Taxing the Savings of Elderly Americans
An elderly widow living on a small Social Security benefit and $24,000 of income from interest, dividends, and a pension annuity faces a 1989 marginal tax rate of 48.3 percent. This extraordinarily high rate is the result of two special taxes levied against the elderly -- the Social Security benefit tax and the Medicare surtax. Without them the widow would be in the 15 percent federal income tax blanket. Because of them, her tax rate is more than three times that of younger people with similar incomes. In the future, things will get worse.
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