SCOTUS: State, Federal Pensions Require Same State Income Tax Treatment

A 9-0 ruling in Dawson v. Steager ensures that state law enforcement retirees will not receive state income tax breaks that are denied to federal retirees. The precedent may also be set for the tax treatment of all types of federal pensions.

The plaintiff in this case had worked for the U.S. Marshals Service. He and his wife sued West Virginia when they were asked to pay taxes on disbursements from his annuity. Had he retired from, say, the West Virginia State Police, his pension payments would go untaxed.

Writing for his unanimous colleagues on Feb. 20, 2019, Justice Neil Gorsuch noted that West Virginia had impermissibly created two unequally treated classes of government employees when no “significant differences” existed between state and federal law enforcement retirees. He also dismissed West Virginia’s defense that it did not intend to disadvantage federal retirees, only to “help certain state retirees.”

This case represented a rare instance of the Trump administration and labor unions agreeing on what the best outcome would be. The U.S. Justice Department under the direction of former attorney general Jeff Sessions and the National Active and Retired Federal Employees Association submitted <i>amicus curiae</i> to the Court. Both urged justices to find for Dawson under the 1939 Public Salary Tax Act.

A complete procedural summary and links to the DOJ and NARFE briefs appear on SCOTUSblog.