Tapping the Senior Resource

This article appeared in the Washington Times on October 22, 1999.
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My father is now in his mid-70s and still works -- though his schedule has slowed down a lot -- and plays more golf than ever before. His father worked well into his late 60s before he retired.

They both continued to work past normal retirement age, not becausethey needed the money, but because work is virtuous. Work is also therapeutic(as is golf). Work keeps one's mind active and provides a sense of purpose.

So why does Congress impose a financial penalty on people like myfather and grandfather? I am speaking of the infamous Social Security earningstest. This tax on those who work past age 65 requires seniors to forfeit $1 ofSocial Security benefits for every $3 earned from working and applies to allincome of more than $15,000 per year. It is anti-work, anti-seniorcitizen, andanti-tax fairness. It imposes punitive tax rates on seniors, thus driving themout of the labor force altogether, or reducing their hours worked.

This is blatant age discrimination by our government and should beended now.

It is also incredibly economically muddle-headed federal policy. Weall know our work force is aging. We all know Americans are living longer andhealthier lives than ever before. Life expectancy is now about 76, but in the next century some health experts think we could get average lifespans up to100 or more. So we should be encouraging seniors who want to continue to workpast 65 to do so.

Instead Congress does the opposite. Through when combining theearnings test and the taxation of Social Security benefits, and adding them to federalincome taxes, payroll taxes, and state income taxes, seniors can easily face taxrates that look like Mount Everest: 65 percent or more, according to a newstudy by the Institute for Policy Innovation. Not even Bill Gates faces tax ratesthat high. As a result of these special taxes on the elderly, many seniorsquite reasonably ask: Why keep working if my distant Uncle Sam is going tosnatch away most of the earnings?

The brainpower, historical knowledge, and lifetime talents of ourseniors are a great natural resource that we are literally squandering as a nation.A mind is a terrible thing to waste. That's true of all Americans - not justchildren. At the precise moment in time when the work force is graying, Congress is foolishly posting a "no seniors need apply" sign on the doors of ourbusinesses. We are escorting more older Americans out of the work force throughpolicies like the earnings test. At age 65, less than half of American men wereretired in 1963, today, three-quarters of all men are retired.

The potential demographic train wreck ahead for America is frightening.The ratio of workers to retirees in America has dropped from 15 to 1 in 1950;to 3 to 1 today; and is expected to decline to to less than 2 to 1 by 2025.(See Table.) When the Baby Boomers start retiring, we won't have the luxury of wasting the talents of Americans over the age of 65. The wagon willbecome too heavy for young workers to pull. But if we can entice more Baby Boomersto work past 65 and defer retirement, the demographic bubble begins to evaporate. We can create more taxpayers, and fewer tax consumers.

Some say we should reform the earnings test to make it less punitive. Isay repeal it entirely. It is legalized discrimination against the elderly.The bean counters at the Congressional Budget Office warn this would cost $8billion over five years in higher Social Security benefits. But without theearnings test, more retirees will work part or full time. When they work, they paytaxes. So the government may actually make more money getting rid of thisoutdated law than by keeping it.

What we need to give seniors is choice. Many seniors want to fullyretire at 65 or earlier, and prefer more leisure over more work. That's fine. Butwhat about the people like my father - and millions of others like them whowant to keep working or just partially retire? Is it fair to tax up totwo-thirds of their earnings? Is it good federal policy for our government todiscriminate against older Americans?

The very first earnings test was applied back during the GreatDepression when unemployment reached 25 percent and Congress and President FranklinD. Roosevelt wanted to discourage seniors from working past retirement age. Washington wanted to free up these jobs for young workers. In fact, inorder to push seniors into retirement, the very first income limit was set at $15per year.

Back then we had a shortage of jobs. Now we have a shortage of smart and talented workers. This explains why President Clinton and the Republicans in Congress have both agreed that this 60-year-old law no longer makes sense. And for once, they are both right.