Braille Monitor                                                             March 2007

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Making Work Pay: Removing the Earnings Penalty for Blind Social Security Beneficiaries

Purpose:
To amend Title II of the Social Security Act by mandating 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 since they could do so without fearing loss of income from Social Security.

Today 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, though historically this limit was tied to the applicable limit for seniors. In 2007 the earnings limit applicable to seniors is $34,400 for an individual who reaches Full Retirement Age (FRA). This limit is adjusted annually. For blind individuals gross earnings exceeding $1,500 monthly ($18,000 annually) cause complete loss of benefits until attainment of FRA. At that point, as is now the case for seniors, there is no earnings limit. This existing inequity must be rectified.

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, monthly benefits are not paid to all blind people, but only to those not working or whose work earnings are below an annually adjusted statutory earnings limit. Personal wealth derived from all sources other than work is subject to no penalty at all. However, excess income generated from work results in a total 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 eliminated their earnings limit altogether. The present situation for blind people is identical to that which seniors faced prior to 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 roughly $11,700 or $978 per month (an average benefit), with no other income, receives this amount tax-free. Gross pay to replace benefits must be approximately $20,000, taking into account taxes (not paid without working) and work expenses (such as commuting and buying work-appropriate clothing). This is $2,000 above the amount blind people are allowed. Annual earnings less than $20,000 will result in an income loss. While some will still choose to work, many will not because they cannot afford the lost income.
• For a blind beneficiary with dependents, the situation is even worse. With two dependents, the family's total benefit averages $17,500 tax-free annually. Therefore, earnings in excess of $18,000 (the annual earnings limit for blind persons), will not replace benefits. Using conservative assumptions, including combined state and federal taxes of 25 percent of gross pay and childcare for two children at $500 per month, replacing $17,500 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 2007 a blind individual�s earnings cannot exceed a rigid monthly limit of $1,500. Earnings exceeding this threshold result in immediate withdrawal of the entire sum paid to a primary beneficiary and 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 the meaningful work incentive proposed here, many would become taxpayers as well. Congress raised the earnings exemption for seniors, and Congress alone can raise the limit for the blind. 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. The earnings limit should be increased according to the following schedule:

• 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 sponsoring or cosponsoring the Blind Persons Earnings Fairness Act of 2007. Please advise members of the National Federation of the Blind of your commitment to sponsor or cosponsor this legislation.

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