by U.S. Senator Jon Kyl
With our April 15 tax day an unpleasant and relatively recent memory, many taxpayers are well aware that the tax burden in America is at an all-time high. This is especially true for many senior citizens, who pay unbelievably high taxes on their retirement income.
"From saving comes having," as the adage goes. Or, at least, that's the way it is supposed to be. After years of hard work and paying taxes, millions of America's senior citizens depend on Social Security as a critical part of their retirement income. Our seniors have paid into the Social Security program throughout their working years. And they depend on the government to fulfill its promises under the Social Security contract so their retirement years can be free of worry.
For many, the security provided by this supplemental pension plan is the difference between a happy and healthy retirement and one marked by uncertainty and apprehension. Particularly for the vast majority of seniors on fixed incomes, the monthly Social Security check can mean the difference between enjoyable golden years and poverty.
As part of his massive 1993 tax hike -- the largest tax increase in history -- President Clinton imposed a tax increase on senior citizens. This increase subjected to taxation up to 85 percent of the Social Security benefits received by seniors who have annual incomes of over $34,000. The tax increase also applied to couples with over $44,000 in annual income. This represents a 70 percent increase in the marginal tax rate for these seniors.
But when you combine this tax with the "Social Security Earnings Limitation," a senior's marginal tax rate can reach 88 percent -- twice the rate paid by millionaires! Nationally, approximately nine million seniors are affected by this punitive tax.
An analysis of government-provided figures on the 1993 Social Security tax increase reached some disturbing conclusions. By the end of 1998, America's seniors have paid an extra $25 billion because of this tax hike. This amount includes $380 million from senior citizens in Arizona alone!
The extremely high marginal tax rates imposed by this tax are a serious deterrent to savings and investment, and thus, to economic growth. Repealing this 1993 tax hike would reduce the penalties on savings for middle income retirees. And, even more importantly, it would send the right message to younger taxpayers that their hard work, planning, savings, and investment will not be punished by the government.