West Virginia is an older state. According to Census Bureau figures, the median age is 42 years; that’s four years older than the national average. One in seven West Virginians is 65 or older.
However, the state does not treat its older citizens very well when it comes to taxation. Kiplinger rates West Virginia “Not Tax-Friendly” for retirees. One of the biggest reasons for that poor ranking is that West Virginia taxes Social Security benefits the same way they are taxed at the federal level.
That’s punitive for many of the 468,000 West Virginians who receive Social Security and make enough to be subject to state income tax. However, Governor Jim Justice is taking the long overdue step of eliminating that tax through legislation.
West Virginians 65 and older already qualify for an $8,000 modification to their taxable income. Under the Governor’s proposal, retirees can choose between excluding their Social Security from taxation or the $8,000 modification, whichever produces the greatest tax savings.
The plan will benefit middle and upper income Social Security recipients the most, but that’s because lower income West Virginians—individuals who earn less than $25,000 and couples with income of less than $32,000 are not earning enough to pay taxes on their Social Security anyway.
The Governor’s office estimates the change will enable older West Virginians to keep an estimated $50 million annually that they would normally pay to the state. That’s money that will stay in local economies, while helping those folks pay their bills and maintain a reasonable standard of living.
Excluding Social Security from state taxation will also make West Virginia more attractive to retirees. The Mountain State will never be like Florida or North Carolina, but protecting more of seniors’ income might entice some retirees to move here or encourage others to stay rather than fleeing to a more tax friendly state.
West Virginia is currently an outlier on this issue. Just three states (West Virginia, North Dakota and New Mexico) tax Social Security benefits like the federal government. Twenty eight states exempt Social Security benefits from taxation.
AARP West Virginia has been working for the Social Security exemption for years, and strongly supports this bill. The organization says their polls consistently show this to be their members number one issue.
Getting older is tough enough as it is. Frequently retirees are unpaid caregivers for a spouse or other family member and an increasing number of older couples are raising their grandchildren because the childrens’ parents have been caught up in the opioid epidemic.
Delivering those senior West Virginians from the additional burden of paying state income tax on their Social Security just makes good sense.