A new Census study shows that the elderly in this country are much better off than previously believed and in fact better off than the average American. Their per-capita, after-tax income was $6,300 in 1980 versus $5,964 for the population as a whole.
That is the most striking finding from a Census survey of 65,000 households that for the first time provides authoritative breakdowns of before- and after-tax income of Americans by age, race, household size and structure and other factors.
The survey counted only cash income, not non-cash benefits such as Medicare, Medicaid and food stamps. It also counted only federal and state income, Social Security and property taxes; sales taxes were left out.
The average 1980 income of all households before taxes was $21,063. After paying $4,791 in taxes--mostly federal income tax--the average household ended up with $16,272, some 23 percent less.
Households headed by people 65 and over had lower average before-tax incomes of $12,628 and appeared to be poorer than any other age group. That seemed to confirm the general view that the elderly are among the poorest Americans.
But, largely because most Social Security benefits are tax-exempt, elderly households have a lower tax rate (13 percent) than any other age group. Elderly households also contain only an average of 1.74 persons compared with 2.73 persons for the nation as a whole.
Thus, when Census converted before-tax income per household into after-tax income per person, the elderly moved up sharply. At $6,300, their so-called disposable per-capita income was higher than for all groups with heads of household younger than 50.
It was only about $350 below the level for households headed by persons 50 to 54 years old, peak earning years, and well behind only those in the 55-to-59 and 60-to-64 age categories, for which the averages were $7,572 and $7,426, respectively.
The new figures are almost certain to become factors in the inter-generational politics that have grown up around Social Security and Medicare. Both these giant programs for the elderly have been in trouble of late, and Congress has had to choose quite specifically between tax increases for the young or benefit cuts for the old.
More such hard choices are likely as the baby-boom generation moves toward retirement and, in the years just ahead, a greater proportion of the population in general is older.
The new study found that the per-capita after-tax income of the elderly averaged $6,299, the non-elderly, about $5,910; blacks, $3,844; Hispanics, $3,905; whites, $6,283; female-headed households with children, $2,917; husband-wife households with children, $4,803.
The report also found:
* The 13 percent tax rate for the elderly was the lowest of any group. It compared with 13.6 percent for female-headed households with children, 23.8 percent for married couples with children, 18 percent for blacks, 18.7 percent for Hispanics and 23.1 percent for whites.
* The total tax structure is somewhat progressive: it falls more heavily on rich than poor. It does redistribute income, but not as much as commonly believed. It narrows the rich-poor income gap only about 10 percent, according to Gordon W. Green Jr., an assistant chief of Census' population division.
The study showed that the people in the poorest fifth of all households received 4.1 percent of income before taxes, and 4.9 percent after taxes; the upper fifth had 44.2 percent before and 40.6 percent after.
* Total tax rates, because of the progressiveness of federal and some states' income taxes, rose steadily from 8 percent in households in the $2,500-to-$5,000 range, to 22.1 percent at $25,000 to $27,500, about 30 percent at $50,000 to $60,000 and 33 percent at $60,000 to $75,000. Households with incomes under $17,500 (nearly half of all households) paid an average of 12 percent of gross income in the major taxes counted, while those with incomes over $35,000 averaged about 30 percent.
* The federal income tax, for the three-quarters of households that owed any, averaged $4,011; state income taxes, paid by two-thirds of households, averaged $859; Social Security taxes, paid by three-quarters of households, averaged $1,114; and property taxes, paid by two-thirds, averaged $580.
* Of the $394 billion in taxes from these sources, the federal income tax produced 62.3 percent, state income taxes 11.4 percent, Social Security, 17.5 percent and property taxes, 7.6 percent. Another 1.1 percent came from federal retirement contributions, which, for the purposes of the study, were viewed as comparable to Social Security taxes.
* Of the $394 billion, white households paid $364 billion; black, $22 billion. Using age instead of color to break down tax receipts, elderly households paid $28 billion, non-elderly $366 billion.
* Overall, the proportion of gross household income going to taxes rose from 20 percent in 1974, the earliest year for which the Bureau had a comparable data base, to 23 percent for 1980.
The reason was partly Social Security and property tax increases and partly "bracket creep" because inflation increases people's nominal incomes and moves them into higher federal and state tax categories.
* Partly because of these tax increases, after-tax income in constant 1980 dollars actually dropped 7.2 percent per household from 1974 to 1980, from $17,527 to $16,272, the study said.
Because low-income households pay relatively low taxes, the proportion of households falling below the government's official poverty line was almost the same on the basis of after-tax income calculations as for gross income. Before taxes, it was 13.3 percent in 1980; after taxes, 13.5 percent.