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Social Security Earnings Test Repealed An original feature of Social Security, the retirement earnings test, will no longer affect seniors working after reaching full retirement age. Until recently, Social Security recipients age 65 through 69 lost $1 in benefits for every $3 they earned over a maximum that was recalculated every year. Until the law change, that amount would have been $17,000 in 2000. The new law is retroactive to January 1, 2000. Benefits of recipients age 62 to 65 continue to be subject to the earnings test. Their earnings are reduced by $1 for every $2 earned beyond the limit, which this year is $10,080. A relic the Great Depression, the earnings test was supposed to keep older workers who had retired out of the labor force to free up jobs for younger workers, but in today's economy it has become a classic case of muddle-brained government policy. Americans are living longer and healthier lives than ever before. Some health experts believe that life spans could average up to 100 or more. But while life expectancies are growing longer, the ratio of workers to retirees in America is dropping from 15 to 1 in 1950, to 3 to 1 today; and is expected to decline to less than 2 to 1 by 2025. The potential for demographically bankrupting of the Social Security system is frightening. Instead of encouraging seniors to continue to work and pay taxes, the earnings test did just the opposite. When combining the earnings test, with the taxation of Social Security benefits, and adding them to federal income taxes, payroll taxes, and state income taxes, seniors faced tax rates of 65% or more. Scaling back the earnings limit will result in Social Security paying out about $22.7 billion in additional benefits over the next decade, but without the earnings test, more retirees are expected to work part or full time. When they work, they pay taxes on what they earn, thus offsetting the additional benefits. Eliminating the retirement earnings test however, will not eliminate taxes on Social Security benefits. Retirees with incomes of more than $32,000 (joint), $25,000 (single) will still be subject to taxes on 50 to 85% of their Social Security benefits. TSCL entered a statement for the record in support of repeal of the Social Security earnings test at the February 15th, Social Security Subcommittee hearing chaired by Representative Clay E. Shaw (R-FL). Sources: “Call To Halt The Penalty For Social Security Recipients Who Work,” Richard Stevenson, The New York Times, February 15, 2000. “Social Security Earnings Test Is Anti-work, Anti-senior Citizen, Anti-tax Fairness,” Stephen Moore, Tribune Review, November 5, 1999.
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