Saturday, January 24, 2009

Andres & Capretta: Change Social Security/Medicare incentives to encourage seniors to work

Gary Andres of the Dutko Group and Jim Capretta of the Ethics and Public Policy Center write in the Washington Times on reforming perverse incentives under Social Security and Medicare rules that serve to drive seniors out of the workplace:

It is apparent from the last two election cycles that conservatives need to refresh their political appeal and develop innovative policy proposals aimed at solving real-world problems. We know the proportion of Americans 65 and older will expand dramatically - from about 12 percent in 2000 to almost 20 percent by 2030. One way to address this issue and promote retirement security is for policymakers to eliminate counterproductive provisions in Social Security and Medicare that discourage seniors from staying in the active workforce beyond age 65.

Click here to read the whole article.


Bruce Webb said...

Interesting. But off the top of my head their arithmetic seems odd in that they are projecting an effective tax rate of 25%. I find it difficult to believe that seniors who chose to work would actually work enough hours at high enough compensation rates to have enough income in the 28% and higher brackets to make their net tax burden come out to an average of 25%. Surely large numbers of them would choose to work part time and perhaps never even make it out of the 15% bracket.

Andrew G. Biggs said...

I'm not sure their average tax rates need to be 25%, but rather the marginal rate. That said, to be in the 25% marginal rate you'd need to be making more than $32,000, which many seniors wouldn't be. So your point may well stand.