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.

Keep Your $250 Gift To Retirees … Or Send It Where It’s More Needed

October 25, 2010

I don’t usually find myself agreeing with the Washington Post editorial board these days. But setting aside the nasty “pandering” slant, I share its view that the White House and Congress should shelve the plan to send Social Security recipients another $250 to compensate for the lack of a cost-of-living adjustment next year.

At least, I concur so far as payments to seniors are concerned. Benefits to other affected groups may be a different story. I’m more comfortable speaking only as one of the 41 million or so who receive benefits because we’ve reached the official retirement age.

Would I like an extra $250? Sure, even though I’d have to pay part of it back in income taxes. Am I disappointed that my monthly benefits won’t be higher next year? Of course. But do I, like some of the recipients who’ve reacted, feel that level payments will be unfair? Absolutely not.

Like other recipients, I’ve already benefited from a protection in the COLA system. Benefits go up when the Consumer Price Index for Urban Wage Earners and Clerical Workers rises, but they can’t go down when it drops.

In 2009, benefits reflected a sharp 5.8% rise in the CPI-W the year before. They stayed level in 2010 when the CPI-W dropped by 2.1%. And as the Center on Budget and Policy Priorities explains, I and all my fellow beneficiaries will still be ahead of the game next year.

This isn’t to say that many recipients of Social Security retirement benefits won’t feel strapped. CBPP reports that the average benefit in June 2010 was $14,000.

More than half of the recipients rely on the benefits for the majority of their cash income. For about a quarter, it provides more than 90%. Dependence increases with age, as income from work becomes less likely and savings get used up.

If you’re trying to make do on $14,000 — or less if you were a low-wage worker — even $250 can make a real difference. But the proposed extra cash would go to all recipients, even the wealthiest.

The White House argues that seniors have seen their savings fall as a result of the recession. Undoubtedly true, as my monthly statements can attest. But we’re likely to have taken less of a hit than younger people — assuming we followed the standard advice to shift toward lower-risk investments as we aged.

In any event, a recent survey by the Pew Research Center found that 70% of us have held our own during the recession — a much higher percentage than for any other age group. This, I suspect, is a combination of investment strategy and, perhaps more importantly, Social Security itself.

Now maybe there’d be nothing wrong with a modest gift from the fed if everyone else had enough to get along on. As things stand, the poverty rate for seniors dropped a bit last year — down to a record low 8.9%. The child poverty rate was more than twice as high — 20.7%. For single-woman families with children, it was a shocking 38.5%.

Which brings me to my last point. While Social Security benefits keep about 90% of seniors out of poverty, a new CBPP analysis shows that TANF cash benefits to parents and children aren’t enough to lift the families out of deep poverty, i.e., above 50% of the federal poverty level, in any state in the country.

Even combined with food stamps, they’re not enough to get families to 75% of the FPL in 41 states and the District of Columbia. (For the District, the maximum TANF cash benefit for a family of three is 28% of the FPL. With food stamps, the family gets to 59% of the FPL.)

Not only that. In all but three states, the benefits are lower in inflation-adjusted dollars than they were when TANF was created in 1996. They’ve lost at least 20% of their value in 29 states and the District, where the loss has been 25.8%. No COLAs here.

In all but one or maybe two states, a TANF family of three was getting less than half the average Social Security retirement benefit in July 2010. What will happen unless Congress renews the now-expired TANF Emergency Contingency Fund is an open question since a majority of states have used a portion of their allocation for basic cash assistance.

So if the White House and the Democratic leadership in Congress want to send $250 checks where they’re needed most, I suggest they send them to TANF families.

“Welfare mothers” aren’t as politically popular — or as likely to vote — as seniors. But they’re raising a generation of desperately poor children, who are at high risk of lifelong poverty — and ultimately dependence on Social Security checks that won’t be big enough to lift them out.