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Opinion

Tax Code Puts American Dream for Seniors at Risk

TAX-CODEFrom – State Representative Charles “Doc” Anderson

You work hard all your life, take care of your family, pay your taxes, and save for a rainy day and to secure your retirement and provide for your golden years. You believe you have achieved the American dream, however, with the current federal tax burden, families have to shoulder, the ability of most Americans to obtain these goals begins to unravel. This is especially manifest in the federal tax code by the “age penalty,” a tax policy targeting seniors which results in a much higher and unreasonable federal tax burden. This “senior tax abuse” scenario is unfair to older Americans after they have worked, saved, and paid taxes all their lives and undermines the American dream.

The top 1% of income earners nationally (millionaires & billionaires) pay on average a federal tax rate of 22% yearly. Compare that with the rate paid by most seniors receiving Social Security benefits and currently earning over $32,000.00 each year who are forced to pay a tax rate of up to 28%. At the $42,000.00 yearly income level (hardly considered wealthy,) 85% of Social Security Benefits become taxable up to a 28% rate. Seriously, a higher tax rate (28%) for a $42,000 yearly income compared to a 22% average rate for million dollar wage earners? “This “age penalty” is blatantly unfair, confiscatory, and betrays those who are self-reliant, did the right thing, and saved for their future retirement.

The arbitrary mandatory minimum distribution (forced withdrawal up to 4% of all savings, IRA’s and annuities) every year after the age of 70.5 is clearly and simply unfair age discrimination on the part of the IRS and Congress. Forcing seniors to withdraw up to 4% of their savings each year (also taxed at a higher rate and increasing their total income) is punitive and creates a “double jeopardy” tax penalty not faced by younger tax payers.

Another, even more egregious, travesty cooked into the IRS tax code allows the federal government to pilfer the financial assets of seniors upon the death of their spouse. The surviving spouse must deal, not only, with the emotional loss but also must surrender most or all of the Social Security benefits of their deceased husband or wife. To add further injury, standard deduction and personal exemptions ($10,300) of their spouse are also lost, resulting in a higher income tax rate on less income.

The result of all of this is that seniors are financing a disproportionate amount of federal spending. The current presidential campaign provides seniors with the opportunity to demand that those seeking the office explain how they will remedy this government sanctioned “senior abuse.” It’s time to lift the heavy hand of government, reform this unfair depletion of senior American’s assets, allow them to reap the benefits of their retirement planning, give seniors a fair shake, and revitalize the American dream.

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State Representative Charles “Doc” Anderson, a veterinarian, has represented  District 56 (Waco and McLennan County) in the Texas House of Representatives since 2005

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James Mourek

There should be a AMAC Congressional Lobby to end the forced distributions from IRA accounts at age 70 1/2. Have your favorite Congressman enter a bill to the Congressional Legislature for a Vote in the 2016 election year! I’d speculate the Democrats will be losing Florida, California, Texas; and, the entire ‘rust belt’ right on into New York City itself for every Congressional NO Vote on a focused legislative issue of ending the United State Government’s forced IRA sales of all IRA asset categories nationally triggered by AGE discrimination. Maybe an Age Discrimination Law Suit for compensation for past Governmental discrimination might hurry them along; (ducking the issue), by having the Supreme Court find for the ACLU in an Age Discrimination Law Suit. Just how can a government justify having elderly forced to sell their assets without also forcing every citizen potentially to do likewise….based on AGE ! A very… Read more »

David

This is one reason that people are being told not to put any money into banks or investments as the government knows and goes after what you have. Taxes offset any interest or profit on investments and only the banks, investment advisors, and the government gets any benefit on your money.

Frank Van Kerckhove

lets remove all taxes we now pay and passThe Fair Tax where we all decide how much tax we pay by what we buy and also give a break to the poor

Roy Hubbard

I guess paying taxes on a social security check is akin to paying taxes on dividends from investments but it just seems to be a bit of a gouge by the elitists who run this country.

Paula Recker

I am retired, but work part time for a financial planner (CPA and CFP) who also teaches taxes at a state university and does tax preparation.

His comments regarding the Tax Code article were that the percentages were incorrect as were the comments about the RMD.

My concern is that if we as members of AMAC cannot rely on the credibility of your articles, how are we to put credibility in your products advertised or any information you provide.

Walter Homsey, Jr.

What? Are you joining the antagonists? We don’t need any more dissension among the ranks, especially at this time.
There have been plenty of occasions to have brought this issue to fore. The socialistic Democratic Party does not need you help. Get off of it and any like articles!

Bob

Don’t vote for incumbents! Incumbents = No change

Tom Reynolds

Most of AMAC’s stuff I agree with but this seems to be creating issues for the purpose of creating issues to make AMAC look like they are doing something. Its too deceptive, which is what I hate about politicians. The paragraph about tax codes is misleading. For example, it uses “averages” for wealthy versus “up to” for seniors which are different and intentionally misleading. I’m not so sure this premise is true given the misleading way it is presented. And remember, the rate is applied after our deductions and exemptions. As to the mandatory minimum distribution – those were the rules when we agreed to shelter current income in the expectation of lower income and less taxes when we retire. (Aha, see purpose of above paragraph’s misleading issue.) Now, after we have the benefits, lets complain about the cost? The issues with SS and death are legitimate, but keeping the… Read more »

Roy Mendelsohn

There is a book that has been published titled “The Fair Tax”. It very clearly lays down the basis for this tax. It states that all existing taxes are eliminated and replaced by a national Sales Tax of, I believe, 20%. There are proposals to cushion the impact on low income people which seem reasonable to me. One is initially appalled at the prospect of everything we buy jumping from 6%/7%/8% to 20% until one realizes that all vendors will also be appalled at the drop in sales such an increase would effect. The vendors would quickly realize that without all the business and other taxes they previously paid, they would be able to reduce their prices to something less than the previous prices with sales taxes at 6%/7%/8%. No doubt there will be hiccups initially, but we have to get off the current IRS debacle. This could well be… Read more »

GAry

Possibly the only escape from what our country has become is a Second Revolution.

Mike

Since this article brought up a “discrepancy” between the 22% tax rate paid by the top 1% of earners and the 28% paid by retirees who earn $42,000 annually, you have probably opened a so-called can of worms. Now the left will want to raise the 22% to exceed the 28%. SHHHHH. Don’t say it loudly again. They might hear. There are a lot of changes that need to take place in the U.S. This is just an example of a minor thing that too many people are spending too much time and effort arguing about and ignoring the serious problems. The truth is that both the rich and the not so rich pay exactly what the House and Senate have them pay by law. If anyone does not like what someone else is paying, let them do what the Constitution states that they can do – “Petition the government… Read more »

Ronnie

Social Security introduced by FDR in 1930’s, only 1% of first 1400.00 in earnings to be considered, program was voluntary. Now we pay 7.65% of our income to SS, mandatory participation. All money paid to SS was to be tax deductible, not anymore. Money was to be in an independent trust fund not to be used for any other government program, moved to the general fund by LBJ and his democratic congress. Annuity payments were not to be taxed. This was changed under Clinton with Al Gore casting the deciding vote as president of the Senate. We now are taxed on 85% of our SS payments received. The real topper to all of this is in 1978 Jimmy Carter and the democratic congress decided if an immigrant came to this country at age 65 they would received SS payments having never paid a dime into the system. THE DEMOCRATS SCREAM… Read more »

Rob

The question arises… Do you live in Washington D.C. or one of the islands controlled by them.? Were you born in Washington D.C. or one of the islands (Puerto Rico, Guam, etc.? Were born to a family from Washington D.C or the Islands? and finally, Are you employed by the federal government or elected to a post there? If not, then you are considered a State Citizen or an Amercan National. As such the latter two are not required to pay any federal taxes unless they volunteer to do so. The fact that some people were affected by the 14th Amendment such as the freed slaves of the Civil War.But, there is a question as to it’s validity due to it not passing by the 3/4ths of the Senate required. In other words the 14th Amendment may not even be legal. The problem has been that most people are ignorant… Read more »

Rudy Treml

We need to eliminate all income tax in the USA on people and businesses. Raise money to run our Government with a National consumption tax ( sales tax ) like the States use. Inturn, the people who spend the most money will pay the most taxes – so very progressive. But, tax all goods and services with no exceptions which takes the politians out of the equation since they like to use the tax code to raise funds for their campaigns. Work out a system where everyone gets a tax break on the initial national sales tax which mirrors the current standard deduction in the current income tax system. And lets fund SS and medicare with the national consumption tax so seniors are protected. Does this sound difficult ? Answer, NO! Why? Because the bill is already written and is in Congress for review. Check it out yourself — the… Read more »

Gavin

Most of the later comments in this article have validity, but my comment here deals only with the first premise that says millionaires and billionaires aren’t paying their fair share. So let me get this straight: A millionaire pays “only” 22%, which equals $220,000.00. A pensioner at $42K pays an “excessive” 28%, which equals $11,760.00. Gimme a break! Even at the lower rate, that single millionaire is STILL paying a total almost as much as 19 of the “overburdened” pensioners. For that, the millionaire deserves a break I think. And maybe it’s we pensioners who aren’t paying our fair share. I joined AMAC because I thought they supported conservative ideologies, but the first premise of this article is a rehash of the whining class-envy perpetrated by the Socialist/Liberal agenda. Is AMAC becoming just another front for the Liberal Democratic Party, like the AARP? Somebody please let me know now so… Read more »

Doug Ross

When I retired and began receiving the Social Security benefits for which I had paid FICA taxes for almost 50 years, I was unaware of the income tax consequences. After paying income taxes on my Social Security benefits, I sent an email to AMAC, Senator Cornyn, Senator Cruz and Representative Williams asking for an explanation of the income taxes on Social Security benefits. Representative Williams’ office responded and provided a link to the Social Security Administration website. The website provided the desired data and the history behind those taxes. These taxes are taxes on the FICA taxes that those that receive Social Security benefits paid. Those taxes are unfair and should be deleted from the income tax code immediately. Furthermore, those members of Congress that support these taxes should be voted out of office and replaced with those that have concern for tax payers fairness. It will be extremely difficult… Read more »

HARRY B

I MAY BE MISTAKEN BUT DID’NT I PAY INCOME TAXES ON THAT MONEY I PUT IN TO SOCIAL SECURITY WHEN I WAS WORKING ? AND NOW I AM PAYING TAXES WHEN I GET IT BACK ? I THINK I’M BEING DOUBLE TAXED. I’M SORRY FOR COMPLAINING AFTER ALL I’M ONE OF THOSE RICH SENIORS ( $56.000 A YEAR GROSS ) COUNTING SOC. SEC. AND PENSION. SO I GET HIT FOR 85% OF THE SOC. SEC. THANKS TO MEANS TESTING NOW IF I HAD A SECTION 8 HOUSING VOUCHER I COULD BE LIVING IN KEY WEST FL. OH YEAH IT’S TRUE..

Larry Walters

This is just another way an income tax system squashes Americans. An income tax system only benefits those in D.C. and their friends, the very wealthy and large corporations who pay millions of dollars to tax lobbyists to see to it that there is special tax breaks for those with money and contacts.
We can eliminate all of this nonsense by hounding our representatives to pass H.R. 25 (House) and S. 155 (Senate), the FairTax bills. Then and only then will there be action to repeal the 16th amendment to eliminate taxing of our incomes and closing all loop hole and credits which most of us can’t take advantage of.

Diana Erbio

Has anyone looked at Rand Paul’s tax plan? It looked pretty fair to me, especially because it cut out the carve outs for the chosen.

John Wood

The thing about the Fair Tax, that people do not get is that when Seniors spend savings now weather it is from a Roth IRA or not you are paying an embedded tax of about 25 percent you just don’ realize it. Every person that handles the merchandise that you buy, pays income tax and that is passed directly along to you. So with the Fair Tax that goes away. “No income Tax” And the fair Tax is included in the price you pay. So if a product costs 100 dollars now it will still cost 100 Dollars, but no income tax and no tax on savings or dividends. This would be the greatest gift to you grand kids you could possibly give. Not to mention the tremendous boost for the economy. And you would have to hide in a hole to avoid getting a job.