Congress has just passed a bill that eliminates the Windfall Elimination and Government Pension Offset provisions from calculating Social Security benefits. Just like the Inflation Reduction Act, this Social Security Fairness Act does the opposite of what its name implies.
Social Security benefits are calculated based on 35 years of covered earnings. However, low income earners were given a boost in their benefits by essentially doubling the rate of return on lower earnings (and reducing the rate of return on high earnings). However, the fact that eligibility for SS benefits requires only 10 years of covered earnings meant that high income earners contributing for a shorter period of time could receive the same boost as low income earner who paid into SS over a longer period of time. This was particularly evident for people who were receiving a government pension without having had to pay SS taxes on those earnings. As a result, the Government Pension Offset provision was passed to eliminate this undeserved benefit.
Similarly, there was a benefit provision intended for non-working spouses to receive an additional 1/2 of their working spouses' SS benefits. However, this also had the unintended consequence of rewarding spouses who did work and were eligible for government pensions with having to pay SS taxes on their earnings. This undeserved loophole was closed by the Windfall Elimination provision for SS benefits.
Now both of these corrective provisions are being repealed, once again exposing Social Security to be more of a government Ponzi give-away than a legitimate retirement annuity. Why should people be allowed to avoid paying SS taxes for most of their working careers but then cash in on the benefits?
Social Security benefits are calculated based on 35 years of covered earnings. However, low income earners were given a boost in their benefits by essentially doubling the rate of return on lower earnings (and reducing the rate of return on high earnings). However, the fact that eligibility for SS benefits requires only 10 years of covered earnings meant that high income earners contributing for a shorter period of time could receive the same boost as low income earner who paid into SS over a longer period of time. This was particularly evident for people who were receiving a government pension without having had to pay SS taxes on those earnings. As a result, the Government Pension Offset provision was passed to eliminate this undeserved benefit.
Similarly, there was a benefit provision intended for non-working spouses to receive an additional 1/2 of their working spouses' SS benefits. However, this also had the unintended consequence of rewarding spouses who did work and were eligible for government pensions with having to pay SS taxes on their earnings. This undeserved loophole was closed by the Windfall Elimination provision for SS benefits.
Now both of these corrective provisions are being repealed, once again exposing Social Security to be more of a government Ponzi give-away than a legitimate retirement annuity. Why should people be allowed to avoid paying SS taxes for most of their working careers but then cash in on the benefits?
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