Fixed-income seniors can expect a tax cut

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By Sen. Barack Obama | Friday, September 21, 2007 |

In this country, we have always believed that a lifetime of hard work and honest living should be rewarded with a secure and dignified retirement. But today, too many seniors are being denied that security because they cannot afford the rising costs of everything from their gas to their medicine. The last thing they need is a tax code that works against them as well. That is why earlier this week, I proposed tax relief for seniors.

My plan will eliminate income taxes for about 7 million seniors making less than $50,000 a year. Twenty-two million more won’t even have to file a return, which also means they won’t have to hire an expensive accountant.

This tax cut is needed especially because since 1993 seniors have been bearing an unfair tax burden. That year, a national tax hike raised the amount that millions of seniors had to pay on their Social Security benefits, which meant that their actual benefits were reduced. My tax cut will give these seniors a break without threatening Social Security.

But the truth is, if we’re serious about making retirement security a reality, mitigating the effects of this tax hike is not enough. We have to ensure that Social Security is a safety net that today’s seniors and future generations of Americans can count on.

As the cornerstone of America’s social compact, Social Security has lifted millions of seniors and their families out of poverty. Without Social Security, nearly fifty percent of seniors would live below the poverty line. Here in Iowa, nearly 20 percent of the population – and more than 95 percent of seniors – receive Social Security. The full measure of Social Security’s value for its recipients – as well as for those who look after and love them – is incalculable.

But we all know the system is not perfect. Some have argued that the problems are severe and that Social Security is fundamentally broken. This is an exaggeration. The underlying system is sound and the actual problem, a projected cash shortfall over the next 75 years, is relatively small and can be readily solved.

A return to fiscal responsibility, so we are not borrowing billions from the Social Security trust fund, would help strengthen the program for the long term. If any additional steps are necessary, we should carefully weigh our options. And as president, there are some basic principles I would honor:

First, I will fight against efforts to privatize Social Security, as I and others did when President Bush proposed private accounts a few years ago. Privatization is wrong. It tears at the fabric of Social Security — the idea of mutual responsibility — by subjecting a secure retirement to the whims of the market.

Second, I do not want to cut benefits or raise the retirement age. I believe there are a number of ways we can make Social Security solvent that do not involve placing these added burdens on our seniors. One possible option, for example, is to raise the cap on the amount of income subject to the Social Security tax. If we kept the payroll tax rate exactly the same but applied it to all earnings and not just the first $97,500, we could virtually eliminate the entire Social Security shortfall.

But the fact is, we will not be able to solve this problem and protect Social Security for good until we stop treating it like a political wedge issue and instead unite Republicans and Democrats behind a sensible solution. In 1983, there were problems with Social Security, and President Ronald Reagan and House Speaker Tip O’Neil worked together to forge an effective bipartisan compromise. That sense of civility and shared purpose is notably absent in Washington today.

We need a President who can challenge conventional thinking in Washington, fight for the people’s interests, and bring Americans together to meet the challenges of our time. That is exactly the sort of leadership I intend to offer.