Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, August 10, 1993 TAG: 9308100174
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: DAVID HESS KNIGHT-RIDDER NEWSPAPERS
DATELINE: WASHINGTON LENGTH: Medium
They are angry because the plan increases income taxes on Social Security benefits for middle-class and affluent seniors. They are confused because it is not always easy to compute the added burden.
Some are finding it hard to square an expected tax increase of several hundred dollars a year with political reassurances that the budget plan wouldn't hurt the middle class.
An estimated 5.5 million Social Security retirees would have to pay a higher tax as a result of the change, which is expected to raise $24.5 billion over five years.
"These are not poor people," Martin Corry, director of federal affairs for the 33 million-member American Association of Retired Persons, "but many of them are not wealthy, either."
And, feeling betrayed by the White House and Congress, the lobby is girding for a second round of budget cuts this fall that is expected to further slash Medicare and could lead to cutbacks in cost-of-living adjustments for Social Security.
The proposed cuts in senior programs are being applauded by increasing numbers of younger Americans who say the nation has got to start making financially able seniors pick up a bigger share of their medical and daily needs.
Just how big a hit will the seniors take from the latest tax increase?
It depends on a number of complicated factors.
Under the change, 85 percent of their monthly Social Security payments will be subject to federal taxation if a single taxpayer's income exceeds $34,000 a year and a couple's income exceeds $44,000. Current law taxes only 50 percent of the Social Security pension on incomes above $25,000 for individuals and $32,000 for couples.
Deloitte & Touche, a national financial management firm, has worked out several examples of how the tax hike would affect various Social Security retirees.
A married couple, both 65 or older, filing jointly with $20,000 in private pension income, $10,000 from investments and $13,536 in Social Security benefits, would pay no additional taxes. With their two exemptions, their standard deduction of $7,850 drops them below the taxable threshold.
But a couple with $18,000 of pension income, $25,000 from investments and $13,536 from Social Security would have to pay $1,030 more in taxes.
A wealthier pensioner, filing singly, with $50,000 of pension income, $5,000 from investments and $13,536 from Social Security - with a standard deduction of $4,750 - would have to pay $1,459 in additional taxes.
Besides the tax increase, the budget package includes a $56 billion cut over five years in the Medicare program, which is expected to cost nearly a trillion dollars over that same period.
Advocates of the Medicare cutback insist patients' benefits would not be altered. The aim, they said, was simply to slow the growth of increases in payments to hospitals and physicians.
But they also acknowledged that health-care providers would offset their losses by shifting costs to paying patients and insurers, sustaining the upward thrust of medical costs in general.
"If experience is any guide," said Rep. Pete Stark, D-Calif., "a great deal of these `savings' to the government will be passed on by the providers in the form of a hidden tax paid by insured patients and their employers through higher premiums. We're not solving anything here, until we reform the whole darn system to make it more efficient and to get a headlock on these costs."
by CNB