One more post on my analysis that shows that a hypothetical young couple in New York City would owe nearly three times the federal, state and local taxes as a senior citizen couple with the exact same income, and would have just half the money left over after taxes and housing expenses. How can this be justified, other than as a matter of political power? The accumulating list of special breaks for seniors is often justified on the grounds that seniors are worse off than the young. They may also be justified on the grounds that the seniors had to pay more when they were young, and the young will get the same breaks when they are old, so it all evens out if one takes a “whole life view.” Considering these points for what they are worth, I find myself agreeing with the Concord Coalition whose analysis (for Northern Virginia) I have essentially duplicated here (with the same results): “Such vast discrepancies are impossible to defend.”
First, it must be mentioned that some of the differences between my hypothetical couples, the Senior Voters and Young and Younger Hopeful, are due to a lifetime of saving on the part of the former. The seniors have low housing costs because they have an owner-occupied housing unit that is completely paid off, after de facto saving for many years, and have equal income despite not working in part due to $250,000 in additional accumulated savings. Today’s young hopefuls would do well to follow that example, and save some money rather than running up the credit card balance. One of my concerns is that as the burden of an aging population becomes overwhelming, the politically easy way out will be to reduce benefits for and increase taxes on those who have saved for old age, on the grounds that they are “rich,” in order to equalize their well later being with those with equal lifetime incomes who have previously lived larger, borrowed and spent it all. The Aesop’s fable about the ant and the grasshopper would have come out differently if the latter could outvote the former.
On the other hand, the relatively high tax burden faced by the young inhibits their ability to save to buy a house, pay the mortgage, save for their children’ education — and retirement. Some can, but most can’t.
The arguments in favor of special breaks for seniors data back to the days when seniors were in fact, as a group, less well off and treated unfairly. In 1950, the suicide rate for people age 65 to 74 was 29.3 per 100,000, while for those age 15 to 24 it was just 4.5. In 1969, the percent of persons age 65 and over in poverty was 25.3 percent, compared with just 13.8 percent for those under age 18. The generations that were old in the 1950s, 1960s, and 1970s, before the huge increase in homeownership in the United States, were more likely to be renters, and at the time Social Security was not indexed for inflation. So when inflation and rents soared in the 1970s, and their Social Security and pension incomes did not, many seniors faced terrible hardship. I’m old enough (just) to remember what the phrase “senior vittles” refers to, the nursing home investigations that made Geraldo Rivera famous, and what the “bag ladies” refers to in Billy Joel’s song “Close to the Borderline.”
Today everything is different. Today’s young are not better educated that those who grew up in the 1950s and 1960s. Social Security has been indexed for inflation since the 1970s, while the minimum wage has not, and yet it is the seniors who people say deserve breaks because they are on “fixed incomes.” Multi-tier labor contracts provide enriched compensation for those with seniority, but diminished benefits — including lost pensions in many cases –for more recent employees. The suicide rate for persons age 65 to 74 fell by half to 15.0 per 100,000 by 1996, while that of those age 15 to 24 nearly tripled to 12.0. In 2002 only 10.4 percent of Americans age 65 and over were poor, compared with 16.3 percent of those under age 18.
But all this is irrelevant to what I am talking about here. Regardless of age, it is fair to say that those with lower incomes can afford to put less into the community and often need more help out of it. But this is a discussion of seniors and young people with the exact same income, and of advantages for the former just because they are over age 65. I read today that Mayor Bloomberg turned 65 today, and therefore is entitled to a half-fare Metrocard. Does he really need it, compared with a working mother earning the minimum wage? (The half fare for seniors used to be inapplicabe during rush hours, and only available off peak when the transit system was grateful for any patronage at all).
Moreover, to quote the Concord Coalition “Some try to justify (far lower taxes for seniors) on the theory that all people are taxed heavily when young and lightly when old, so that over the life cycle it evens out. But this doesn't wash. In fact, today's seniors were much more lightly taxed when young by all levels of government than young people are today. In 1965, for example, the maximum any working couple could contribute to Social Security was $696 dollars a year–versus $16,963 today. And what about today's young when they grow old? On the benefit side, they will have to bear the brunt of cost-cutting reform when the age wave hits.”
And on the tax side, they’ll have to pay back the federal, state and local debts that have been run up for most of the past 25 years. My analysis of the tax burden on the Young Hopefuls doesn’t even take that deferred tax burden into account. Do you really think that the exclusion of pension and Social Security income from state and local income taxes in New York will survive in a future where the burden of the aged is overwhelming, fiscal times are desperate, and the only people who still have defined benefit pensions are former public employees? Because as I have written elsewhere, when today’s young are old we may be going back to the past, when seniors were less well off, since half of all workers don’t even have a 401K, and few employers even contribute to the 401Ks anymore. Starting in a decade, the poverty rate for seniors may start to rise. But that is no reason to give tax breaks to more fortunate seniors today.
No, there is only one justification for the low taxes on seniors, balanced by higher taxes on everyone else. The young don’t pay attention, and don’t complain. If they don’t complain, they don’t have it so bad, some might conclude. The seniors complain about taxes, make demands, and vote accordingly. This series hasn't drawn much comment, even after I was given a like from Gothamist. But if it had been the case the seniors pay three times MORE than the young and I had written about it, there would have been comments galore. And God forbid any pol try to take a senior break away, or even objected to more of them.
The young are clueless, but have always been so, which is why their elders need to look out for them. But apparently they aren’t doing so in today’s United States. On behalf of my children, however, I say it is time for things to change.