Braille Monitor                                                    March 2008

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Increasing the Earnings Limit:
A Common Sense Work Incentive for Blind Social Security Beneficiaries

Legislation: H.R. 3834, the Blind Persons Earnings Fairness Act of 2007 introduced by Congressman John Lewis.

Purpose: To amend Title II of the Social Security Act by mandating five annual increases in the level of earnings allowed for blind individuals before applying a work penalty.

Background: By increasing the Social Security earnings limit in 1996, Congress gave seniors a powerful incentive to work. Advocates stressed that seniors would continue to work, earn, and pay taxes because they could do so with no fear of losing income from Social Security.

The need for a higher earnings limit for the blind is much more compelling because of an all-or-nothing penalty for exceeding the limit. Nevertheless, the earnings limit for blind individuals has not been increased beyond the annual rate of wage growth, though historically this limit was tied to the applicable limit for seniors. In 2008 the earnings limit applicable to seniors in the year they reach Full Retirement Age (FRA) is $36,120. This limit is adjusted annually. For blind individuals gross earnings exceeding $1,570 monthly ($18,840 annually) cause complete loss of benefits until attainment of FRA.

Existing Law: Like "retirement age," "blindness" is specifically defined in the Social Security Act and can be readily determined. By contrast, evaluating "disability" is far more subjective. Although blindness is specifically defined, not all blind people receive monthly benefits. Only those not working or whose work earnings are below an annually adjusted statutory earnings limit are eligible. Personal wealth derived from all sources other than work is subject to no penalty at all. However, income in excess of the earnings limit generated from work results in a complete loss of cash benefits for blind beneficiaries. Recognizing the negative impact of the earnings limit on seniors, Congress changed the law in 1996 and later entirely eliminated their earnings limit. The situation confronting blind people today is identical to that seniors faced before 1996.

Examples: For the blind who find employment, earnings almost never replace lost benefits once taxes and work expenses are paid. Therefore few beneficiaries can truly afford to attempt significant work, and those who do often sacrifice income and the security of a monthly check. The following examples illustrate the penalty for working.

• A single blind person with no dependents having annual cash benefits of approximately $12,000 or $1,000 per month (an average benefit), with no other income, receives this amount tax-free. Gross pay to replace benefits must be approximately $20,500, taking into account taxes and work expenses (including transportation and purchase of work-appropriate clothing). This is $1,660 above the amount blind people are allowed. Annual earnings less than $20,500 clearly result in a net loss of income. While some blind people nevertheless choose to work, many do not because they cannot afford the lost income.
• For a blind beneficiary with dependents, the situation is more desperate. With two dependents the family's total benefit averages $17,870 tax-free annually, and earnings greater than $18,840 (the annual earnings limit for blind recipients) will terminate benefits. Using conservative assumptions, including combined state and federal taxes of twenty-five percent of gross pay and childcare for two children at $500 per month, replacing $17,870 in benefits would require over $32,000 in gross pay. When dependents are involved, the choice whether or not to work is profoundly restricted, and the amount necessary to replace combined family benefits vastly exceeds the blind person's earnings limit.

Need for Legislation: Steadily increasing the earnings limit for blind people over five years, thereby linking it to the limit applicable in the year of FRA, will allow blind people to work without facing an overwhelming financial penalty for their effort. This would provide more than 100,000 blind beneficiaries with an effective work incentive. In 2008 a blind individual�s earnings cannot exceed a rigid monthly limit of $1,570. Earnings over this threshold lead to immediate withdrawal of the total sum paid to a primary beneficiary and all dependents following completion of a trial work period. The economic risk occurring to a blind head of household negates any possible economic benefit.

An increase in the earnings limit would be cost-beneficial. With an estimated 74 percent unemployment rate, an overwhelming majority of working-age blind people are already beneficiaries. With this meaningful work incentive proposal, many would also become taxpayers. The chance to work, earn, and pay taxes is a constructive and valid goal for senior citizens and blind Americans alike.

Requested Action: Congress should enact annual increases in the statutory earnings limit for blind individuals over five years, ultimately linking it to that applicable to individuals in the year they attain full retirement age as follows:

• For 2008 $21,600
• For 2009 $26,400
• For 2010 $30,000
• For 2011 $34,200
• For 2012 the amount applicable to individuals who attain Full Retirement Age in that year.

Please support blind Americans by cosponsoring the Blind Persons Earnings Fairness Act of 2007, H.R. 3834.
Senators, please support companion legislation when introduced.