Quit Double-Taxing Seniors; Critics of Plan Shortchange Taxpayers
Byline: Larry Craig, SPECIAL TO THE WASHINGTON TIMES
When it comes to taxes, most of us believe that they should be as low as possible and as fair as we can make them. Unfortunately, the current tax on investment dividends fails both tests, and I'm glad President Bush has proposed eliminating that tax at the individual level. This is particularly important to 10 million senior citizens in America who pay almost half of all dividend taxes.
Not only do dividend taxes unfairly target seniors, those paying that tax also get taxed twice. Here is how it works.
Dividend-paying companies pay about 35 percent of their income in federal taxes. Taxpayers who receive dividends usually pay between 28 to 39 percent of this income in federal taxes. State and local taxes take another bite out this income. Ask yourself: "Is that fair?" Should anyone, especially older Americans who worked hard their whole life, saved and invested for their retirement, have to pay taxes on their savings twice?
No one should be taxed twice - especially seniors.
But the truth is that older Americans are being literally triple-taxed "to death." Seniors pay federal and state income taxes on Social Security payroll taxes during their working years and then pay taxes on their Social Security benefits when they retire. They are unfairly targeted by the double taxation of dividends. If seniors have anything left over, the government gets another share at the end of their life with the death tax.
To his credit, Mr. Bush has proposed to eliminate one of the least productive examples of double taxation on seniors. The United States taxes dividends at the second highest rate in the world. Even industrialized nations renowned for "democratic" socialism, such as Sweden and Germany, "only" tax dividends at a rate under 50percent. But the United States taxes dividends at just over 70 percent - the second highest rate in the world - just behind Japan, a country whose economy has been on a flat-to-downward economic spiral for the past 10 years.
Almost half of all dividend income goes to Americans age 65 and older. Today, the Senate Aging Committee will hear from one senior who will describe the benefits of the president's proposal to eliminate the double taxation of dividends. We will hear about his 89-year-old father, a retired railroad switchman, who receives a significant share of income from corporate dividends. Our witness will also describe the benefits of the president's dividend tax proposal for his 91-year-old mother-in-law. These are real Americans on fixed incomes who could use a few more dollars in their pocket. …