Governor Jim Justice, during his state of the state address last week, proposed eliminating the state tax on Social Security income. The state currently does not apply the income tax to single filers who make less than $50,000 a year and joint filers below $100,000, but this proposal would extend the exemption to all Social Security recipients regardless of income.
West Virginia continues to be an outlier on this issue. Only eleven other states—and none that border West Virginia—apply their state income tax to Social Security payments.*
The Justice administration says excluding all Social Security benefits from state income taxes would benefit at least 50,000 senior households, saving them an estimated $37 million in taxes. West Virginia AARP** state director Gaylene Miller says this is a priority for their members.
“Social Security beneficiaries in the Mountain State deserve to keep the money they’ve earned over a lifetime of hard work,” Miller said.
She’s right. West Virginians pay into the system over decades of work. It is a misnomer to think the government is “saving” the money for individuals; the payroll deductions are used to pay current benefits. However, the promise remains true: you pay into the system with the understanding that the benefits will be there when you retire.
According to Miller, for nearly a half-million West Virginians, Social Security is essential for helping cover living expenses and pay bills. “Taxing Social Security undermines the purpose of Social Security. This was a program designed to lift seniors out of poverty, not fund the government.”
Of course, even if Justice’s proposal passes, West Virginians will still be subject to federal income taxes on Social Security. According to the agency’s information website, up to 85 percent of Social Security benefits may be subject to federal taxation for higher income earners, while individuals with more modest incomes may have to pay taxes on 50 percent of income.
Still, Miller argues that excluding state taxes will benefit local economies as well as individual taxpayers. “By allowing West Virginia’s Social Security beneficiaries to keep all of this hard earned benefit in their pockets, we’ll see a greater reinvestment of these dollars in the state’s economy through increased purchases of goods and services in the Mountain State,” said Miller.
In addition, West Virginia is trying to position itself as a destination for retirees. Taxes aren’t the only issue retirees consider when deciding where to live, but it is one of them. Excluding Social Security from state income tax checks a box for them.
West Virginia leaders have made progress in recent years bringing the tax structure in line with the rest of the nation. Eliminating the rest of the state tax on Social Security benefits is another step toward achieving that goal.
*(Eleven states will tax Social Security for the 2023 tax year: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah and Vermont.)
**(Editor’s note: AARP is a sponsor MetroNews’ legislative coverage.)