Friday, January 24, 2014

Aging America-The Fiscal Impact on Governments?

Governing ran an interesting article on January 16, 2014 by Frank Shafroth.  Who Will Cover the Costs of an Aging America? Demographic change and tax policies that favor the elderly mean an ever-widening fiscal gap for state and local governments takes on the impact of longevity and aging on tax bases and revenues for governments. Referring to the aging demographics, the author explains that "[t]his demographic trend heralds a growing fiscal gap between the cost of government services to an aging America and reduced revenues, a gap exacerbated by two unsustainable trends: retirement-benefit liabilities and rising health care costs." We all know about the worker-to-retiree ratio and the impact on the Social Security Trust Fund, but this article looks at the impact on governments when there are fewer workers paying taxes, but more citizens needing services. The article suggests that the time may be coming when state and local governments need to reexamine any tax breaks that are offered to their elder citizens. We may not realize the extent of those tax benefits:

Out of the 41 states with personal income taxes, 37 have some type of exemption for retirement income. In addition, 27 states and the District of Columbia exempt all Social Security benefits from income taxes. (A 28th, state, Iowa, will phase out its tax on Social Security benefits by the end of this year.) The remaining states with personal income taxes include some portion of Social Security benefits in taxable income. Seventeen states exempt military pensions from income taxes entirely, while many other states exempt some portion of military pension income. Ten states go the full gamut: They exclude all federal, state, and local pension income from taxation.

The article notes that private pensions do not receive the same generous treatment and that property tax breaks also need to be examined:

Many cities and counties offer a senior or elderly property-tax exemption, with the most common being a reduction in the equalized valuation of property so that, in essence, the property owner pays taxes on a discounted value. Some cities and counties "freeze" the assessed property valuation for seniors, thus allowing the property owner to pay property taxes each year based on a previous, lower valuation, while others offer property-tax deferral programs. Cities and counties all have their own terms to qualify for senior or elderly exemptions, but the age of 60 appears to be a common trigger point.

The article concludes that with more elder citizens but less money for services, "a day of reckoning" is on the horizon.

http://lawprofessors.typepad.com/elder_law/2014/01/aging-america-the-fiscal-impact-on-governments.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef01a5112703c5970c

Listed below are links to weblogs that reference Aging America-The Fiscal Impact on Governments?:

Comments

Post a comment