The Tax Foundation

Not So Golden Years: Rise in Capital Gains and Dividends Tax Would Hit Seniors Hard


The baby boomers' nest egg will soon start to crack if the Bush tax cuts are allowed to expire.

Retired seniors could be among the hardest hit by the failure to extend Bush-era tax cuts on Jan. 1 since they rely most on investments and savings

Lawmakers have been warning for months about the income-tax consequences for working families, including penalties on marriage and a reduction in child tax credits.

But those living off investment income would see not only their 401(k) and savings accounts taxed at higher income rates, but also dividends and capital gains skimmed deeper and deeper by the federal government.

Studies of IRS data put out by The Tax Foundation show seniors over 65 earn more from dividends and capital gains than any other age group -- more than $77 billion in dividends and more than $150 billion in capital gains in 2008.

That means for retired workers, every penny is that much more valuable. Investment income typically supplements Social Security, or vice versa, and tax analysts say that if the Bush tax cuts expire, it could mean thousands of dollars less every golden year.

Comment: The second link has a quick calculator.

1 comment:

  1. One would figure that even Democrats might remember the real estate fiasco in 1987 when Congress decided to tax that more heavily--I seem to remember it costing hundreds of billions of dollars even before it triggered that 500 point DJIA drop--and apply the lesson to today.

    Apparently, I am wrong. Sigh.


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