Older workers and retirees "have much to lose and not much to gain from" The Republican Party’s plan for tax reform, CBS MoneyWatch’s Steve Vernon reports.
The GOP tax plan relies on cuts to the wealthy and on large corporations, which they think will "stimulate the economy sufficiently to increase tax revenues over the long term," but this plan won’t be of much help to retirees and those approaching retirement.
"First, many retirees don't pay any federal income taxes, or they pay very modest amounts… As a result, many retirees won't realize much, if any, direct savings from tax cuts," Vernon wrote.
"Another reason that older workers and retiree might not benefit from a tax cut is that their most valuable resources don't increase if the economy improves. For example, Social Security benefits, Medicare and traditional pensions don't increase in a strengthening economy. Although retirement savings that are invested in stocks might benefit, retirement savings are modest for most current older workers and retirees, so there's not much to gain there.
"Finally, even though older workers and retirees who want to work might benefit from an improved economy that sparks job creation, somebody has to hire them, which is also questionable."
If the deficit does not decrease as planned, Congress may have to seek alternative means of lowering it, possibly by reducing the two largest items in the federal budget: Social Security and Medicare.
"A ballooning federal deficit could put intense pressure to cut Social Security and Medicare benefits," Vernon wrote.
"The limitations on (or elimination of) deductions for mortgage interest and property taxes under the Republican tax cut packages represent another issue for older workers and retirees. Home equity is a significant asset for older workers and retirees who might be counting on it to supplement their modest retirement savings.”
Vernon concludes that "for many older workers and retirees, the GOP tax gamble could be a 'Heads I win, tails you lose' proposition."
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