Social Security Plan To Phase Out Taxes

Lawmakers in West Virginia have approved a bill that will see state income tax on Social Security benefits be gradually phased out.

Republican Governor Jim Justice announced in January during his annual budget proposal that he wished to see all state-levied taxes on Social Security axed. The plan has taken a step further toward becoming law after it was passed in the West Virginia House of Delegates on Thursday.

This is part of a wider series of tax cuts that have been enacted in West Virginia. In 2023, state income tax rates were reduced by more than 20 percent, the largest tax cut in West Virginia’s history, officials said. While some have praised the latest proposed cut on Social Security benefits as a “step in the right direction,” others have expressed concern over its effects on the state budget.

In 2019, West Virginia enacted legislation that started the gradual elimination of income tax for Social Security benefits for single filers with incomes below $50,000, and $100,000 for those who are filing jointly. The state provided a 35 percent exemption on benefits for eligible taxpayers starting in 2020. This rose to 65 percent as of 2021 and reached 100 percent in 2022.

Senate Bill 458 (House Bill 4880) would extend the exemption to all Social Security recipients regardless of how much they earn a year if it is passed. This would again be gradually introduced over three years, with the tax being cut by 35 percent this year, retroactive to January 1, 65 percent in 2025, and wiped completely in 2026.

The proposal is not yet law—after passing in the House, it will now proceed to the Senate. According to a report by The Associated Press, Justice originally sought to eliminate Social Security taxes completely this year, but has yet to comment on the version passed by the House. Newsweek has contacted Justice via email outside of regular working hours.

Republican delegate Larry Kump signaled that it was high time that state level taxes were removed from Social Security benefits in the state. “This issue regarding taxation on Social Security or any pension or retirement program really grinds my gears, gives me legislative heartburn,” he said, according to The Associated Press. “We’ve been fooling around with this taxation issue on Social Security for many years now, and I’m grateful that we’re going to be doing some more on it.”

“Taxing Social Security undermines the purpose of Social Security,” Tom Hunter, spokesman for AARP West Virginia, which supports the interests of senior citizens told West Virginia Watch in January. “This was a program that was designed to lift seniors out of poverty. It wasn’t a program that was designed to fund state governments. So we believe this is a step in the right direction.”

The tax cut would cost around $37 million in both 2025 and 2026 and would impact more than 50,000 households, according to AP.

On Thursday, West Virginia Center on Budget and Policy Executive Director Kelly Allen said in a statement that “continued efforts to erode and eliminate the personal income tax are undermining our ability to meet the needs of seniors, children and families across our state.”

In January, speaking about the governor’s proposed budget overall, she had expressed concern over the consequences additional tax cuts would have on the budget.

“I think it’s really frankly irresponsible to consider more cuts to revenue as we have yet to see the full impact of last year’s tax packages,” Allen said, West Virginia Watch reported.