Winning the Chance to Pay Taxes

Winning the Chance to Pay Taxes

The Braille Monitor

April 1997

(next)

(contents)

Fact

Sheet

Winning the Chance to Earn and Pay Taxes: How the Blind Person's Earnings Limit

in the Social Security Act Must be Changed

BACKGROUND: The Social Security earnings limit, also known

as the "retirement test," was recently changed by Congress. The new

law, which first took effect in 1996, provides a 1997 earnings exemption threshold

of $13,500 and specifies five more annual increases to reach an earnings exemption

of $30,000 in the year 2002. In making the case for this change, advocates in

Congress explained that senior citizens in greater numbers would now have the

opportunity to work, earn, and pay taxes.

In spite of a law passed in 1977 creating a logical and identical

earnings exemption threshold for blind people and retirees under Social Security,

beneficiaries who are blind were singled out for exclusion from the new, mandatory

raises in the earnings exemption. This means that a lower earnings limit for

the blind--$12,000 as compared to $13,500--is now in effect. By 2002, when the

exemption for seniors becomes $30,000, the lower limit created by Congress for

the blind in 1996 will be less than half the amount allowed for seniors unless

the law is changed. At that point a blind individual, age sixty-four, with earnings

of approximately $14,400 will lose entitlement to any payment whatsoever from

Social Security. But the same individual, upon becoming age 65, will be permitted

to earn up to $30,000 before there is any effect upon eligibility for Social

Security. This is clearly a counterproductive federal policy which speaks of

work incentives for the blind but for seniors provides actual continuation of

monthly cash benefits as a tangible incentive to work.

EXISTING LAW: Section 216(i) of the Social Security Act specifies

what "blindness" means. The definition of blindness is clearly stated

in medical terms. Therefore, blindness can be determined quite reliably on the

basis of objective medical evidence. This unique feature of the Social Security

Act makes blindness the only defined disability. All other disabilities are

determined on the basis of an individual's "inability to engage in substantial

gainful activity." This inability is actually hard to determine reliably

in many cases.

Although blindness is precisely defined, monthly disability

insurance benefits are not paid to all persons who are blind. Under the law

benefits are only paid to those people who are blind and who do not have substantial

earnings. Personal wealth not resulting from current work activity does not

count as earnings and has no effect on eligibility. Only work is penalized.

The amount of earnings considered to be "substantial" for working

people who are blind is $1,000 per month ($12,000, annually). The procedure

for adjusting this exempt amount for each year remains in effect under the law

passed in 1977 but applies at present to the blind only, since increases in

the exempt amount for seniors were mandated in 1996.

PROPOSED AMENDMENTS: Congress should restore work incentive

equity for blind individuals by re-enacting the identical earnings exemption

threshold for blind and senior citizen beneficiaries under Title II of the Social

Security Act. Legislation to achieve this objective is being offered in the

105th Congress by Representative Barbara Kennelly. Mrs. Kennelly is the ranking

minority member on the Subcommittee on Social Security in the House of Representatives,

Committee on Ways and Means. Amendments to retain the identical exemption for

blind people and seniors enjoyed broad bipartisan support during the last session

of Congress but were blocked from consideration when the provision which raised

the exemption limit for seniors was attached to the unamendable debt ceiling

bill.

The National Federation of the Blind (along with every other

organization having interests in the blindness field) strongly supports legislation

to restore the identical exemption threshold for the blind and seniors. By creating

an earnings limit that is lower for blind people than for seniors, the bill

passed last year applies a harsh work disincentive policy to blind Americans.

NEED TO REMOVE WORK DISINCENTIVES: Mandating the adjustments

in the earnings limit for blind people along with the adjustments for age sixty-five

retirees will assure that an estimated 104,300 blind beneficiaries will receive

a powerful work incentive. Most blind people could then not lose financially

by working. The mandated earnings limit changes if made applicable to blind

people would be cost- beneficial, since among those of working age 70 percent

are currently unemployed or underemployed. Most of them are already beneficiaries.

At present their earnings must not exceed a strict limit of $1,000 per month.

When earnings exceed this exempt amount, the entire sum paid to a primary beneficiary

and dependents is abruptly withdrawn after a trial work period.

When a blind person finds work, there is absolutely no assurance

that earnings will replace the amount of lost disability benefits after taxes

and work expenses are paid. Usually they do not. Therefore, few of the 104,300

beneficiaries can actually afford to attempt substantial work. Those who do

will often sacrifice income and will certainly sacrifice the security they have

from the automatic receipt of a monthly check. This group of beneficiaries--people

of working age who are blind--must not be forgotten now that the earnings exemption

has been raised for seniors. Just as with hundreds of thousands of seniors,

their positive response to the higher amounts of earnings allowed will bring

additional revenues into the Social Security trust funds. The chance to work,

earn, and pay taxes is a constructive and valid goal for senior citizens and

blind Americans alike.