Testimony at Comm. On Finance & Rev. (Jack Evans, Chair), January 9, 2012, regarding
B19-512, the Age-in-Place and Equitable Senior Citizen real Property Act of 2011”
by Lee Aikin, Senior Citizen [Items in brackets have been added or changed since testifying]
Thank you for this opportunity to bring to your attention some serious inequities in the entire tax system. We have become painfully aware of the problems created for middle income taxpayers by the failure of the Federal government to index Alternative Minimum Tax figures for inflation. The current problem with the 50% senior citizens property tax reduction illustrates the same issue here at home. If no one is paying attention to these tax issues, then the appropriate adjustments are not made.
There has been no change in the $100,000 maximum income allowed since 1992. According to the CPI Inflation Calculator available at BLS.gov, if adjustments had been made for inflation, the allowable figure would now be $160,000. [In 2013 is $165,911] In other words, the $125,000 increase proposed is another example of much to little much too late. A modest mitigation would be to allow deductions from the Adjusted Gross Income for allowable medical expenses and charitable deductions from 1040 Schedule A, and required distributions from IRAs.
Another victim of city government inattention has been our D-40 allowances for Deductions and Exemptions. In 1974, around the time we gained Home Rule, the Federal deduction for a couple was $2,000. The DC deduction for singles and couples was also $2,000 total. The Federal exemption was $750 each, while the DC exemption was only $500. In 2004, I realized that my DC tax was more than my Federal tax, whereas 20 years earlier with comparable income it had only been about half. I decided to dig through old tax records to find out what had happened or had not been done . This was also the time period when DC was being cited as having the highest taxes in the country.
I discovered that while in 2004 the Federal deduction for singles was $4,850 and for married $9,700, DC was STILL only allowing $2,000 total for both singles and married. This after 30 years. No wonder we have the highest taxes in the country. Our elected officials have been sleeping longer than Rip van Winkle. The exemption figures were only slightly less bad, with $3,100 for the Federal, and a modest increase for DC to $1,370, which I believe occurred way back in 1991. [ If DC had the same deduction and exemption rates in 2004 as the federal, a DC family of 4 would have owed taxes on $14,620 LESS income. It has continued to get more unfair with the difference being $16,400 for 2012 taxes.]
I immediately called Councilmember Catania and brought this to his attention. He introduced legislation to couple the DC deductions and exemptions to the Federal allowances. Unfortunately, the hearings were held in March of 2005. This was 3 months before my husband ended his long dying from Alzheimers, and I was not able to follow through on my initial efforts. Mr. Catania's efforts unfortunately also failed. Nevertheless, I think this did FINALLY wake up a few other Councilmembers, and in 2006, the DC deduction for single and married was raised to a magnificent $2,500. The exemption was also raised to $1,500. The Federal figure for single was $5,150, and $10,300 for married, and the exemption $3,300 each. I feel happy to think I may have saved taxpayers at least $28 each in 2006, and perhaps more in 2008.
A modest improvement occurred in 2008 when the DC deduction was raised to $4,000, and the exemption to $1,650. However, the Federal deduction for single was now $5,450 and married $10,900, and the exemption $3,500. This would have saved DC taxpayers at least $92 from the 2004 rates. DC made no further changes 2009 to 2011. However, the Federal figures for 2011 were single $5,800, married $11,600, and $3,700 exemption. Thus we continue to fall behind. WAKE UP Council!!
Another place where adjustment for inflation has not kept up is the D-30, Unincorporated Franchise Tax form. This small business disincentive requires anyone with a GROSS income of $12,000 to file it. The $12,000 figure has not been changed since 1986. According to the BLS calculator, the current figure should now be around $25,000. I brought this form to Mr. Evans' former staff member, Eric Goulet's attention. He agreed that it was hard to figure out what I needed to do to fill it out and went with me to the tax desk at the old North Capitol St. location. There we discovered that the people on the front desk were also lacking in comprehension. Again, I was not able to follow through on trying to get this tax form simplified because of my husband's health care needs, and after he had died, Mr. Goulet was no longer in Mr. Evans' office. I should note that a tax attorney at a tax preparation service could not figure it out either and said that people with as small a business income as mine usually just sent in the $100 minimum and ignored it. This is no way to run a government. SIMPLIFY the form!!
It would be helpful if seniors and others could make a little extra money by renting a room or two in their homes. However, this requires the complicated process of acquiring the Basic Business License. One requirement of this process is that a person sign The Clean Hands Form, swearing under penalty of law that one does not owe the city over $100. I know of people who attended that Sept. 2010 Tax Amnesty, paid whatever they were told they owed, and then in the spring of 2011 started receiving letters saying they owed hundreds and thousands of dollars, which took them months to straighten out. With the city's aggressive auto fines policy, one who wishes to contest a fine above $100 would also be unable to sign this form and get their BBL. The only requirement should be that they learn how to fill out a greatly simplified D-30 if they are going to earn more than the GROSS specified. [For many people their only income is for rentals or small/home businesses in DC. Rather than fill out the complicated/incomprehensible parts of the D-30, they should merely have to submit a copy of the Federal Schedules C and E as appropriate with the D-30.]
The city is loosing money with the BBL which only takes in around $300 from people who rent out rooms. I know people who get 100 inquiries in two days when they advertise a $700 room in a popular area. Think how much more money the city would collect from sales taxes paid by renters, and income taxes paid by owners and renters? Imagine how many young people are renting in MD and VA who could rent here if only more rooms were available? How many young interns decide to move into DC after they graduate because they enjoyed renting a room in a lively location like Dupont Circle, Adams Morgan, or Capitol Hill? Let's make it easier for them and their potential renters. Does the term cost/benefit analysis mean anything to our hyperactive government tax and fee inventors?
One further measure that would greatly help the elderly is an addition to Exemptions. Currently, on both the DC D-40 and Federal 1040, one can claim for “over 65” and “blind”. Well, I am here to tell you that caring for my husband with Alzheimers for the final 3 years was far harder than caring for a blind person. Let us lead the nation by allowing an exemption for anyone who is medically certified as being at least as handicapped as a blind person, i.e., wheelchair bound, dementia, etc.
Finally, I would like to point out that in the federal calculator for determining if one must pay taxes on social security income, there is a deduction of $25,000 for a single person, and $32,000 for a married couple. This has not been changed since [1983 when as a bipartisan measure (Reagan Administration) SS benefits/income were taxed for the first time. Moving to adjust these figures to their current values of $58,427 and $74,787 (2013 figures) is well worth political action by any elderly person or political activist with time on their hands. In 2010 I had to pay taxes on most of my Social Security, unlike earlier years when my relative income was less. Also there are elderly singles who could afford to marry with such new exemptions in place.]
With the proposed income increase from $100,000 to $125,000 a small improvement will be made in the situation of the elderly in DC, but the problem will continue to get worse over time. Far better would be to increase the allowance to $160,000 and then index for inflation in future years.
Thank you again for your kind attention to these issues.