13.7: Low-Income Seniors

Protect low-income seniors.

Other Information:

Protecting Low-Income Seniors. For Medicare-eligible senior citizens, the measure of taxable income is modified to ensure that the flat benefit amounts for Social Security and the Medicare defined contribution are tax-free. Thus, lower-income seniors will not be pushed back into poverty by the tax system after Social Security and Medicare have lifted them out of poverty. As noted earlier, during the lengthy transition period for the Heritage plan's Social Security reform, some seniors above certain incomes with relatively high benefits will pay tax on part of those benefits, but they will pay less than many do today. Thus, this tax plan includes three important senior-specific features: * During the transition to the new Social Security and Medicare systems, all seniors have a "senior's standard exclusion" amount equal to the sum of the flat Social Security benefit amount plus the value of the Medicare defined contribution. This exemption amount will be approximately $22,500 per senior in 2015. This provision ensures that seniors protected from poverty by the Social Security and Medicare reforms are not again placed at risk by losing some benefits through taxation. As explained earlier, when the benefits reforms are fully implemented, the amount received by a senior will not be taxed. * Encouraging seniors to stay in the workforce longer is important both for their own financial security and for the health of the economy. To achieve this, the first $10,000 of a senior's wages and salary is excluded from tax. This provision is especially important for low-income and middle-income seniors. * Because they are on Medicare and have the seniors' standard exclusion to protect low-income seniors from tax, seniors do not qualify for the health insurance tax credit described above.

Stakeholder(s):

• Low-Income Seniors

Indicator(s):

Indicator:1

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