Colorado Seniors Threatened with a Tax on Social Security Benefits by Ballot Measure

by | Nov 4, 2016 | Media Releases

FOR IMMEDIATE RELEASE

DALLAS – November 4, 2016 – A Constitutional amendment to create free health care for everyone in Colorado would impose very high tax rates on senior citizens, even though they would get almost no benefits from the measure, according to a new study by Goodman Institute.

Amendment 69 would give a new state entity, ColoradoCare, the power to set doctor and hospital fees throughout the state for virtually every medical procedure. It would make ColoradoCare the sole payer of all medical bills. It would provide care without deductibles and copayments. And it would be paid for by a 10 percent tax on the incomes of all Coloradans – rich and poor, young and old.

“Colorado will become like Canada or Britain if the proponents get their way,” said Linda Gorman a health economist who produced the study for the Goodman Institute, an independent research organization. “Medical care will be free for everyone, but there may be long waits for elective surgery, such as hip and knee replacements; and expensive cancer drugs may not be available.”

A surprising feature of the measure is that senior citizens will be forced to contribute to the plan even though they will continue paying premiums and payroll taxes for their enrollment in Medicare.

“Seniors will face higher taxes in Colorado than anywhere else in the nation,” said Gorman.

Elderly wage earners making only the minimum wage will get hit with a 10 percent tax on their earnings, according to the report. Beyond $24,000 of retirement income, they will have to pay 10 percent of their income from pensions, dividends, interest, capital gains and withdraws from IRA and 401(k) accounts.

“Seniors will even have to pay a 10 percent tax on their Social Security benefits,” said Gorman. “They will also have to pay taxes on tax exempt income.”

When added to other taxes, some moderate-income seniors may find that they lose more than one-third of their pension checks and savings withdrawals. Some elderly workers will lose as much as 98 cents in taxes and reduced benefits when they earn one more dollar of wage income.

“Middle income seniors already face very high tax rates,” said Gorman. “Colorado care will make things worse.”

According to the study, an elderly retiree in the 15% federal income tax bracket with at least $24,000 of retirement income could face the following tax rates:

  • The federal Social Security benefits tax can increase the tax rate on pension income and IRA withdrawals from 15% to 27.75%. When the ColoradoCare tax is added, the total tax rate will climb as high as 37.75%.
  • When both taxes are combined, the tax rate on capital gains and dividend income could climb from zero to 22.75%.
  • Tax exempt income could be taxed at a rate as high as 22.75%.
  • Social Security income itself will be taxed at another 10%.

“The exact tax rate depends on the individual’s circumstance,” said Gorman. “But extremely high tax rates will not fall on the very rich; they will fall on middle income retirees with very modest means.”

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About Goodman Institute

Led by Dr. John C. Goodman, the Goodman Institute for Public Policy Research (GIPPR), is a nonprofit, nonpartisan public policy research organization that promotes private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. Topics include reforms in health care, taxes, and entitlements. Visit www.goodmaninstitute.org.

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