As our blog noted Tuesday, the 47 percent of Americans that Republican presidential nominee Mitt Romney dismisses as “dependent” on government because they don’t pay income taxes includes many elderly households. Romney concludes his remarks on the 47 percent by saying, “My job is not to worry about those people. … I’ll never convince them that they should take personal responsibility and care for their lives.”
Romney may not realize this, but a majority of the elderly fall into this category. The nonpartisan Tax Policy Center found that in 2011, 55.9 percent of elderly households paid no federal income taxes, compared to 43.9 percent of nonelderly households. In fact, as the graph below shows, at nearly every income level, the elderly are more likely to pay no federal income tax. Furthermore, nearly two-thirds of elderly units have cash incomes under $50,000, where the difference between the two groups is the greatest.
This largely reflects intentional features of the tax code to reduce elderly tax burdens. For example, the elderly are granted an expanded standard deduction and a special tax credit, and Social Security benefits are excluded from taxation. As the chart below shows, elderly tax units derive nearly 60 percent of their income from Social Security benefits, while earnings only make up 16 percent.
Are these people who have failed to take personal responsibility and care for themselves? Of course not. First, Social Security and Medicare are earned benefits. These households paid payroll taxes during their working years so they could have some basic income and health care during their retirement years, and they often face premiums and co-insurance payments for certain Medicare benefits. Second, the vast majority of these households paid income taxes during their working years. Nearly 80 percent of households pay income taxes in their prime working years, according to the Brookings Institution’s Hamilton Project. Third, these households frequently pay taxes other than income taxes, such as sales taxes or in some cases, property taxes. And finally, many of the elderly, of course, are no longer in a position where they are able to earn enough to pay income taxes.
Romney’s off-the-cuff remarks ignore any semblance of the social contract. We are indebted to older generations for building this country into what it is today, and instead of bashing the elderly (intentionally or not), we should be focusing on how we can improve retirement security for all Americans.