Other Free Encyclopedias » Medicine Encyclopedia » Aging Healthy - Part 4 » Taxation - Federal Tax Law, State Income Taxation, The Combination Of Federal And State Income Tax Burdens

Taxation - Conclusions

age aging social relief income elderly perspectives

Federal, state, and local tax systems tend to treat elderly taxpayers very generously. The costs of this generosity will rise rapidly after 2010 when the number of elderly persons will grow at an extremely rapid rate and the number of workers will stagnate because of the continuation of low birth rates that began in the 1960s.

The devices used to provide tax relief to older adults often have erratic and inequitable effects. People with the same income can face quite different tax bills depending on how the income is received. If it is deemed desirable to provide tax relief to older individuals, it would be more equitable to do it with an extra exemption, a tax credit, or lower tax rates for all those over a certain age, say sixty-five, rather than concentrating relief on specific types of income likely to be received by old people, such as Social Security or pensions. Whether one chooses a credit, an extra deduction, or a lower tax rate would depend on how one believes that the tax relief should be shared by different income groups. Superficially, it appears somewhat odd to provide any tax relief at all to very affluent older taxpayers. However, the current tax and transfer system, along with private policies such as means tests for college financial assistance, already contain numerous disincentives for accumulating wealth. It is necessary therefore, to be cautious as to how far we should go in continually making the system more progressive.

RUDOLPH G. PENNER

See also ESTATE PLANNING; PENSIONS; RETIREMENT PLANNING; SAVINGS; SOCIAL SECURITY.

BIBLIOGRAPHY

DUNCOMBE, W.; ROBBINS, M.; and WOLF, D. ‘‘Chasing the Elderly: Can State and Local Governments Attract Recent Retirees?’’ Aging Studies Program. Paper 22. Syracuse, N.Y.: Center for Policy Research, 2000.

ENGEN, E. M.; GALE, W. G.; and SCHOLZ, J. K. ‘‘The Illusory Effects of Savings Incentives on Saving.’’ The Journal of Economic Perspectives 10, no. 4 (1996): 113–138.

GALE, W. G., and SLEMROD, J. B. ‘‘Ancestor Worship.’’ The Milken Institute Review 2, no. 3 (2000): 36–49.

HUBBARD, R. G., and SKINNER, J. S. ‘‘Assessing the Effectiveness of Savings Incentives.’’ The Journal of Economic Perspectives 10, no. 4 (1996): 73–90.

NALEBUFF, B., and ZECKHAUSER, R. J. ‘‘Pensions and the Retirement Decision.’’ In Pensions, Labor, and Individual Choice. Edited by David A. Wise. Chicago: University of Chicago Press, 1985. Pages 283–316.

National Conference of State Legislatures. Fiscal Affairs: State Death Taxes. Available on the World Wide Web at www.ncsl.org

PENNER, R. ‘‘Tax Benefits for the Elderly.’’ The Retirement Project Occasional Paper No. 5. Washington, D.C.: The Urban Institute, 2000.

POTERBA, J. M.; VENTI, S. F.; and WISE, D. A. ‘‘How Retirement Savings Programs Increase Saving.’’ The Journal of Economic Perspectives 10, no. 4 (1996): 91–112.

U.S. Office of Management and Budget. ‘‘Tax Expenditures.’’ Analytic Perspectives: The Budget of the United States Government, Fiscal Year 2001. Washington, D.C.: U.S. Government Printing Office, 2000.

U.S. Treasury, Internal Revenue Service. Individual Income Tax Returns 1998. Washington, D.C.: IRS, 2001.

VOSS, P.; GUNDERSON, R.; and MANCHIN, R. ‘‘Death Taxes and Elderly Interstate Migration.’’ Research on Aging 10 (1988): 420–450.

[back] Taxation - Effects Of State And Local Tax Policy On Location Decisions

User Comments

The following comments are not guaranteed to be that of a trained medical professional. Please consult your physician for advice.

Your email address will be altered so spam harvesting bots can't read it easily.
Hide my email completely instead?

Cancel or