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Additional Standard Tax Deduction for the Elderly: A Description and Assessment, May 7, 2008 1 (May 7, 2008)

handle is hein.tera/crstax0075 and id is 1 raw text is: Order Code RS20342 Updated May 7, 2008 CRS Repo for Congress Additional Standard Tax Deduction for the Elderly: A Description and Assessment Pamela J. Jackson Specialist in Public Finance Government and Finance Division Jennifer Teefy Information Research Specialist Knowledge Services Group Summary An additional personal exemption for elderly taxpayers was enacted by the Revenue Act of 1948 (P.L. 80-471). The rationale for the provision was to accord the elderly tax relief because the elderly had small incomes and are unable to adjust their incomes in response to increases in the cost of living since they no longer work. Congress attempted to target the tax benefit to low- and moderate-income elderly individuals by substituting an additional standard deduction for the personal exemption amount in the Tax Reform Act of 1986 (P.L. 99-514). The additional standard deduction for both the elderly and the blind is projected to cost $9 billion in lost tax revenue over the next five years and fails to meet the economic tests of horizontal and vertical equity among taxpayers. The provision could be corrected with alternative policies. If Congress wanted the provision more focused to benefit lower-income elderly, then it could be converted to a tax credit with a phaseout range. This report will be updated as warranted by future developments. Brief Summary of Current Law Tax laws provide certain allowances for the elderly. Among the most important is the availability of an additional standard deduction amount allowed for those age 65 years or older. Other special tax allowances are included in other provisions of the law,1 such ' For more information on the provisions available to aged taxpayers, see the U.S. Department of Treasury, Internal Revenue Service's annual publication entitled Older Americans 'Tax Guide (continued...) Congressional Research Service The Library of Congress Prepared for Members and Committees of Congress

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