European Stars and Stripes (Newspaper) - October 03, 1989, Darmstadt, Hesse                                The stars and stripes Page 10 columns James j. Kilpatrick wage limits for retired should be eliminated in a the talk we have heard late about changes in the Federal tax code almost nothing has him said about the one group of americans who Are treated most harshly. These arc the oldsters 62 to 69,who arc punished if they do the most american of All things work. 1 he system is incredible but it has existed since social Security began. Consider if you please the situation of a hypothetical Joe Needham. He is a retired bus Driver now 62. Who draws social Security of $4,800 a year. He continues to work As a Security guard at a supermarket. For every $2 Joe earns beyond j6.480 a year he loses $1 of social Security benefits. His marginal tax is an effective tax of 50 percent. Millionaires arc not taxed As brutally. In a paper just published by the National Center for policy analysis in Dallas economists Gary and Aldo a Robbins document the absurdities of the system. It has its Alice in wonderland aspects. In wonderland you will recall Alice had to run As fast As she could just to stay in the same place. If she wanted to get somewhere she had to run twice As  it is with the Joe acc dams. In an extreme instance cited by the authors the marginal tax May reach to almost 102 percent. Earnings above the permissible limit for All practical purposes arc simply confiscated. The idea behind this Giddy setup is to discourage the elderly from working. The less they work the More jobs presumably arc available for Young people enter ing the work Force. If this theory Ever made sense it makes no sense at a time when the nation s Economy needs people who Are willing to work. A further rationalization is that abandonment of an earnings limitation would Cost the Treasury a bundle. If social Security benefits were not penalized full benefits would have to be paid. But this line of reasoning fails to give account to the taxes that would be paid by the elderly  authors estimate that if the retirement earnings penalty were eliminated entirely at least 700,000 elderly retirees would return to the labor Market. These experienced workers would produce goods and serv ices of More than $ 15 billion a year. The government s additional income would amount to $4.9 billion More than enough to offset the higher social Security benefits that would be paid. Such fiscal considerations arc the least of the relevant considerations. It is socially wrong or so it seems to me to put this kind of a penalty on honest work. A Man or a woman at 62 May be past the prime of life but years of productive living lie ahead. Many retirees of course want nothing More than to fish play Golf or Putter around the reuse but Many others want to keep their minds and skills Active. Why Levy a George will thought Yaw a tax �.? fir a. So penalty on their Industry and ambition next year the situation will be slightly cased. Reti Rees in the 65-10-69 age bracket will be permitted to earn As much As $9,360 before they lose $1 for every $3 in wages above that amount. Those Over 70 have no earnings limitation so much to the Good. But next year unless the program of health insurance for Catas trophic illness is repealed or rewritten they will have the medicare surcharge to pay. Their social Security taxes also will be increased. If this $9,360 earnings limit were doubled tripled or even quadrupled the authors contend the Federal government would receive considerably More in new work related tax revenues than it would lose in in creased social Security benefits. If the limit were in creased to $39,360. The Federal deficit could be reduced by $3.2  help May be on its Way. Rep. Dick Armey  sen. William Armstrong r-colo., arc at the forefront of members of Congress who recognize the unfair Ness and want to do something about it. The House ways and Means committee has voted to increase the 1990 earnings limit for the 65-Io-69 retirees to $9,720. Armstrong s proposal is to raise the limit by $3,000 a year for the next three years. Certainly this makes sense. About 400,000 elderly workers now gauge their outside employment so carefully that they come within 10 percent of the earn Ings limit. Without a limit the number of elderly workers with some wage income would Rise from 1.9 million to 2.6 million. Their additional labor would increase the wage income of All elderly workers by $10.3 billion. If there is anything socially or economically wrong with the Prospect i fail to perceive it. Universal pub by Syndicate is Bentsen already looking ahead to 1992? when Lloyd Bentsen Steps out to lunch in Washington he Steps Lively Down the Block and across the Street and straight up the Steep Steps to the second poor Entrance to the Senate Side of the Capitol. That he says of the climb is part of my  there is Little other discipline in town. The leaves Are turning colors and the government is turning somersaults to feign compliance with the Gramm Rud Man deficit reduction  under Gramm Rudman the deficit has increased for two consecutive years according to the Senate budget commit tee. And Bentsen is decorous by disgusted about the Way policy is being distorted for cosmetic deficit reductions. Debate about whether to repeal Catas trophic care for the elderly is being influenced by the fact that the program would in the Short run produce a sur plus of contributions Over outlays. Also Congress May approve a Yoyo capital gains tax Cut Down now Back up in a few years to generate some Revenue by accelerating sales of assets. Never mind the violation of the sacred As it was de scribed during the 1986 tax Reform de Bate principle that economic rationality not tax avoidance should drive invest ment decisions. The executive Branch too is practice ing now Nowise. It is fudging forecasts using creative accounting to shove expenses out of one fiscal year and slosh revenues into another. It is collaborating with Congress in putting part of the Sav Ings and loan bailout off budget thereby raising by billions the real Cost of it. And so on. Happy new year fiscal year 1990 arrived at Midnight saturday last Spring such frauds provoked Bentsen alone among those attending a White House Summit to refuse to troop outside to pose for a picture with president Bush in Celebration of the Wink Wink deficit reduction. Bin Lson s absence made Bush Cross read his pursed lips. Bentsen s focus is on the far Hori Zon on raising the nation s anaemic Sav Ings rate. That would help lower interest rates to Levels enjoyed by commercial competitors abroad. If says Bentsen americans saved $20 More per week per household the savings rate would Rise 30 percent Back to what it was not Long ago. In this decade it has been less than half what it was in the three preceding dec Ades. In 1986-87, it was less than one third. Bentsen acknowledges that Ameri cans reluctance to save May have deep cultural roots that cannot easily be treated by tinkering with the tax code. A cultural contradiction of the welfare state is this its entitlements reduce fear of the future and thus the inclination to save for a Rainy Day. And weak savings weaken society s ability to make productivity enhancing investments that make the Economy Strong enough to finance the welfare slate. Bentsen also acknowledges that demo Graphy has an improved destiny in store for us. True the aging of the population will increase welfare state costs pen Sions medical care. However As the work Force Ages it becomes More productive and saves More. Still Bentsen favors forgoing for now a capital gains tax Cut and instead proposes enhancing individual retire ment accounts to Speed the growth of the savings Pool. Many economists say iras primarily produce a shuffling of monies that would have been saved anyway. Bentsen counters with the opinions of other economists. His economists cite among other problematic evidence the situation in Canada where the savings rate tracked the . Rate until the mid-1970s. Then Canada s rate jumped. That coincided with an increase in the amount canadians could contribute to iras. To pay for revenues lost by expanding Ira deductions most democrats want to increase taxes on the wealthy and Salt some of the surplus Revenue into a Defi Cit reduction Trust fund thereby looking responsible. Bentsen winces at the tax in crease talk remembering the 1988 Campaign and perhaps contemplating a 1992 Campaign at age 71. Pardon my language but the Iowa caucuses Are Only about 850 Days Dow the Road and strange but True Bentsen loved the 1988 Campaign. No wonder he dug out from under the landslide with his stature enhanced. Suppose California moves its primary up to say March. That would weight the nomination process the Way it once was and should be weighted in favor of Well known Veteran players of the Politi Cal game. Bentsen notes that an Early California primary which would Swal Low Money would favor someone like ahem the chairman of the Senate finance committee who is Good at raising Money. He also notes that in 1988 some California polls showed him preferred Over his presidential running mate Michael Dukakis and Bush. So an Ira in every pot the slogan needs work but there is time for that. Washington Posl wailers group