Over at Room Eight, Larry Littlefield has posted a provocative analysis of “the issue no one wants to talk about” — i.e., the extent to which state and federal tax policies favor the old over the young.

Updating an annual analysis he began two years ago, Littlefield walks us through the tax returns and financial situations of two hypothetical New York City couples, “the Young Hopefuls, now both age 29 with a three-year-old child, and the Senior Voters, now both age 69.”  The Senior Voters aren’t just your average seniors, though:  Littlefield assumes they are retired city employees, which means they are better off than most.

In 2007, when Littlefield said both couples had incomes of $100,000, the Young Hopefuls paid more than twice as much in federal, state and local taxes as the senior citizens.  As a result, “After paying for taxes and housing the Senior Voters had $83,405 left to spend, the Young Hopefuls $46,980.”  And remember—they began with the same income.

Moving to 2008, Littlefield further assumes — not unreasonably — that the Young Hopefuls were hit hard by the downturn last year:

Like many of their generation, Mr. Hopeful has been forced to work as a freelancer or independent contractor, so his non-employer could avoid providing him with health insurance and pensions while continuing to provide these to other employees hired earlier. With business down in the recession, his self-employment income was cut from $75,000 in 2007 to $50,000 in 2008. While this sort of income loss is more common among the self employed, the current recession has seen wage cuts and furloughs become common for wage and salary employees as well, particularly in recent months, with both wage rates and hours falling.

Mrs. Hopeful was laid off from her part-time retail job and is now collecting unemployment, so the younger couple’s income dropped in 2008 to $57,000.  The Senior Voters, meanwhile, are still better off.  Sure, the savings in their employer-sponsored retirement savings account has been hit hard by the market  meltdown, but their municipal pensions — and their Social Security — are both indexed to inflation.  Result: their income has risen slightly, to over $102,000.

Then comes the eye opener.  Using Turbo Tax, Littlefield calculates the 29-year-olds, struggling to raise a child in the city on income of just $57,000, will pay almost the same total tax bill as the retired seniors with income of $102,000.

There is nothing inherently immoral about a set of public policies that makes it hard on young people, particularly those without the burden of caring for young children, while making it easy on old people. The young, after all, have many other advantages. But such a system is only moral if it is sustainable. Can the Young Hopefuls expect similar benefits when they are senior citizens in 40 years? May I call your attention to the national, state and local debts, and the sudden interest — while the federal government is borrowing $trillions — in “reform” for Social Security and Medicare, with presumably no impact on those who were “age 55 and over” when former President Bush said the words? The Young Hopefuls had better plan on working until their health fails, and then living on less. [Emphasis added.]

There’s much more where that came from — all worth pondering.   As is Littlefield’s conclusion:

No wonder that when listening to Bloomberg Radio while riding my bike to work, I’m treated to a parade of guest experts saying the Obama Administration needs to borrow as much money as necessary to stop housing and stock prices from falling, in order to turn the economy around. How? By passing a law requiring everyone under age 40 to pay 50% of their income for housing, whether in rent or mortgage, in addition to one-third in tax? The idea that younger generations could be paid less (real wages have been falling for most since 1973), taxed more (particularly since the increases in the regressive payroll tax to “save Social Security in 1983), and still buy houses (or for that matter stocks) at inflated prices is laughable. Only Congress can make it possible, by taking away people’s choices. Because what I tell young hopefuls who are thinking of buying a house is don’t do it. Not until the price is so low that they could claw back, in the form of lower housing costs, all the public debts and obligations this generation of senior voters is leaving to them

P.S. — Littlefield also makes this pitch-perfect observation:  “Since the inflation of the early 1970s, before the automatic inflation adjustment for Social Security was enacted in 1975, no elected official has been able to say the words ‘senior citizens’ without also saying the words ‘on fixed incomes,’ the fixity of those incomes being part of the presumed need and entitlement of the retired, regardless of how high those fixed incomes are.”  Yes.  Exactly.

About the Author

E.J. McMahon

Edmund J. McMahon is the Empire Center’s founder and research director.

Read more by E.J. McMahon

You may also like

A grim toll gets worse

The full toll of the coronavirus pandemic in New York is likely thousands higher than the official death tallies, according to newly released federal data. Read More

NY outlook: worse than 2008-09

#NYcoronavirus: The outlook for New York's economy is the grimmest on record, according to the first post-pandemic lockdown round of credible economic surveys and forecasts. Start with the Federal Reserve Bank of New York, whose regional economists today issued a notably pessimistic report based on their monthly Empire State Manufacturing Survey and a broader Business Leaders Survey that take sin the northern New Jersey and metropolitan New York. Read More

Why New York?

#NYCoronavirus: It's increasingly apparent that New York is suffering more severely from the coronavirus pandemic than any other part of the U.S. and most of the rest of the world – raising stark questions for city and state leaders. What is it about New York, and especially New York City, that made it especially vulnerable to infection and death? And how can that be changed before the next virus breaks loose? Read More

Big bucks, no impact

The billions of dollars funneled from New York's treasury to movie and TV producers had no statistically significant impact on the industry's employment in the Empire State through 2017, according to a new multi-state study of such tax incentives. Read More

SALT suit swept aside

In what could rank among the least surprising federal court rulings of this or any year, a U.S. District Court judge in Manhattan has rejected New York's constitutional challenge to the state and local tax (SALT) deduction cap in the new federal tax law. Read More

NY’s dimming budget outlook

When New York's current state budget was enacted, Governor Andrew Cuomo hailed it as "the broadest  and most sweeping" of his tenure, adding that "for the ninth straight year it was both timely and fiscally responsible." "Timely," yes: budget bills were passed by the Legislature just in time for the April 1 dawn of a new fiscal year. As for "fiscally responsible"—well, that's more a matter of opinion. Read More

Albany unleashes a green monster

The Climate Leadership and Community Protection Act on its way to enactment in Albany would vastly expand the state government’s power to regulate every corner of New York’s economy in pursuit of reducing greenhouse gas emissions. Yet even as it addresses what proponents describe as a “climate emergency,” the bill’s most controversial elements have been postponed until after the 2022 elections. Read More

NY per-pupil spending reaches $23k

New York's spending on elementary and secondary education reached a record $23,091 per pupil in 2017, once again topping  all other states in this category, according to the latest U.S. Census data. Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130
E-Mail: info@empirecenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.