Monday, February 18, 2013

Taxing the Elderly

While taxes are major revenues for the government, it has tremendous impact on buyers and sellers.  According to Hyman (2011), not a single person enjoys paying taxes including the elderly who, after years of toiling, have to grapple with tough living conditions they can’t bear afterwards. It is absolutely hard for a person of advanced age to survive without assistance either from family or friends or from the government. The reason the government imposes taxes on its citizens is to provide revenue for the goods and services it supplies. Taxes collected by the federal and state governments ultimately benefit the taxpayer. Every state in the U.S. has its own way of taxing the elderly (Edward & Wallace, 2004).

One thing that makes the elderly exceptional during their careers is that they have accumulated years of hard work and dedication to their country through continuous payment of taxes for the years they have been deployed in their workplaces. Therefore, upon retirement, they deserve to be given gratitude through tax exemptions. According to Edward and Wallace (2004), almost 43 states give tax relief to the elderly. On the other hand, 39 states give the elderly tax exemptions on their social security incomes. Apart from the social security tax exemptions, another 36 states are known to give additional credits or exemptions to the elderly (Wallace & Edward, 2004).

The equitable and efficient distribution of income to the elderly is noted in the continuous delivery of social security payments by the government for the period they are in retirement or until they depart the world. However, regardless of accumulating substantial amount of taxes for the years they were employed, on the other hand, for some, the social security benefits dished out by the government may not be enough to sustain their living conditions. The lack of means-testing in the social security program makes it hard to measure equity and efficiency in the fields of social security benefits (Wolfe, 1983).

According to Hyman (2011), most nations that profess democracy give exemptions and deductions to select groups of citizens for particular reasons and that equity is a subjective concept applied by economists who are simply ordinary people like anyone else. In the case of high unemployment caused by economic stagnation or global economic meltdown, government inability to collect taxes may undermine elderly social security benefits. Thus, lack of economic growth could spell disaster for the nation’s social security coffers that diminish if the government intentionally covers its raw surpluses. There are misconceptions that social security should be treated differently even though, from Hyman’s (2011) judgment, Social Security is like any other government program and that there is great contention among economists whether Social Security should be allowed to partake in direct investments in the private industry through stocks and bonds.

According to Arawatari and Ono (2011), some countries, despite sharing similar political and economic backgrounds, apply elderly taxation differently with some imposing higher tax rates while others choose lower tax rates. In developed countries, the elderly are regarded as an exceptional class given the long service they rendered their countries, while in other countries, parents depend on their children for care when they attain feeble age regardless of the many years of toiling. When a government cares for its elderly citizens through special programs like Social Security and Medicare, there is a greater chance the elders will stay healthy and seek little help from dependents.

Most elders who receive government benefits are better off in their advanced ages as the equity and efficiency generated from government goods and services allow them to be independent. Thus, they can arrange for safari tours in the Serengeti and Tsavo National Parks in Tanzania and Kenya respectively; they can buy movie tickets online; or they can go on a cruise to the Caribbean, and also visit the massage parlor frequently.

Caring for the elderly with efficiency and equity should be the hallmarks of any government. Elders are a section of society that played its rightful role when they were hale and healthy. After attaining old age, it becomes the responsibility of the government that they get the care and devotion they deserve. Taxing them, such that they become vulnerable to disease and unable to care for themselves is not a good option for any democracy that wishes to see its citizens overcome all conceivable hardships. Taxing the elderly due to stress related with demographic changes, is a big task for the United States and many other European countries and Japan that are witnessing increased elderly populations. 

Despite the decline of the ratio of the working population to supplement retirees, what is required, is the creation of alternative solutions before the dawn of 2030 when the ratio of retirees to employees is expected to plunge to disastrous proportions due in part, to severe financial emergency as experienced by states, at times, when they fail to make credible forecasts into their futures. Longer forecasts allow policy planners to make crucial demographic prognostications and long-term goals that help overcome unexpected huddles that may have administrative, social, political, and economic implications for society as a whole. Making revenue predictions allow policy makers to make adjustments on demographic developments on finances. Thus, it is imperative Social Security implementations be given top priority so that the revenues earmarked for the program is never exhausted anytime. Likewise, federal and state governments will have to work hand in hand to ensure the elderly continue to receive their packages without obstructions as stipulated by law.

Even though long-term predictions on demographic developments on finances are usually not tested against actuals, they can be replaced with short term forecasts while budgetary allocations are being deliberated (Mikesell, 2011). Not taxing the elderly can be a significant tool to achieving efficiency and stability in the general economy. According to Mankiw (2009), every year, the government makes adjustments to Social Security benefits for the elderly to compensate for the rise or increase in prices. This act by the government is commendable and should be encouraged at all costs. If the rise in prices is left unchecked, there could be problems sustaining the living conditions of the elderly whose survival is based on what they are paid by the Social Security Administration.

Taxing the elderly should be different from taxing the young people in the workforce who also draw unemployment benefits as a safety net in case of loss of job. Medicare and Social Security are two vital safety nets that ensure the survival and wellbeing of our elderly generation. The government may rush to impose hefty taxes on the elderly meager earnings when best by financial constraints that limit its ability to continue providing the efficiency and equity required by law. In a nutshell, poor governance and poor economic forecasts can be utterly dangerous for society as a whole. The good thing with the governing institutions of democracy is the elevation of sound rationalism and liberal values. The use of reasoning as a basis of action or rationalism and encompassing liberal philosophical applications are two important elements that have made possible the prolongation of democracy and the ideals of caring for humans in time of need.

Taxing the elderly as a penalty for living longer should be restrained at all cost because, anyone fortunate enough to attain long life, including the living youthful workforce, will one day raise the alarm and demand their fair share of care and human attachment. Making the elderly pay taxes on their Social Security benefits is not equity in anyway and should be discouraged if we are to see a society of elders with the iron will to survive and live longer. 


Arawatari, R. & Ono, T. (2011). Retirement and social security: the roles of self-fulfilling
            expectations and educational investments. Economics of Governance, 12(4), 353-383. doi: 10.1007/s10101-011-0099-x

Edwards, B. & Wallace, S. (2004). State income tax treatment of the elderly. Public Budgeting

            and Finance, 24(2), 1-20. doi: 10.1111/j.0275-1100.2004.02402001.x.

Hyman, D.N. (2011). Public finance: A contemporary application of theory to policy (10th ed.). South-Western, Cengage Learning.
Mankiw, N.G. (2009). Principles of macroeconomics (5th ed.). Mason, OH: South-Western, Cengage Learning.
Mikesell, J.L. (2011). Fiscal administration: Analysis and applications for the public sector (8th ed.). Boston, MA: South-Western, Cengage Learning.
Wolfe, J.R. & Cullinan, P.K. (1983). Redistribution within an elderly cohort by the social security retirement program.  Policy Studies Journal, 12(1), 47-61. doi: 10.1111/1541-0072.ep11779936.

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