AARP Decries Tax Bill's Medicare Hit

Higher taxes on seniors and the prospect of rising Medicare premiums do not a happy AARP make.

“The Senate tax bill could trigger tens of billions of dollars in potential cuts to Medicare next year alone as well as little or no tax relief, or even higher taxes for older Americans,” AARP CEO Jo Ann C. Jenkins said in a letter the group blasted out to senators earlier today. The AARP has 39 million members throughout the U.S.

Much of Jenkins’s criticism is focused on the fact that next year Medicare will be front and center as a funding mechanism to offset the $1.5 trillion the tax measure is expected to add to the deficit over the next 10 years. Congress will be required to pass reconciliation legislation in 2018 or automatic cuts impacting Medicare will kick in.

The non-partisan Congressional Budget Office (CBO) has confirmed that unless Congress takes action, reconciliation legislation will result in automatic federal funding cuts of $136 billion in fiscal year 2018, $25 billion of which must come from Medicare. “Such sweeping cuts would be detrimental to an already vulnerable population,” Jenkins said.

“The large increase in the deficit will inevitably lead to calls for greater spending cuts, which are likely to include dramatic cuts to Medicare, Medicaid and other important programs serving older Americans,” Jenkins said.

The future of seniors’ individual tax bills is no less troublesome for the AARP. The group has estimated that the Senate Tax Cuts and Jobs Act will increase taxes on 1.2 million taxpayers age 65 and older in 2019, and by 2027, 5.2 million older taxpayers will experience higher taxes. In addition, this bill would provide no tax relief for 5.1 million older taxpayers in 2019, and that number rises to 5.6 million taxpayers by 2027.

The bipartisan Joint Committee on Taxation (JCT) itself has estimated that the Senate Tax Cuts and Jobs Act will reduce taxes for millions of taxpayers beginning in 2019. However, the JCT also estimates that beginning in 2021, tax filers with incomes of $10,000 to $30,000 will be worse off, paying $5.9 billion more in taxes. By 2027, taxes will go up for filers with income below $75,000 by $27.4 billion.

“In fact, the Senate Tax and Jobs Act may not deliver tax cuts that older Americans anticipate, and will likely increase taxes for many,” Jenkins said. In fact, the law chains the Consumer Price Index to the tax code and, for many filers, repeals state and local tax deductions, and these changes would result in little if any tax benefit for many older tax filers, and would result for others in a tax increase.

“Efforts to restructure all or part of the federal tax system should maintain incentives for health and retirement security,” Jenkins said. “Such incentives are not only important to assist individuals in attaining the security they deserve but are vital to our nation’s future economic well-being.”

“We appreciate that the Senate Tax Cuts and Jobs Act rejects the House provision which eliminates the additional standard deduction for those 65 and older, as well as rejects proposals to make significant changes to the tax treatment of retirement contributions, which would have affected the ability or commitment of many tax filers to save for their retirement,” Jenkins said.