Hang Your Hat: April 7, 2016

Regarding the Hang Your Hat contribution by Eudice Germaine:

I found  the article interesting and quite informative, raising several issues for concern.  However, I have one major disagreement.   

The article states that “senior citizens don’t pay state income taxes, so there would be no refund due us”.  

Thoughts:

1. Disclaimers – I am not a tax attorney or advisor and am not giving advice, nor is this an endorsement or non-endorsement of any individual running for public office.

2. This is supposedly a Tax Credit proposed, not a deduction. Deductions usually reduce income while tax credits usually reduce taxes to be paid after deductions and other things are taken into account to arrive at a taxable amount. I could be wrong, but I thought credits would be refunded even if tax wasn’t due.

3. The major problem I see is that the statement supports an incorrect perpetuation of a widely held myth believed by many in the younger generations. That myth is that seniors are getting all this money from entitlements that the government and working people are just giving away to the seniors. The article in stating that senior citizens don’t pay income taxes only upholds that myth.

Seems to me that Social Security was a first stab at the government’s attempt for a retirement plan for citizens to contribute to every paycheck. Also, I seem to recall when I first got my card, it was called Social Security Insurance.

As with any retirement plan, and most insurance for that matter, one would expect to get something for their payments.

4.  Sadly many people rely substantially, if not totally, on their social security payments. Many others, likely the majority, have other income that may require payment of some, perhaps substantial, income taxes. Some very common examples that may be counted as state taxable income subject to payment of taxes depending of course, on the tax bracket:

— many seniors in Sun City are still employed and they may pay state and federal income taxes on that income

— interest from CDs, savings accounts, money markets may be taxable income if not within a qualified retirement plan

— stocks, mutual funds and bonds many times pay dividends that may be taxable income

— sales of stocks and mutual funds may generate taxable income

— alimony payments may be taxable as are lottery and gambling winnings

— while life insurance payments may not be taxable, if the payment is invested, that investment’s earnings may be taxable

While many qualified retirement plan distributions/payments are not taxable in Illinois, there are plenty of other opportunities for senior citizens to be required to pay income taxes at both the federal and state levels and especially to help bailout our bankrupt state.

Kenneth D. Kalitowski
Neighborhood 21

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