmakers as they craft a budget.”

“We don’t want retirees or people who are planning for retirement to have to wait anxiously until August to find out how much money they are going to have,” Vance said.

Tarr said he has the same concerns for the state that AARP has for retirees.

“I need certainty for the state in order to do this budgeting,” Tarr said. “And when things are in a lot of flux beyond what you can accurately forecast, that’s usually when I personally like to apply a trigger.”

Eliminating the state tax on Social Security is one of three tax cuts Gov. Jim Justice has proposed in his $5.26 billion fiscal year 2025 budget. Eliminating the tax would mean about $37 million loss in revenue and the three tax cuts together equal about $50 million.

AARP West Virginia has advocated for eliminating Social Security tax for years, Hunter said. It was the number one issue brought up in a survey of AARP members recently.

Currently, the state allows a tax deduction for all Social Security benefits for single people with less than $50K in federal adjusted gross income or married people less than $100K in federal adjusted gross income.

Asked about the Social Security tax elimination bills during his weekly press briefing Wednesday, Justice said the House of Delegates has stood “rock solid” on pay raises for state employees and tax cuts and the “Senate’s still thinking about it.”

“There’s no point in casting any stones or anything like that,” Justice said. “I hope to goodness that they’ll come along and we’ll be able to give our pay raises to our folks and we’ll be able to give our tax breaks, tax cuts to our folks as well.”

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