Disabled Veterans TaxUnder current law, veterans with 20 years of military service receive retirement benefits from the Defense Department and those with service-related disabilities receive disability compensation from Veterans Affairs. If a veteran has 20 years of service and a disability, however, the veteran’s retirement benefit is reduced by the amount received in disability compensation. This reduction in benefits is known as the “Disabled Veterans Tax.”
According to the Defense Department, over half a million veterans lose an estimated $3 billion in benefits each year due to the Disabled Veterans Tax. A series of Special Investigation Division reports analyze the local impact of the Disabled Veterans Tax.
Legislation in the 108th Congress, the Retired Pay Restoration Act of 2003, would eliminate the Disabled Veterans Tax. A report prepared by the Special Investigations Divisions (see below) finds that the Retired Pay Restoration Act would provide immediate relief to all of the 560,000 veterans affected by the Disabled Veterans Tax, while the House Republican plan would phase in benefits for only 1/3 of these veterans.
House Republican leaders have not allowed a vote on the Democratic bill. In June 2003, Rep. Jim Marshall filed a “discharge petition” that would force House leaders to allow a vote if 218 members sign the petition. To date, 200 Democrats, 1 Independent, and 2 Republicans have signed the petition.
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