I am sorry that this letter has not been more brief; but there is much left unsaid. I hope you are successful in your inquiry. The family, as the basic unit of our society, must be supported by any measure which can help strengthen its structure. Many of us want our parents with us, but economic pressures make it an increasingly difficult situation. I do not believe that it is the mere presence of aged parents in a family which is at the root of the problem. I think that it is the fact of additional tensions which are created by the increased responsibilities each member feels. Tax relief might also be a monetary inducement to those who are not now inclined to accept any responsibility for their parents. At least it might have a beneficial effect in enhancing the status of the old people in their own and their children's eyes. (The writer of the above letter was asked questions which, together with her answers, appear below :) Q: How do your parents feel about your inability to obtain Federal tax concessions for your support of them? Has this made them more reluctant to take assistance from you? Do you think they would be happier to receive assistance from you if your assisting them substantially reduced your Federal tax burden? A: My parents have both felt that the Federal Government, in setting up its tax schedules, does not take into consideration the many burdens and responsibilities placed upon children who support their parents. While the tax may not be excessive in itself, when added to other problems it becomes quite weighty. This has made them feel that they are adding to my burdens. I really do not think that even a reduction in my tax-because of my supporting them-would completely lessen their distress at the situation. They would certainly welcome any relief for me; but they are aware of the urgency of our economic situation. Q: To what extent do you believe your heavy Federal tax burden has contributed to your daughter's maladjustment? Please explain. A: While it may be a minor contributing factor, indirectly, I cannot put the blame on my tax burden for my daughter's emotional problems. It would certainly help her situation to have a mother who was less harassed financially. She was counseled by a psychiatrist at the Univ. of Fla. for only six weeks last summer. As you may know, the cost of such treatment is prohibitive. Although the need is indicated, it is financially out of the question at this time. (Her problem is more closely associated with one of the other matters I brought to your attention: the child-support laws.) Q: What, if any, consideration have you and your parents given to the possibility of their applying for Old-Age Assistance, Medical Assistance for the Aged (Kerr-Mills), or both, as a means of decreasing their need for contributions from you? If you and they have not considered this possibility, why not? If the possibility has been considered, what was the result of that consideration? A: My father, at the present time, is in a stage of advanced senility. He has been a resident of a Home for the Aged since Feb. 23, '66. This has been another source of great mental anguish to my mother and me. She is ashamed to have anyone know about it. I am ashamed that. although he always took care of me and gave me a good home and education, I am unable to provide for him at home now. A representative from the State Welfare Board has told my mother that Kerr-Mills will no longer be in effect when Medicare comes in. My parents will have been residents of Florida for five years at the beginning of August, 1966. They will then be eligible for state welfare. The agency has notified my mother that they will contact her again at that time. Senator GEORGE A. SMATHERS, FORT LAUDERDALE, FLA., May 15, 1966. DEAR SIR: Am happy that you realize the problem of aging parents needing help from their children and being allowed tax relief for the financial assistance given their parents. * See p. 1. I am a widow 74 years of age-I had to retire from Dade Co. public schools in 1951 because of a stroke. My retirement pay is $1,720 a year. I get a small amount from New York Life Insurance Co. for disability. In 1958 I broke my hip and have been a semi-invalid ever since. I am in the Lauderdale Beach Hospital now recuperating from a fall. I have one child, a son 44 years of age married and has four children. He is very glad to help me all he can afford and I do have to accept his help. If he could deduct this expense from income tax, I would not feel so reluctant to take it. I reared my son alone and gave him 5 years at Univ. of Fla. on a teacher's salary. He graduated in 1943 and went into the Army at once. The government did not educate him. I paid for his education on a meager salary. Is there anything I can do to help you convince your committee that this situation should be corrected? Sincerely yours, RUTH F. BROWN. BAIRD & BAIRD, DEAR SENATOR RANDOLPH : Council Bluffs, Iowa, May 9, 1966. I have been a member of the Committee on Tax Problems of Farmers of the Section of Taxation, now known as the Committee of Tax Problems of Agriculture, for many years and so I welcome this opportunity to give my views on this important subject. I recently had a client consult me about her tax situation. After working as an employee of the Veterans Administration for thirty years, she retired and now lives with her Mother... Her principal income is the annuity or pension she receives from the government and now it is all subject to tax because she has in previous years received her contribution or her cost. Her complaint is that although she is required to spend all of her modest annuity to support herself and her aged Mother, who has rather large medical expenses, she is not permitted to consider her Mother as a dependent because her Mother receives Social Security benefits of over $600.00 per year. In other words, her Mother does not meet the gross income test for a dependent. Since her Mother does not meet the test for a dependent, my client is not entitled to the head of household tax treatment. This seriously affects the tax liability of my client and in turn it affects the amount she has to spend for the care of her Mother. I have tried to console her with the thought that some day the personal exemption may be increased to $1,000.00 as I have seen suggested in newspaper articles and elsewhere. I feel that some action should be taken in this situation. There must be thousands of other women who like my client are single and who have all or nearly all of the expenses of a household thrust upon them and who are deserving and need some help in their tax situation. I want to thank you for your invitation to write this letter to you. DONALD P. BAIRD. MY DEAR SENATOR: After reading the item in the newspaper about a tax break for those who support a parent, hits our home like a streak of lightning. This tax relief is long overdue. My daughter, single and 48 years old, is a secretary and I am a widow 79 years of age. She can't claim me a dependent on her income tax *** Most of her wages go for the expense of this modest home. I think it is about time to do something for the worthy. My daughter has never had a new car. We keep turning it in for a used car a little better than the present one *** Now I hope you will do your part to help the single workers who are doing their * See p. 2. 4 See p. 2. part to their parents. I hope you will be able to do something along the lines you say as it would be a great help to my daughter and me, too. * Sincerely, [Name withheld.] NEBRASKA, May 16, 1966. DEAR SENATOR SMATHERS: This is in reference to your news release dated Sunday, May 14, 1966, of which a copy is attached. I would like to express my opinion on this matter since it has affected me personally. During the calendar year of 1965–66, I will have spent in excess of $1,000 each year, as supplemental support of both my parent and the parents of my wife. Consequently, the thoughts related in your news release carry some merit. Whether there should be a tax incentive or not, I shall continue to support and give whatever care is required by our parents. Your statements are well taken, however, in that it can place periodical binds on a young family man. For your information, I am 31 years old, an educated individual, and have three children. My annual income is approximately $13,000 per year. If I interpreted your news release correctly, I would fit into one of the categories which you were discussing. I would not take it upon myself to solicit your specific interest in this matter, however, it does continue to give you some perspective as to what is happening in this area. Most sincerely yours, FRANKLIN J. WILLIAMS. DEAR SENATOR SMATHERS: I am most pleased to have received your release of May 14, 1966, regarding the most wonderful Biblical injunction: "honor thy father and mother." I wholeheartedly agree and support your position as I have been blessed with parents now in their nineties who I have been supporting for many, many years. I am sincerely grateful that I am able to do so, however, the normal deduction is nowhere the amount of money I spend every year. I have taken the responsibility of paying their mortgage and interest as well as their gas, electricity, telephone, etc. I also pay for their food for the year as well as their doctor bills, medical payments, etc. All of the above is not deductible. If something could be done to allow people in my position to deduct some of the expenses involved, it would be most helpful. I should hate to think what might happen if I was incapacitated and unable to do any of the above. I look forward to your further advice. Sincerely, See p. 2. See p. 2. 66-332 0-66 -6 [Name withheld.] APPENDIX B PROFESSIONAL COMMUNICATIONS RECEIVED AMERICAN MEDICAL ASSOCIATION, Chicago, Ill., June 24, 1966. DEAR SENATOR SMATHERS: Thank you for your letter of June 7, 1966, which invites the American Medical Association to comment on draft material on "Tax Consequences of Contributions to Needy Older Relatives." Your letter particularly solicits our comments on “Possible Finding No. 3" and "Possible Recommendation No. 3." These are as follows: Possible Finding No. 3.-At present, Federal Income Tax statutes discriminate against taxpayers who pay the medical expenses of their needy elderly relatives but who are prevented by technicalities from deducting such expenditures. Possible Recommendation No. 3.-The Committee recommends that the Internal Revenue Code be amended to permit deduction by a taxpayer of his payments for medical expenses of a relative over 60 who had less than $1,200 of income during the taxable year, even if the taxpayer did not contribute as much as one-half of the support of the older relative during the year. The American Medical Association in the past has advocated changes in income tax laws, which changes would provide an incentive for individuals to furnish medical care for older relatives and would accomplish a more equitable treatment for those taxpayers who have made expenditures for such medical costs. In 1963, the American Medical Association appeared before the House Ways and Means Committee to discuss suggested changes in the Internal Revenue Code. The recommendations we submitted at that time were reiterated in 1965, when we appeared before the Senate Committee on Finance, which was then holding hearings on the Social Security Amendments of 1965. At the latter hearing we commented specifically with respect to Section 106 of H.R. 6675, 89th Congress, which would amend the Internal Revenue Code with respect to medical expense deductions. We supported the liberalizing provision which would grant a deduction to every taxpayer of a part of the amount which he spends for health insurance. We opposed the provision in that bill which would remove the then existing exemption, granted to the aged and to taxpayers furnishing medical care for certain relatives, from the 3% rule with respect to medical expenses and from the 1% rule with respect to medicine and drug expenses. We regarded the removal of those exemptions as a "step backward," and believe it unfortunate that this occurred in the enactment of P.L. 89-97. We would accordingly support your proposal to reinstate these provisions in the Internal Revenue Code. At the 1965 hearing, the AMA also suggested three amendments to the Internal Revenue Code with respect to medical expenses of the aged. We set these out in full below as bearing on aspects of "Possible Recommendation No. 3." You will note that our suggestions are in harmony with your recommendation. Our recommendations were: For persons who have attained age 65, we propose the using of a credit against tax liability instead of a medical expense deduction. The tax credit should be related to the amount of his income and to his medical expenses so that a taxpayer who has a burden of medical expenses which is large in proportion to his income will receive the greater amount of tax relief. Our second proposed Code amendment would permit taxpayers over age 65 to receive full tax benefits for medical expenses by use of the carry-forward and carry-back method. The Code now permits businesses to offset losses in one year against profits in another year. We believe that it would 38 be equitable to apply the carry-forward and carry-back mechanism to the medical expenses of elderly persons. If the medical expenses of a taxpayer who has attained age 65 are unusually high in one year, he should be permitted to carry back (or forward) the "excess" so that the tax benefits will not be lost to him. We therefore recommend that the Code be amended to authorize for these taxpayers a three-year carry-back and a five-year carryforward for unclaimed medical care deductions. Our third proposed Code amendment is to permit a taxpayer to deduct in full the amount paid for the medical care of any person who has reached the age of 65 and is within the named group of persons defined as dependents under section 152 of the Internal Revenue Code. Under existing law, [1965] a taxpayer is entitled to deduct without limitation the amount he has spent for the medical care of his parents or his wife's parents who are his dependents and who have attained age 65. However, with respect to his sisters, brothers, grandparents, or other dependents who have attained age 65, the general rule applies which permits the taxpayer to deduct only those medical expenses which exceed 3% of his adjusted gross income. There appears to be no reasonable basis for restricting the taxpayer to a smaller deduction merely because the dependent is not a parent. The financial hardship to the taxpayer is the same regardless of the degree of family relationship. Another inequity is the requirement of dependency before a taxpayer can deduct for the medical expenses which he has paid for another person. Under existing law, unless the taxpayer has contributed more than one-half of a person's support, the individual it not a dependent and the amount paid by the taxpayer for the medical care of the individual is not deductible. Permitting the taxpayer to deduct his contribution toward the medical care of an elderly relation will encourage family responsibility. It will also make it unnecessary, in those cases where it might otherwise be so, for the aging persons to convert to cash necessary income-producing assets in order to pay for their medical care. Possible Recommendation No. 3 would liberalize the medical deductions allowed taxpayers. As indicated above, the American Medical Association supports this goal. We hope that the above information will be of assistance to your Committee, and we are pleased to have the opportunity of expressing our views. Sincerely, F. J. L. BLASINGAME, M.D. THE UNIVERSITY OF WISCONSIN, Madison, May 23, 1966. Mr. J. WILLIAM NORMAN, Staff Director, Special Committee on Aging, U.S. Senate, Washington, D.C. DEAR MR. NORMAN: In view of the shortness of the time before May 26 and the tightness of my schedule, I am submitting herewith a few paragraphs which represent a hasty reaction to your excellent memorandum : Although in general I am opposed to further proliferation of exemptions on the score that they contribute to the undue erosion of the income tax base, I accept the contention that the support of older relatives by their children should be encouraged and that present allowances in this area are harsh and niggardly. Ideally, the re-examination of these allowances should entail the reconsideration of the entire area of tax allowances for the aged. This is a large order encompassing the inclusion of social security in the tax base, the double exemption for the elderly and the retirement-income credit. My views on these matters have been stated in Federal Tax Treatment of the Family: Brookings, 1963. There I observed: Particularly conspicuous. . . is a combination of privileges piled one upon another, which are obviously surplus for many older people in need and which greatly reduce the tax of those who are in no sense underprivileged . . . If all income of the elderly were included in the tax base and ordinary exemptions allowed, then the exemptions associated with transfers by relatives could be liberalized in good conscience. For instance the income test which presently pre |