Speaking As A DC Senior

June 12, 2011

True confession: I’m one of those seniors who’s become such a focus of political concern — sometimes real, often as not just a sure-fire talking point.

I generally don’t think of myself as a senior, except when I mislay my keys. And I rarely identify myself as such, for what I trust are obvious reasons.

The occasion for this exception is DC Councilmember Jack Evans’s purported objection to the proposed tax on interest earned on out-of-state bonds.

In the first of two required votes, the Council approved the tax– a majority viewing it as a lesser evil than the new 8.9% top income tax bracket in Mayor Gray’s proposed budget.

Also because some Councilmembers thought it would vanish before anyone had to pay it, as it would have had Council Chairman Brown’s version of the tax provision passed unamended.

Evans says he’s against the tax because many retirees depend on income from bonds.

Not the same thing as income from bonds issued by state and local governments, mind you. Bonds come in lots of flavors.

But why make fine distinctions when you’re trying to gin up sympathy for us seniors who’re supposedly trying to make do on Social Security and the proceeds from our little nest eggs?

Let’s get real.

The proposal that’s so concerning Evans and some of his colleagues would tax interest on out-of-state bonds the same as other ordinary income.

So seniors who are scraping by would pay the extra at a relatively low rate, especially because the District doesn’t tax Social Security benefits or the first $3,000 from public-sector pension plans.

But most who’d be more than minimally affected aren’t scraping by. The DC Fiscal Policy Institute reports that 67% of retirees who hold out-of-state bonds have incomes over $100,000. Only 2.4% of those with adjusted gross incomes under $50,000 hold any out-of-state bonds at all.

And what’s all this out-of-state bond interest anyway? Surely the Chairman of the Finance Committee knows that interest rates on municipal bonds are no great shakes.

I’ve got a couple in my portfolio — all yielding about 5%. Quick browse of the Web indicates that’s about par for the best-performing municipal bond funds.

So you’d have to own lots of out-of-state bonds and/or shares in municipal bond funds to get hit with a significant DC tax increase.

All of this doesn’t mean that I think the tax on out-of-state bond interest is a good substitute for a new top income tax bracket — or several new brackets for that matter.

But the opponents of the bond interest tax are also staunchly against that approach to making our local tax structure more progressive.

What irks me is when policymakers use some heart-tugging stereotype of geriatric cases like me to argue for positions that have little or nothing to do with our interests.

High on this senior’s list are investments in programs that make our community a good place to live — for everyone. Holding on to every penny of interest from my out-of-state bond holdings isn’t.