A Reasonable Proposal

On Barack Obama's official website, we read his proposal on taxation of elderly people under the category "Strengthen Retirement Savings":

Eliminate Income Taxes for Seniors Making Less Than $50,000: Obama will eliminate all income taxation of seniors making less than $50,000 per year. This will provide an immediate tax cut averaging $1,400 to 7 million seniors and relieve millions from the burden of filing tax returns.

A website called taxfoundation.org asserts about Obama's claim that this change in the tax code would "relieve millions from the burden of filing tax returns":

As for not making seniors file a tax return if their incomes are below $50,000, it sounds like it may make the the tax system simpler, but many seniors would still have to do much of the work involved in determing whether their incomes are above $50,000 due to the multiple income sources they often have, such as capital gains, dividends, Social Security, retirement pensions, etc., even if they didn't have to officially file with the IRS.

So the Obama plan probably wouldn't cut down on paperwork as much as he maintains. Still, the nub of the proposal is eliminating all income taxes for senior citizens making under $50,000 per year. Taxfoundation argues "why should seniors receive special tax treatment anyway? Why should a 35-year old single person making $40,000 in wage income have to pay more in taxes than a senior who lives off $40,000 of retirement income (assuming it wasn't previously taxed)?"

A legitimate question- but easily answered. There are two reasons: 1) the elderly still would be paying property taxes, a tremendous burden for (mostly middle-class) old persons; and 2) as the elderly get more elderly, they often need at-home care which is not covered by Medicare; in old-age facilities, once private income is exhausted, the only option is Medicaid. This is not ideal given that Medicaid: a) as a government program, is financed itself by taxes and b) as an income-sensitive program, bears an obvious resemblance to a welfare program. Medicaid is necessary- but society has an interest in helping senior citizens avoid it, and if maximization of their net income is one way to that end.

This is not a wash- Obama is on to something important. Perhaps John McCain also would support ending income taxes for senior citizens of modest incomes- but we may never know, inasmuch as his official website omits any mention whatsoever of the economic plight of elderly people. You're not surprised about that, are you?