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Tax Break for the Elderly


Abstract

The History and rationale for enacting tax breaks for the elderly is wide and has a deep history to evaluate. The first few major programs enacted by federal and state governments are addressed, in addition rationale for these programs is presented. In this paper, we seek to consider which type of benefits is most effective to provide relief to the elderly, while creating a sustainable economic model. After evaluation on the issue, we are left asking ourselves, should Tax Breaks for the Elderly be Increased/Decreased in Order to Better Balance State and Federal Benefits?

Introduction

Individuals that are classified as “senior citizens”, elderly, are typically eligible for many government and private sector benefits that are normally not enjoyed by the rest of the U.S. population. Hence, after a life of work and contributing towards the growth and development of our nation – through the payment of taxes), the retiring elderly may choose to live out the rest of their days in relative comfort majorly attributable to many incentives. Within the scope of this report, tax breaks are defined as “A special tax benefit given to promote specific economic or social objectives,”. As per the definition provided the Tax Breaks include: (1) Fiscal Income, (2) Discounts, (3) Direct Benefits, (4) Indirect Benefits, (5) Entitlement Programs and others. The history of tax breaks for the elderly is extensive in nature, and is not a novel concept. Hence, tax breaks have been provided exclusively to the elderly since the early formation of the United States. More recently, the passing of the Social Security Act, Medicare, Medicare Expansions, (i.e. Medicare Part B) and the Affordable Care Act, all contain specifications that include further benefits to elderly tax beneficiaries.

History of Tax Breaks for the Elderly

The federal government and every state with an income tax offer some kind of tax break for the elderly. Since the passing of the Social Security Act in the middle of the 20th century the percent of states with income taxes that offer tax breaks to the elderly has increased from approximately 2% to 90%. The peak of tax breaks is noted to have been in the late 1980s and the year 2004. During these times laypersons will observe that respective presidents passed major legislation: Ronald Regan and George W. Bush. The bulk of tax breaks has been centered on pension incursion as well as healthcare related expenditures such as Medicare, and relevant expansions such as Medicare Part B. At the onset of major historical tax breaks the personal income tax was noted as the key to funding benefits that would be doled out to the public. The federal income tax was established in 1916 by the federal government and at the time it did not contain any text specifying specific benefits that must be obtained only by the elderly. However, not long after the passing of the federal income tax, many states began adopting their own state income taxes and these states (i.e. Vermont) created intangibles that would be given to individuals of “advanced age”. More significantly, some states began enactment of programs that aid the elderly independent of the federal government. This is due to the fact that the income tax (Federal) did not do anything to aid the elderly. The initial programs started in the 1915s and were limited in their scope. The major benefits came to the elderly in 1935 when the Social Security Act was passed and additional benefits were added to the program in 1948, when the program was essentially “beefed up”. The term given to tax breaks to the elderly was called “Age Exemption”. As the World War 2 was winding to an end, the cost of living in the U.S. was increasing at an exponential rate. Elderly people whom could not work anymore were not able to support themselves and the strain placed on family members led to overwhelming support for beefing up the SSA. The Townsend Act was the most prominent act passed during this time period and gave direct benefits to the elderly in the form of tangible income. At this point a lump sum of $200 was given to everyone over the age of 60 and was doled out on a monthly basis. Elderly or “senior citizens” were not subject to the same level of taxation to their income and/or property if they received an income (not counting pensions or direct federal benefits). Additional mechanisms were then built into pension programs to exempt taxation. Hence, income that was obtained through a federal pension could not be taxed when the recipient is of “eligible age”.

Pros

The reduction of income taxes would free up the cash that flows to the senior citizen and this would offset the need to enact more sweeping benefit programs that may cripple the U.S. economy over time. Fast-forwarding to present time the increase of benefits to the elderly is obvious. The amount of indirect benefits has increased to include payment for qualifying medical conditions, qualifying medications, qualifying medical visits and even specialist visits and/or home care. The push to reform the tax system by providing benefits to the elderly in the form of medical health benefits was prompted by the fact that much of the untaxed income was returned to the system through payment to medical professionals. The passing of Medicare and the expansion of Medicare Part B were critical points in providing benefits to the elderly as almost all of the medical conditions faced by the elderly will be covered by Medicare and drugs/prescription medication and/or specialist visits will be covered through Medicare Part B. Furthermore, the elderly may elect to obtain private insurance in addition to double-dipping through Medicare. This is extremely beneficial in instances where Medicare proves to be non-exhaustive and does not cover certain medications or procedures that are medically necessary.

Cons

Most of the negative attributes of providing care via tax breaks to the elderly, are related to fiscal consideration. Balancing the budget is usually the cry of politician’s that may not feel that it is necessary to provide certain care via tax breaks. In addition, insurers are unable to reap the same profit when the federal government is the final payee on medical bills. In cases, it requires greater staffing to deal with administrative roles, focused on the interaction between more patients, and less income to the applicable firm. Some insurers fight “tooth and nail” to deny coverage to patients of a particular genre. This is due to the fact that greater risk is placed on the elderly as they will certainly face more expenditure by the company that covers them under a coverage plan. Therefore, in addition to setting up the framework for managing elderly patients, and loss of private revenue, there are some draw-backs to providing tax-breaks to the elderly. Many government leaders usually attempt to balance these tax-breaks through tax-cuts in other areas that are overseen by the government and this usually includes much lobbying by private firms, who are fighting to preserve and/or expand their firm. Additional draw-backs include increasing the federal deficit when appropriate checks and balances are not put into place.

Social Resolution

The position of this paper is that the society should full stand behind the program of tax break for the elderly. Historically, the storyline behind increasing tax breaks for the elderly is normally a favorable talking point and is received very well by the majority of the society. With respect to the private sector and the rest of the U.S. population, there are mixed emotions about the government entitlement programs that make-up the bulk of tax breaks to the elderly. But judging on the broad positive implications the breaks have to the society, it is worth support.

Political resolution

Today elderly citizens enjoy major benefits that are related to Medical and Dental Expenses, Property Sale, Retirement Plan Contributions, Investment Expenses, Business Expenses, Charitable Contributions, and Standard Deductions. Benefits are no longer limited to direct contributions of cash to the elderly but are not more expansive and economically sound. It is noted that cash payouts through “entitlement” programs are some of the most costly federal programs and some believe that these programs threaten to unravel the U.S. economy and deem it as “unsustainable”. While the truth of these matters is hard to decipher the enactment of the previously mentioned “tax incentives” allow the elderly to pay-out less when performing their day-to-day tasks. The most important items appear to be covered and this is certainly related to medical care. At this point we must consider that the enactment of benefits that pay out cash via direct benefits will likely create an unsustainable economic model. While in parallel these indirect benefits will help the elderly, grow the amount of tax breaks that are made available and perhaps even create more jobs for individuals that must aid the elderly in taking advantage of these benefits. In this paper therefore, we do advocates that the issue of tax break for the elderly should be a subject of political concern to each and every leader to have a clear focus on the benefits accorded by tax breaks to the elderly and ensure its full implementation.

Healthcare resolution

Once the healthcare for the children and the aged is looked upon, the healthcare of the whole nation can be considered to be under stake. The benefits that comes with tr3eatment of the two age brackets are quite high in comparison to leaving the duty to them. Even if it comes at a cost, the general impact is high sanitation needs satisfaction and greater society benefits. This paper therefore pushes for such a societal call and resolutions.

Conclusion

In summary, the tax-breaks enjoyed by the elderly should be considered as rights that have been earned by life-long work. The cons of the problem, which is expansion of tax-breaks through programs such as Medicare Part B, pale in comparison to the pros. The major stakeholder: Elderly Patient, benefits greatly by the expanded role of the federal government and may live a more comfortable life, throughout their earned retirement. In addition, nurses and healthcare professionals also benefit through expanded job creation, and flexibility in new roles. The cons seem to be limited to financial consideration, and are centered on the push of private insuring firms that are already viewed in a negative light. It is and remains my belief that the elderly should remain a priority for tax-breaks and that Medicare Part B should be expanded to include even more breaks, in a balanced manner.

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