Senior Tax
Dear Editor: 1. Apparently, those in favor of this proposal have ignored the fundamental and elementary concept of Net Present Value in their deliberations. Simply put, “money now is more valuable than money later on.” In the case of the senior tax exemption, a rebate of, for the purposes of discussion, of $500 in one year is not equal to the daily availability of the money that will accrue to $500 over that year.
For the senior citizen that is living on the margin, the extra 6% (soon the be 7%) will immediately result in falling below the margin as needed groceries, utilities, fuel, etc. are purchased. It will result in a slow, inexorable decline into debt and despair due to the inability to pay needed expenses when they are due, either at the point of purchase (groceries and fuel) or monthly (utilities). The senior citizen will have fallen below the margin. Choices will have to be made regarding which purchases will not be made. The money is just not there, and.their bills won’t be paid, or groceries will not be purchased.
Let’s assume that the decline at the end of the year exactly equals the $500 rebate. This is where Net Present Value comes into play. The $500 rebate paid to the senior citizen at the end of the year is not equal to the value of being able to use the same amount when it is
needed in the present. In addition to the opportunity cost of being unable to make purchases, debt will accrue with associated interest, penalties and loss of services and/or goods. By the time the rebate is paid, it will be too late. Whereas the tax exemption at the point of purchase or on the due date keeps the senior citizen on the margin, the rebate does not. The rebate plan causes the senior citizen that is on the margin to fail to meet their needs.
While it appears to balance out, it doesn’t because the $500 in a year does not equal the $500 that accrues at 6% per day over the year. It’s all the same to the tax man, but it is a devastating loss to the senior citizen.
2. It is bad social policy to exploit the most vulnerable and disenfranchised taxpayers to pay for the folly and deferred needs of Sitka. For example, it is unconscionable for the Sitka Assembly to turn a blind eye to the extravagant, white elephant Sitka Performing Arts Center (that is empty the majority of the time) and turn to the senior citizens to foot the bill. Elders make a valuable contribution to the Sitka community. This rebate program will push many of them over the edge and run them out of town.
3. The rebate program adds administrative costs and increases the size of the city government when we need to be cutting the size and cost of the city government.
May I suggest that if you must change the existing senior tax exemption program, then limit the exemptions to those necessary purchases such as food, fuel, utilities, and shelter. Tax on wants, but not on needs.
4. Finally, I would appreciate it if one of you would stand up and call for a stop to the scurrilous and slanderous accusations of dishonesty and cheating by senior citizens using their tax exemption.
There isn’t one single documented bit of evidence to support these groundless accusations. All that has been offered is hearsay and vague anecdotes. We may disagree on policy, but we must agree on due process and simple respect.
Sincerely,
Dr. Ronald E. Dick
