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 Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

As migrants flow to NY, so does red ink 

The influx of foreign migrants to New York could cost the state $4.5 billion more than expected next year, Governor Hochul today warned.  Read More

The Bill Arrives: NY Faces $9B Budget Gap Next Year 

New York’s outyear budget gaps, the shortfall between planned state expenses and state tax receipts over the next three years, has exploded to more than $36 billion, just-released documents show.  Read More

NY school spending again led US, hitting all-time high in 2020-21

Public elementary and secondary school spending in New York rose to $26,571 per pupil in 2020-21, according to the latest Census Bureau data Read More

A Tale of Two Levies

New York school districts are getting record levels of state aid. But how many are using it to cut taxes? Read More

Albany’s Belated Budget Binge 

State lawmakers have begun passing the bills necessary to implement the state budget for the fiscal year that began April 1. Read More

Courts set a limit on NY’s tax reach

Just in time for tax season, New York State's tax agency just lost a major legal challenge to its policy of pursuing maximum income tax payments from wealthy vacation homeowners—even when they live elsewhere. Read More

New York’s pricey hospitals draw pushback from labor

A City Council hearing in Manhattan on Thursday promises a rare scene in New York politics: hospitals playing defense. The council is debating whether to establish a watchdog agency focused on the high price of hospital care in New York, with a goal of helping the city and other employers contain the rapidly rising cost of health benefits for workers. Read More

DiNapoli aims to curb NY’s borrowing binge

Comptroller Thomas DiNapoli has unveiled a new proposal for constitutionally curbing the state’s seemingly uncontrollable appetite for borrowing. Read More

Empire Center Logo Enjoying our work? Sign up for email alerts on our latest news and research.
Together, we can make New York a better place to live and work!