NCPA - National Center for Policy Analysis

Beginning Of The End For Social Security Earnings Test

March 1, 2000

Political observers say legislation to repeal the Social Security earnings test for those who retire at 65 or older appears headed for passage. For nearly 50 years, Democrats in Congress have opposed changing the earnings test because they feared it would benefit the rich. But now their opposition to the current Republican initiative is dwindling and President Clinton has said he would sign the measure when it reaches his desk.

"On the one hand we are continually told that workers have a right to Social Security whenever there is a proposal to modify cost-of-living adjustments," says Bruce Bartlett of the National Center for Policy Analysis. "But on the other hand, we take away benefits from many seniors simply because they have chosen to work past the normal retirement age."

  • The earnings limits was instituted during the Great Depression to encourage seniors to give up their jobs so that younger workers could find employment.
  • But in today's tight labor market, the cry is for more workers -- not fewer -- and removing the caps would allow seniors to continue to earn and contribute their labor.
  • The move would repeal the current requirement that retirees between 65 and 70 lose $1 in benefits for every $3 they earn in salaries or wages over $17,000.
  • But it would not change a similar earnings test for those who retire between 62 and 65.

Under current law, about 1.15 million seniors lose Social Security benefits because they work. Roughly a third of those are found in just three states -- California, New York and Florida.

Source: Peter Cleary, "GOP's Next Big Move to Cut Taxes: Killing Social Security Earnings Test," Investor's Business Daily, March 1, 2000.

For new NCPA backgrounder on the Earnings Penalty


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