Double Tax for Seniors

Now there is a new case of double taxation for senior citizens. Certain seniors are to be taxed on 85% of their Social Security receipts. This is unfair for two reasons. First, they have already been taxed on the 35%, if they previously had been employees. Or they were taxed on the entire 85% if they had been self-employed. Second, is a large increase for most seniors involved (as much as 20%) fair in contrast to 8%? This large increase applies to senior couples with income of more than $44,000. This marginal figure is computed by including one-half of Social Security and all of their tax-exempt income.

During the recent debates leading to the adoption of the Omnibus Budget Reconciliation Act of 1993 the involved seniors were referred to as affluent. Are couples with $44,000 total income to be considered affluent when under this same new law a family, with two children, can earn up to $25,292 and still receive an earned income credit?

The investments of individuals lead to the second important case of double taxation, not new, but now more important than ever. This is the double taxation of corporation dividends. The corporations are taxed as separate legal entities, then the individuals are taxed again on the dividends. (There once was at least a $200 exclusion.)

In 1976 the elimination of double taxation of dividends was seriously discussed by President Ford and later by President Carter. Interest paid on debts of corporations is deductible, but income available for dividends is taxed and then taxed again.

There have been many strange taxes but one of the strangest was the federal and Virginia state tax, in 1815, on furniture of residences. It applied “only to furniture made wholly or in part of mahogany that exceeded $200 in value.” What next?

GEORGE GIBBS, Emeritus Professor of Accountancy and Economics

Claremont McKenna College