What the Republican Platform Would Mean for You
Americans in their 50s and older could see big changes in taxes, retirement benefits and health-care costs
Bob Rosenblatt is a writer and editor specializing in aging issues. His blog, Helpwithaging.com, focuses on the finances of aging.
For the GOP vision to become reality, Mitt Romney would need to win the White House and the Republicans would have to capture control of the Senate while maintaining their majority in the House. Even under that scenario, it’s unlikely that the entire Republican platform would become law. But here’s what its key elements would mean for you: (Next Avenue will post an analysis of the Democratic platform shortly.)
What the platform says: The tax system must be “simplified.” The goal is a tax system that is “simple, transparent, flatter and fair,” promoting savings and recognizing the burdens on families with children. The platform calls for extending the 2001 and 2003 Bush tax cuts, pending reform of the tax code, to keep tax rates from rising on income, interest, dividends and capital gains (for the lower and middle class); reducing marginal tax rates by 20 percent across the board; eliminating taxes on interest, dividends and capital gains for lower- and middle-income taxpayers; ending the “death tax” (also known as the federal estate tax); repealing the alternative minimum tax; keeping charitable deductions tax-deductible and, if tax reform doesn’t happen, preserving the mortgage interest deduction.
(MORE: The Security of Future Retirement Benefits: 5 Questions for Obama and Romney)
What it would mean for you: If tax reform really happened along with cuts in tax rates, you might lose many tax deductions and credits, while retaining the ability to write off charitable contributions. Despite the Republican platform, Romney has told Fortune that middle-income taxpayers would not lose tax breaks; only high-income individuals would.
A 20 percent cut in tax rates would lower the top tax rate to 28 percent from 35 percent. And if you are in, say, the 25 percent marginal tax bracket (taxable income of $70,700 to $142,700 for married couples filing jointly), your top rate would become 20 percent.
Reuters columnist Linda Stern notes that if taxes are eliminated on dividends for low- and middle-income taxpayers, “that could be a boost for retirees who rely on dividends but are in low tax brackets.”
According to Romney’s tax plan, if your annual adjusted gross income is below $200,000, you would no longer pay taxes on interest, dividends or capital gains from the sale of investments. There would still be a 15 percent tax rate on investment income if your income is over $200,000.
Under current law, the federal estate tax applies only to estates of $5,120,000 or more; the estate-tax exemption is scheduled to drop to $1 million in 2013. The tax rate, now 38 percent, would rise to 55 percent. The Republican platform would exempt all estates from the tax.
Retirement and Social Security
What the platform says: Social Security “is long overdue for major change,” and Republicans “are committed to setting it on a sound fiscal basis that will give workers control over, and a sound return on, their investments.” No changes should “adversely affect any current or near-retiree,” but “comprehensive reform should address our society’s remarkable medical advances in longevity and allow younger workers the option of creating their own personal investment accounts as supplements to the system.”
What it would mean for you: Hard to say. It’s unclear how old you’d need to be to take a portion of your Social Security taxes and put the money in a personal account invested in stocks or bonds. And the platform doesn't discuss any change in the Social Security payroll tax rate.
The platform also doesn't mention a specific new eligibility age for Social Security benefits. In a 2011 GOP presidential primary debate, however, Romney said he’d "add a year or two to the retirement age under Social Security." He didn't say when that the eligibility-age hike would take effect.
Romney has also called for slowing the growth of Social Security benefits for “higher-income” recipients, although this wasn't specifically mentioned in the Republican platform.
Private Health Insurance and Health Care
What the platform says: President Obama’s Affordable Care Act would be repealed and replaced with a system “empowering individuals and small businesses to form purchasing pools in order to expand coverage to the uninsured." The goal is to encourage a system providing "higher quality care at a lower cost to all Americans." And individuals with pre-existing conditions who maintain continuous insurance coverage “should be protected from discrimination.”
What it would mean for you: The mandate requiring you to buy health insurance by 2014 or pay a tax penalty would be repealed. It’s not clear exactly how the health insurance purchasing pools would work, since they wouldn’t be mandatory, although the Republicans hope that competition would hold down premiums. Legislation would be needed to prevent insurers from refusing to sell policies to people with pre-existing conditions.
What the platform says: The current Medicare system is deemed unsustainable because spending for the federal health-care program for Americans 65 and older is growing faster than the economy and that deepens the federal budget deficit. Instead, Medicare would transition to a “premium support” model. Beneficiaries would choose between Medicare and private health insurers offering catastrophic protection; the government would provide an “income-adjusted contribution toward a health plan of the enrollee’s choice.” And the age to become eligible for Medicare would “be made more realistic in terms of today’s longer life span.”
What it would mean for you: If you’re now 65 or older, you’d no longer get the growing discounts for prescription drugs, part of the Affordable Care Act, because that law would be repealed. Under current law, in 2012, you get a 50 percent discount on brand-name drugs and a 14 percent discount on generics for prescription drug costs between $2,930 and $4,700 — the so-called “donut hole.” The Affordable Care Act would have closed the donut hole by 2020.
(MORE: What Ryan’s Medicare and Social Security Plans Mean for You)
If you’re now 55 or older, the way Medicare works wouldn’t change. But if you are under 55, you’d need to choose between Medicare and private insurance once you become eligible for Medicare. As health-care costs rise, the government’s share of Medicare spending would slow, so you’d need to pay a larger share of premiums.
Although the platform doesn’t mention a specific age for Medicare eligibility, Romney supports gradually increasing it to match the scheduled lengthening of Social Security’s retirement age, which will top out at 67 for Americans now 52 or younger, starting in 2027.
Vice-presidential candidate Paul Ryan has called for gradually increasing the Medicare eligibility age starting in 2023 so it would reach 67 in 2034, when today’s 45-year-olds would hit that mark.
What the platform says: “Medicaid is too big and too flawed to be managed in its current condition from Washington,” according to the platform. Instead, the federal-state health-care program for poor Americans 65 or older would be converted into a block grant program. Each state would get its share of Medicaid money, but would no longer have to follow federal rules about the program’s benefits.
What it would mean for you: There could be substantial variations in Medicaid eligibility, depending on where you live. For instance, some states might place limits on how many days you spend in a nursing home in order to receive Medicaid benefits; others might eliminate nursing home coverage entirely. The cost of a nursing home would depend on where you (or your parents) live; so would the ability to gain admission to one.
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