Legions of other Americans would also like a break from the Social Security Administration. An estimated 750,000 senior citizens lose some or all of their benefits because they work and bump up against the “earnings test”: those 65 to 69 forfeit $1 in benefits for every $3 they earn above $10,200 this year.* Many see the law as a disincentive to work-and blatantly discriminatory. The earnings cap does not affect people once they reach 70. Nor does it apply to income from pensions, interest or stock dividends (chart). Meanwhile, because they must continue paying into the social security system, as well as paying state, federal and local taxes, some working seniors face a marginal tax rate as high as 70 percent. “I’m working awfully hard to make a little bit of extra money,” says Clyde Freed, 69, a Baptist pastor who holds a second full-time job with the U.S. Chamber of Commerce to make ends meet and consequently forfeits all his social security. Others simply despise the law in principle. “If people paid social security all their lives, they have a right to that money,” says Russell Dummich, 66, who bags groceries for only a few hours a week so he doesn’t jeopardize his $800 monthly benefit.

Congress has repeatedly raised the earnings limit over the years, but many seniors want it removed completely. Just before Thanksgiving, the Senate voted to do just that: Arizona Republican John McCain tacked a provision abolishing the limit onto the reauthorization of the Older Americans Act, which passed by unanimous voice vote. The House version of the act contains no such provision, so the matter will now be decided by a House-Senate conference committee. “We’ve got the best shot at [repealing it] that we’ve ever had,” says Jake Hansen of The Seniors Coalition, a nonpartisan lobbying group.

Opponents argue that eliminating the earnings test would cost $28 billion over the next five years and primarily benefit the elderly well-to-do. Half the benefits would go to workers with family incomes of more than $60,000 a year, the SSA estimates. Proponents counter that the real beneficiaries would be those with meager pensions and savings who need to supplement their income. Some conservative economists also estimate that so many elderly Americans would return to work if the cap were removed that they would offset the revenue loss, at least partially, by paying additional taxes. “As the recession worsens, it doesn’t make sense to shut out people who want to work,” says Martha McSteen of the National Committee to Preserve Social Security and Medicare.

House Ways and Means Chairman Dan Rostenkowski favors merely raising the earnings limit again, to $17,600 by 1996. That idea, backed by the Bush administration and the American Association of Retired Persons, would cost about $3 billion over five years and target relief to lower-income seniors. But House Democratic leaders aren’t eager to press the issue, since either version would require a tax increase or budget cuts. At the same time, lawmakers don’t want to vote against a bill popular with the nation’s elderly. Instead, the House-Senate conferees may quietly drop the provision, leaving older Americans to fight another day for the right to work and receive full social security.

  • Those who begin drawing social security before 65 lose $1 for every $2 they earn over $7,440. None of the current proposals would effect that age group.

Photos: ‘Working awfully hard to earn a little extra money’: Dummich (left), Freed (DAN HELMS-COMPIX, PAUL FETTERS)

Under current law, people 65 to 69 years old lose $1 in social-security benefits for every $3 they earn over $10,200. A hypothetical sampling:

Dorothy, a widowed homemaker, is eligible for only $300 a month in social security, which puts her well below the poverty line. To supplement that, she earns $16,200 a year as a bookkeeper, but that requires her to forfeit $2,000 of her $3,600 annual benefit.

Bob earns $40,000 as an engineer-too much to receive social security. He’d like to work part time, but if he earns $19,200, he’d lose $3,000 of his $7,200 in benefits annually.

Jim, a former CEO, has a retirement income of $150,000 a year in pension, interest and stock dividends. Since those aren’t counted against the earnings limit, he also collects a maximum social-security benefit of $13,056 a year.