Boomers: Tax Players and Payers

It's not just the money they
make, but how they spend it that makes baby boomers resent income
taxes. People in their 40s and 50s are typically higher wage earners
because they've had years to settle into a career and advance up the
pay scale. And because they're not teen-agers anymore, they have a
house full of responsibilities that eat away at their income-to-tax
ratio. That makes April 15 -- tax day -- a dark day in many American
households.

A tax deduction for elderly parent care applies only for self-employed
adults using Schedule C. College students in the family entitle boomers
to the Hope Scholarship deduction, but it's only $1,000, which sure
doesn't go far when college tuition alone can be 10 times that figure.
Teen-agers, teen-age auto insurance rates and teen-agers' cars eat away
at a family's budget.

"The baby boomers of the world seem to get it from all sides," says
Michael Rozbruch, CPA for Tax Resolution Services Co., and member of The
American Society of IRS Problem Solvers. "They get killed
with capital gains taxes if they have rapid stock turnover. They feel
the brunt of the marriage penalty; they hear of surpluses in the
government, yet they haven't seen any money coming back to them. They
want to see changes in how income taxes are structured."

No single tax reform could accommodate everyone's wishes, Rozbruch
tells ThirdAge News, but more and more 40- and 50-somethings are
leaning toward a flat tax structured much like a sales tax. "The idea
of paying a tax for items purchased or services used makes sense to
many people," Rozbruch says. "Social services could still remain
intact, though more people this age think in terms of cashing in IRAs
than in collecting Social Security."

There's a down side to that thinking, though. If taxes are paid only on
money spent, doesn't that mean that the lower income brackets are taxed
on nearly all their income, while the upper brackets can stash away
plenty of retirement cash, essentially tax-free?

"That's the debate," Rozbruch says. "Depending on your perspective and
your position, a flat tax can be a good or bad thing. A graduated flat
tax, where there are no exemptions, but increasing rates based on total
income, could be another alternative more people could live with."