Readers Sound Off on Taxes and the Legal and Moral Obligations
I hit a nerve last week.
A senior citizen wrote to complain about having to pay taxes now that she was retired. Her income from investments was high enough that her tax bill equaled her Social Security and pension payments. She felt her retirement income should be exempt from taxes and that she was being punished for having saved for her old age.
My response, that she get a grip, set off a torrent of e-mails and letters from readers--who overwhelmingly seconded my answer. (The column can be found at on The Times’ Web site at https://www.latimes.com/moneytalk).
Here’s a sampling:
* “I was delighted to read your response to the reader’s complaint about the ‘overstuffed insatiable pork-belly appetites’ of politicians. No one enjoys paying taxes, but it was refreshing to read a column that states the obvious--namely, that we are simply providing for the common good. People can debate how best to allocate government revenues, but simply whining about taxes is pointless.”
* “I’m a lifelong conservative, but tax whiners are a pain. ‘Get a grip’ pretty much sums it up.”
* “Your final remarks to the retiree hit the mark. I am a retired civil servant (San Diego County) and through the years I have heard many complaints regarding excessive taxes, fees and regulations. For these complainers I would recommend that they try to find another nation similar in economic development with a lower tax burden or less regulation. (They will not find one.) Sorry, folks, you have to pay for what you get.”
* “I also am a retiree and feel sorry for this woman who spent her life being frugal and now the IRS takes so much of her income. Our situation is similar--not that we pay as much as she does, but it seems we paid taxes on the money that went into Social Security and now we have to pay again because we lived conservatively and managed to put away for our old age so we wouldn’t have to be dependent on our children. I think that’s what most of our generation who used their heads did. Social Security should not be taxed again. I can tell that you are young and don’t realize what sacrifices our generation made to be able to stay independent.”
This last reader is correct: The younger generation probably can never fully appreciate the sacrifices made by the older one.
Current retirees survived the Depression, fought World War II and helped launch the United States on one of the greatest economic expansions in history. Their courage, frugality and independence helped make this country the powerhouse it is today.
But no sacrifice, however great, exempts us from paying taxes. As long as we have incomes that can be taxed, they will be.
By the way, this reader did not “pay taxes” on the money paid to Social Security. The money that went to Social Security was a tax. It wasn’t saved up in some kind of account; the money went toward supporting people who had already retired, just as the Social Security taxes paid by working people now are used to support current retirees. Working people pay 6.2% of their incomes into Social Security, plus 1.45% for Medicare; their employers pay equal amounts.
In the future, to save the two programs from bankruptcy, those taxes will probably have to be increased or benefits reduced.
They Should Be Grateful Too
Q: My wife and I both work at Kingston Technology Corp., the Fountain Valley company whose founders are generously distributing $100 million to their employees as part of the company’s sale.
So far, so good. So what’s the problem? The distributions, made as ordinary income, exploded everyone’s W-2, ours included. Isn’t there any way such “once in a lifetime” windfalls can be treated as such so that the tax bite is less burdensome? The federal tax bill alone for my wife and me is more than $290,000. This is not a typo. Others have cited the old “see the glass as half full, not half empty,” but somehow that just doesn’t do it. We are not rich people by any stretch.
*
A: Excuse me a minute--I have to scramble back up after falling off my chair.
Actually, you are rich, by every stretch. That tax bill means your windfall was somewhere around $800,000. Even after taxes, you’re looking at $400,000 free and clear. Since your generous employers based those bonuses on pay and seniority, I’m guessing you two were already enjoying incomes in the top 5% to 10% of all wage-earners.
Your friends who are chiming in about the water glass are being nice. Most of them would probably like to break the windows on your Lexus.
*
Liz Pulliam is a personal finance writer for The Times and a graduate of the certified financial planner training program at UC Irvine. She will answer questions submitted--or inspired--by readers on a variety of financial issues in this column. She regrets that she cannot respond personally to queries. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. For past Money Talk questions and answers, visit The Times’ Web site at https://www.latimes.com/moneytalk.
