December 17, 1995
AT THE SAME TIME Congress is contemplating plans to reduce the Earned Income Tax Credit for low-income workers, it is raising the amount of money seniors can earn without reducing their Social Security benefits. The logic behind these contradictory efforts is difficult to fathom.
Congress should be removing all disincentives to working without selectively choosing among various age groups. With the entire Social Security system headed toward insolvency in the next century, all measures that keep seniors working longer and delaying retirement are in the national interest. By the same token, removing tax credits for low-income workers isn't in the interest of the country. Nevertheless, the EITC has been targeted for severe cutbacks at the same time the House Ways and Means Committee has passed legislation allowing retirees to simultaneously work and collect Social Security benefits.
Under the committee-approved bill, seniors could earn up to $30,000 in 2002 and not suffer any loss of retirement benefits. Under current law, social security recipients up to the age of 70 can earn $11,520 annually without suffering any decrease in their social security benefits check. Ironically, Social Security recipients who are 70 and older won't benefit at all from this bill. Those retirees have been free to earn as much as they could without any loss of in their retirement payments.
Over the next seven years, this change is expected to put an extra $7 billion into the pockets of 1 million seniors. Two-thirds of the money will go to families with incomes of more than $46,000.
Contrast this to the current congressional plans to reduce the EITC, which provides tax credits for low-paid workers. At present, families earning more than $11,600 a year lose about 60 cents of assistance for each additional dollar they earn. They receive reduced EITC payments and fewer food stamps at the same time their payroll and other taxes increase.
Under EITC cutbacks contained in the reconciliation bill President Clinton vetoed, some families stood to lose between 70 and 75 cents for each additional dollar they earned. Since about 75 percent of the EITC flow to families with incomes of less than $15,000, these proposed changes will severely hurt working low-income families.
Life for the 7.7 million households that would lose their EITC benefits under current plans is hard enough. Current proposals to cut those benefits of working would only make life harder and discourage them from working.
