Trump Administration Pushes for End of “Orphan Tax”
Recently, the Trump administration successfully encouraged a 30th state to eliminate its “orphan tax.” This initiative followed First Lady Melania Trump’s push for a program aimed at placing children in foster care, helping them to secure a better future.
Yet, New York remains one of the 20 states that continue to impose this tax, which deducts Social Security survivor and disability benefits from foster children’s finances. This practice leaves many foster kids in a tough spot financially once child support ceases.
The benefits in question can accumulate to thousands, often representing a crucial lifeline that can determine whether a young adult finds success or struggles with poverty once they enter the job market.
Alex Adomas, assistant secretary of the Department of Children and Families (ACF), highlighted in a discussion that these survivor benefits can genuinely be the “difference between success and failure.” He noted that they could facilitate essential expenses like housing and education, stating, “It’s a down payment on a house. It’s years of rent on an apartment.” For foster children, these funds signify far more than they do for the state.
Under current laws, if a parent has been contributing to Social Security and passes away, their child is eligible for monthly survivor benefits. However, the orphan tax is perceived by critics as double jeopardy, given that states are already mandated to cover foster care costs. In just one year, states managed to collect around $179 million from Social Security for these children.
Typically, survivor benefits average around $1,100 monthly, which can aid in transitioning foster children towards education or stable housing. Adomas pointed out that after spending two to three years in foster care, these survivor benefits become a significant resource for youth.
The latest state to eliminate this practice was Oklahoma, with Governor J. Kevin Stitt stating, “Regardless of their background, all children deserve the opportunity to pursue the American Dream and build a bright future.”
As for the remaining 20 states, some have shown willingness to abolish the orphan tax. ACF anticipates more states will follow, as governors can easily halt this practice with an executive order.
“Thirty states have prioritized equity over bureaucracy,” remarked Department of Health Secretary Robert F. Kennedy Jr. “These benefits are intended to help children after a parent’s death, not to repay the government.” He added that HHS would maintain pressure on states to protect these funds.
Interestingly, New York’s governor, Kathy Hochul, hasn’t offered any insight into why the state persists with this tax. Meanwhile, New York City has taken steps to ensure orphans receive their survivor benefits. In 2021, the city allowed orphans transitioning from foster care to access these benefits through bank accounts.
Many states dropped the orphan tax after Melania Trump introduced a savings initiative for children in foster care called Cultivating Future Accounts. Adomas noted that the First Lady’s involvement has “accelerated” progress on this front, with numerous states committing to creating accounts for adopted children and ditching the tax.
The issue of financial independence comes into sharper focus. Adomas expressed optimism that these accounts could mature into meaningful resources by the time these children reach adulthood, as nearly all young individuals who enter foster care come from low-income backgrounds and most exit the system with very little.
Statistics reveal that around 65% of youth aging out of foster care face poverty by the age of 23, as reported by Imprint. The introduction of these savings accounts alleviates fears among state officials concerning how 18-year-olds would handle significant sums of money.
“Fostering the Future Account is designed for substantial life milestones,” Adomas explained, adding that it helps ensure children are on a path toward financial self-sufficiency when they transition into adult life. The First Lady emphasized that supporting children in foster care is a “moral obligation” for the nation.
