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This file contains materials relating to Cleonice Tavani, Arthur S. Flemming, and Bertha Adkins.
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Aging - Federal Council on Aging (3)
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This file contains materials relating to Cleonice Tavani, Arthur S. Flemming, and Bertha Adkins.
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Sarah C. Massengale Files (Ford Administration)
Sarah Massengale's Health, Social Security and Welfare Files
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The original documents are located in Box 3, folder "Aging - Federal Council on Aging (3)"
of the Sarah C. Massengale Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the
United States of America her copyrights in all of her husband's unpublished writings in National
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Library.
FORD i LIBRARY GERALD
The Impact
of the Tax Structure
on the Elderly
Federal Council on the Aging
FEDERAL COUNCIL ON THE AGING
WASHINGTON, D.C. 20201
The Impact
December 29, 1975
of the Tax Structure
The President
the Elderly
The White House
Washington, D.C. 20500
Dear Mr. President:
On behalf of the Federal Council on the Aging, I am pleased to
1975
submit a "Study of the Impact of the Tax Structure on the
Elderly.
This study was undertaken to fulfill the legislative mandate of
the 1973 Amendments to the Older Americans Act, Section 205 (h):
The Council shall undertake a study of the combined
impact of all taxes on the elderly - including but
not limited to income, property, sales, social se-
curity taxes. Upon completion of this study, but
no later than eighteen months after enactment of
this Act, the President shall submit to Congress,
and to the Governor and legislatures of the States,
the results thereof and such recommendations as he
deems necessary.
The 1975 amendments to the Older Americans Act extended the time
by which the President is to submit recommendations to January 1,
1976.
Recommendations based on the findings of this study are also in-
cluded for your consideration.
Butha Sincerely,
Bertha S. Adkins
Chairman
The Impact
of the Tax Structure
on the Elderly
December 29, 1975
FEDERAL COUNCIL ON THE AGING
WASHINGTON, D.C. 20201
The
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402
- i -
PREFACE
In the 1973 amendments to the Older Americans Act, the Congress
directed the Federal Council on the Aging to:
" undertake a study of the combined impact of all taxes on the
elderly including but not limited to income, property, sales,
Social Security taxes. Upon completion of this study, but not
later than eighteen months after enactment of this Act, the
President shall submit to Congress, and to the Governor and legis-
latures of the States, the results thereof and such recommendations
as he deems necessary."
The 1975 amendments to the Older Americans Act extended the time by
which the President is to submit recommendations to January 1, 1976.
This report consists of both a description and analysis of various
taxes which impact on the elderly as well as recommendations from the
Federal Council on the Aging for the consideration of the President to
forward to the Congress, and to the Governor and legislatures of the
States.
The Council is most grateful to Elizabeth T. Duskin for her services
as consultant to this study. She carried out the research for this under-
taking; the conclusions and recommendations contained in this report
reflect the formal actions of the Federal Council on the Aging. Final
review by the Council took place at its meeting of December 3-5, 1975 in
Washington, D.C. Approval was unanimous on the recommendations except
for D-2 on property tax on which there was one dissenting vote.
The Secretary of the Department of Health, Education, and Welfare
and the Commissioner on Aging are ex-officio members of the Council but
they do not participate in the development of recommendations by the
Council because of the fact that such recommendations are made, under the
law, to them, to the President, and to the Congress.
- ii -
- iii
PART II
THE IMPACT OF THE TAX STRUCTURE ON THE ELDERLY
ANALYSIS AND EVALUATION
TABLE OF CONTENTS
Page
PART I
CHAPTER I - INTRODUCTION AND BACKGROUND
1. The Purpose of the Study
16
SUMMARY AND RECOMMENDATIONS
2. Income and Wealth Characteristics of the Elderly
18
Page
3. The Tax Base
23
1. Objectives of the Study
1
4. Taxes Selected for Inclusion
24
2. Summary of Findings
1
CHAPTER II - THE AGGREGATE PICTURE
Income Characteristics of the Elderly
3
1. Introduction
25
The Aggregate Picture of Tax Impact:
The General Population
3
2. The Combined Impact of All Taxes on the General
27
Population
The Aggregate Picture of Tax Impact:
The Elderly
4
3. The Combined Impact of All Taxes on the Elderly
31
Population
The Individual Income Tax:
Federal and State-local Levels
5
CHAPTER III - THE IMPACT OF SPECIFIC TAXES ON THE ELDERLY
Recommendation A
5
A. THE INDIVIDUAL INCOME TAX
39
The Payroll Tax
6
1. Introduction
39
Recommendation B
8
2. Estimates of the Relative Burden of Individual
41
Income Taxes on the Elderly
The Sales Tax
8
3. The Distribution of Tax Expenditures
46
Recommendation C-1
9
Recommendation C-2
10
B. THE PAYROLL TAX
54
The Property Tax
10
1. Introduction
54
Recommendation D-1
12
2. The Social Security System
54
Recommendation D-2
13
3. Should the Elderly be Relieved of the Payroll Tax?
59
- iv -
PART I
Page
SUMMARY AND RECOMMENDATIONS
C. SALES AND EXCISE TAXES
63
1. Objectives of the Study
1. Introduction
63
This Congressionally mandated study assesses the impact of the tax
2. The Burden of Sales and Excise Taxes on
64
the Elderly
structure at the Federal and State-local levels on the income position of
3. Alternatives to the Sales Tax: Evaluation
65
the population aged 65 years and older relative to the non-aged population.
and Recommendations
Philosophically, the study is not directed towards the question of adequacy
4. Appendix: Selected Characteristics of States'
72
Sales Tax Structure
of income or well-being of the elderly. Instead, with implicit recognition
D. THE PROPERTY TAX
75
of the unmet needs of the elderly, two related questions are asked:
1. Overview
75
First, given that many elderly are in the unfortunate circumstances
2. Homeownership and Housing Characteristics of
78
of poverty or near-poverty, is it the fault of the tax structure? The
the Elderly
simplified answer derived from the study is, on balance, the tax system is
3. Property Tax Incidence: Theory
80
not a significant contributor to the relatively low income position of the
4. The Measurement of Property Tax Liabilities
85
and Burdens
elderly as a group.
5. Current Forms of Property Tax Relief:
95
Second, are specific taxes, tax preferences, and tax relief programs
Description and Evaluation
equitable and adequate for the job which they are intended to do? Do they
6. Effects of Federal Intervention
107
shield lower income households, among which the elderly are disproportion-
Appendix: Federal Income Tax Treatment of the Elderly
111
ately represented, from undue hardship and provide for a fair sharing of
tax burdens? Evidence is presented that this is not always the case.
The recommendations advanced by the Federal Council on the Aging are
presented in the spirit that where a goal is to be achieved, the path to
be taken should be the most equitable, efficient and adequate for the
intended purpose.
- 2 -
- 3 -
O Property tax liabilities disproportionately impact the
2. Summary of Findings
current incomes of the aged relative to the non-aged;
Primary emphasis of this study is directed towards the burden placed
property tax burdens are also more heavily directed
towards the elderly, regardless of shifting assumptions. 1/
upon lower income elderly households. Since an overall view based on
To place these findings in an operational policy context, several
average measures may not clearly picture either the contribution of specific
distinct aspects of the tax structure and tax-related relief programs were
taxes to the total impact, or the burden placed on families in the lower
examined to determine the effect of these elements on the distribution of
end of the income distribution, several taxes have been selected for
income between the aged and the non-aged and among the aged. The elements
individual study:
examined include:
The individual income tax;
O the design of the structural provisions provided to raise
The Social Security payroll tax;
revenues;
The sales tax;
o the system of preferences or "tax expenditures" grafted
on to the basic structure, which are designed to provide
The property tax.
financial assistance through a reduction in tax liabilities;
O related tax relief programs, outside of the tax structure
In general, the initial findings of the study are that:
itself.
o The overall effect of the tax structure appears to have no
Therefore, both the level of tax impact and the redistributional aspects
greater impact on the aged than the non-aged, subject to one
qualification. If the corporate income tax and the property
of the tax system and its appendages are considered. A summary of the major
tax are assumed to be "progressive," 1/ then the burden on
the aged population is slightly greater than that of the
points of the study follows:
non-aged.
INCOME CHARACTERISTICS OF THE ELDERLY
o The elderly are treated preferentially across all income
levels by the Federal individual income tax and State and
More so than any other age class, the elderly are disproportionately
local individual income taxes, separately and combined.
This is primarily due to the double exemption allowed and
represented at the lower end of the money income distribution. Almost 50
the preferential treatment of retirement income.
percent of elderly units are represented among households receiving less
o The elderly as a group pay lower payroll taxes than the
non-elderly, largely due to their lower rate of labor
than $5,000 census-defined money income; aged blacks are significantly less
force participation.
well-off than aged whites.
O The elderly, on average, spend slightly less than the
non-elderly on sales taxes. This is in part due to the
constraint imposed by low current incomes, and in part
due to lower consumption of highly taxed items. Neverthe-
less, the sales tax is judged to be unduly burdensome to
1/ A tax liability is a legal obligation to pay, but the burden, in the
all lower income groups.
first round of effects, may be shifted forward to consumers through higher
prices, or backward to producers through lower profits. A tax burden refers
to the actual reduction in real income of an individual or family; whose
1/ With a progressive tax, the ratio of taxes to income rises as income
real income is reduced is determined by the shifting process.
rises; with a regressive tax, the fraction of income extracted is the same
at all income levels.
- 5 -
- 4
It is important to note that money income is but one dimension of
tax are "regressive," that is, they impact lower income groups more heavily
judging economic circumstances. Net worth is also a significant deter-
than upper income groups. On the other hand, if the reverse is assumed, the
minant, and average net worth among the elderly is greater than the
elderly pay a slightly larger proportion of income in taxes than the non-
average for the population as a whole. However, evidence suggests that
elderly.
although asset ownership is important among the elderly as a group,
The explanation for this perhaps unexpected result is that the asset
significant asset holdings are concentrated among a small proportion of
position of some elderly shows up significantly when a comprehensive measure
the elderly.
of economic circumstances is used. This is particularly obvious when the
THE AGGREGATE PICTURE OF TAX IMPACT: THE GENERAL POPULATION
corporate income tax - which is an indirect "wealth" tax, and the property
Two major general conclusions emerge from consideration of the tax
tax which is direct "wealth" tax, is under consideration. The elderly,
system as a whole: 1/
on average, pay more of both these taxes; the above average amount is
O The tax structure has very little effect on the relative
distribution of income for almost 90 percent of all families.
sufficient to outweigh the lower average payments of income, payroll, and
For this majority, the total system is proportional to income.
sales taxes. This is merely a restatement of the previously noted
O Both the rich (upper three percent of the income distribution)
and the poor (lower ten percent of the income distribution) pay
observation: average net worth among the elderly is greater than the
higher effective tax rates than the large middle range -
conclusion regarding whether the rich pay higher rates than the
regardless of shifting or incidence assumptions. However, the
average for the general population.
poor or vice versa, is sensitive to the assumptions made about
Clearly, this is not the same as saying that the tax structure does
the incidence of certain taxes, - particularly the corporate
income and property tax. 2/
not harshly impact the income position of all the aged. Instead, it points
THE AGGREGATE PICTURE OF TAX IMPACT: THE ELDERLY
out that an overview of the average effect of the tax structure on the
Using a comprehensive definition of income, which includes both current
elderly is insufficient to determine its impact on lower income elderly.
money income plus the potential claims on income represented by asset holdings,
Several taxes are therefore examined individually.
the aged fare no worse, on average, than the non-aged. This conclusion is
reached under the assumption that the corporate income tax and the property
1/ Joseph A. Pechman and Benjamin A. Okner, Who Bears the Tax Burden?, The
Brookings Institution, 1974.
2/ There is general agreement on the direction of shifting in the case of
most other taxes.
- 7
- 6 -
o How many elderly depend upon post-retirement earnings and
THE INDIVIDUAL INCOME TAX: FEDERAL AND STATE-LOCAL LEVELS
contributions to obtain eligibility? (This may be particularly
important to women who either enter the labor force later than
The aged as a group are treated more favorably than the non-aged by
men or have interrupted work histories.)
the individual income tax, particularly at the Federal level. This is due
O How would benefit levels of workers currently past retirement
age be affected in the future?
in large part to the double exemption the retirement income credit and the
Would benefit levels of future retirees be affected?
exclusion of certain forms of retirement income, such as Social Security
How would this affect the long-term actuarial balance of
benefits, from taxable income. These preferences, in conjunction with the
the system?
low-income allowance, effectively shield low-income elderly from undue burdens
Will the method of financing Social Security be altered?
from the income tax system.
How will payroll tax relief affect labor force participation
by the elderly? By the non-elderly?
However, under existing preferential provisions in the income tax
O Would selective taxation on the basis of age be constitutional?
structure, middle and upper-income elderly receive greater per capita
Consideration of each of the above issues in light of the functioning
benefits than lower income elderly. A substantial number of elderly, those
of the Social Security system leads to the following observations:
whose income is too low to require filing a tax return, receive no benefits
Relief from payroll taxes on post-retirement earnings on a
at all.
voluntary basis would introduce an element of uncertainty to
Social Security financing; hence, compulsory termination of
RECOMMENDATION A
payments at and above a specified age is preferable from the
point of view of program administration.
No further preference for the elderly should be sought
Under compulsory termination of payroll tax obligations --
via the existing individual income tax system. Cash or
Some small number of workers in covered employment might not
in-kind benefits or a negative income tax system are
obtain sufficient quarters for eligibility. This assumes that
the system would continue the current practice of not counting
better suited to attaining redistributional goals.
untaxed earnings towards eligibility.
THE PAYROLL TAX
Payroll tax relief on current (higher) wages may act to reduce
benefit levels from what they might otherwise have been.
The elderly as a group pay lower payroll taxes than the non-elderly,
Therefore, such relief may not be in the best interest of all
those who voluntarily postpone benefits to remain in the labor
largely due to their lower rate of labor force participation. For those
force. This assumes that untaxed earnings are not included
in benefit calculations.
who are subject to payroll taxes - particularly the Social Security payroll
O The short-run problem of a shortfall in revenues relative to
tax, suggestions to excuse post-retirement earnings from further contributions
benefit payout will be aggravated.
must be evaluated in the light of many complicated issues.
- 9 -
- 8 -
RECOMMENDATION B
Relief would act to raise tax rates, taxable income ceilings,
and possibly reduce benefits of future retirees.
Action to relieve the elderly worker of the payroll tax
O slack labor market, providing an incentive for the workers, elderly
should be deferred: further study should be directed
to In a participate in the labor force may displace result. younger
so that no net gain to the economy would
towards alternative means of relieving the burden of the
Therefore, it is not clear that relief from payroll tax obligations
payroll tax on all lower income earners, taking into
on post-retirement age earnings would be beneficial to all elderly, to
account the impact on the elderly worker and the costs
the Social Security program or to the nation.
to the system.
Further study should be directed towards comparisons of the costs to
THE SALES TAX
the system and the fairness to participants under various options:
1. The payroll tax is terminated on post-retirement age earnings;
The elderly as a group are more lightly burdened by the sales tax
O credit is given on such untaxed earnings towards eligibility
than the non-elderly. This is in part due to the constraint of low
and benefit payments;
incomes and in part to lower consumption of highly taxed commodities such
O no credit is given for untaxed earnings;
as liquor, tobacco, gasoline and automobiles. Nevertheless, the sales
o credit is given on untaxed earnings but an actuarial
no increase in benefit levels is included to compensate for
tax does adversely affect the ability of all lower income groups, among
the shorter period of benefit collection.
which the elderly are disproportionately represented, to purchase the
2. The payroll tax on post-retirement age earnings is continued;
basic essentials of living.
O post-retirement earnings and an actuarial increase
both benefit levels to compensate for the shorter period of
The alternatives to the inherently regressive sales tax at the State-
in benefit collection are included in benefit calculations.
local level are (1) increasing reliance on State income taxes, and (2)
Within each of these options, it is important to know who among the
reducing the regressivity of State and local sales taxes. These options,
employed elderly will benefit most. Additionally, options should be
however, present their own difficulties to the fiscal structure of States.
studied within the larger context of the impact of the payroll tax on
In the case of the income tax:
lower income workers of all ages.
o Higher marginal tax rates are required by income taxes to
collect the same amount of revenue as broad based sales
tax, thus providing an incentive for out-migration of
higher income residents.
-
- 10 -
- 11 -
o Revenues from a graduated income tax are less stable than
O Accompany the above action by using the revenue gains to
sales tax revenue. They automatically increase during
the Federal government to provide a credit based on State
prosperous times, but automatically decrease during
income tax liabilities with a maximum ceiling per household
economic declines when demands for public assistance and
which declines as income rises. This would provide an
unemployment compensation rise.
incentive to States to increase reliance on the personal
income tax.
The widespread adoption of the individual income tax at the State
O The Federal government could institute a program of counter-
level (as of 1972 six States did not have an income tax) operates against
cyclical revenue sharing. This could take the form of
a revision of current general revenue sharing.
the possibility of significant out-migration of high-income residents,
o Because of its very important relationship to the matter of
but the problem of the instability of this source of revenue remains.
the stability of States' fiscal structure, careful considera-
tion should be given to the Federalization of responsibility
The difficulties present in reducing the regressivity of the sales
for such income maintenance and related programs as Aid for
Dependent Children, Medicaid and Unemployment Compensation.
tax by exempting basic essentials such as food and drugs include loss of
Further inquiry is required to determine the most desirable
form of Federalized provision and the consequent net costs,
substantial revenues and poor targeting of benefits since both needy and
considering the potential offsets of current outlays.
non-needy households consume exempted items.
Independent of Federal action, States could reduce the regressivity
Since the sales tax is a relatively stable source of revenue, among
of the sales tax in the following manner:
other features which may be attractive to burdened State and local govern-
RECOMMENDATION C-2
ments, elimination of this fertile revenue source is probably not feasible
A credit or rebate against State and local taxes targeted
under present circumstances.
at lower income households, including both sales and
RECOMMENDATION C-1
property taxes, should be considered as a replacement for
The Federal Council on the Aging recommends that
existing "circuit-breaker" and homestead exemption programs.
encouragement should be given to States to place
Such a credit or rebate should gradually diminish as income
greater reliance on the income tax rather than
rises. Consideration should be given to provision of
the sales tax.
rebates to family units whose State income tax liability
is less than the amount of credit entitlement. Equity
Steps which might be taken by the Federal government to encourage
requires that both the aged and non-aged be included.
'States to move in this direction include the following:
o Disallow deductibility of State and local sales taxes in
calculating Federal liabilities. This would deny States a
1/ "Cyclical" refers to recurring periods of economic prosperity and
subsidy and provide an incentive to decrease reliance on
recession; counter-cyclical programs are intended to act as offsets
sales taxes.
to recession and inflation, in turn.
- 12 -
- 13 -
THE PROPERTY TAX
As long as property tax liabilities enter into the calculations,
The unpopularity of the property tax rests on the belief that the tax
greater benefits from such programs go to those with greater net worth
is regressive, administered unevenly and particularly burdensome to older
within any income class; this is not consistent with equity considerations.
people with low incomes. Property tax relief at the State and local levels,
Other inequities exist which violate the principle of ability-to-pay, the
particularly for the elderly, has increased significantly in recent years.
equal treatment of households in similar circumstances (horizontal equity),
Federal intervention in property tax relief is a current issue.
and the notion that households in greater need should receive greater
Alternative propositions are examined in this study with the conclusion
benefits (vertical equity). Attempts to correct the "unfair" program
that property tax liabilities are a burden to lower income aged -- as well
elements result in unfortunate trade-offs - either other inequities
as to all lower income persons but property tax relief in existing forms
result or the programs may become administratively complex and unwieldy
is inequitable and an inefficient means of attacking the underlying problem
or excessively costly.
of current income inadequacy.
In any case, average annual benefits ($143 for circuit-breakers; $173
Neither the claim that the property tax is regressive or that it is
for homestead exemptions) are not sufficient to merit a program with this
progressive can be resolved due to lack of data availability and hence,
degree of complexity.
empirical support. If the proper concept of "income" (average income over
When property tax relief programs are considered as housing allowances
five years or more) is employed in measuring property tax burdens, however,
or income maintenance programs, it is less clear why one particular cost
the tax appears to be roughly proportional to income.
of housing has been singled out for relief. In fact, property tax relief
Evidence further supports the view that property tax liabilities do
does not require that benefits, i.e., funds that are freed for other uses,
impact the elderly disproportionately in terms of current income; property
be spent in any particular manner. Hence, income maintenance, which
tax burdens have a disproportionate impact on the elderly regardless of
provides assistance to those deemed needy and deserving, to purchase
whether the tax is viewed as regressive or progressive.
adequate housing or other basic essentials may be a more direct, efficient
However, current forms of property tax relief are not consistent with
and equitable form of relief from undue burdens for the elderly poor as
any existing theory of property tax burdens, but are analogous to "back-
well as other lower income groups.
door" income maintenance or housing allowance programs. As such, they are
seriously flawed.
- 14 -
- 15 -
If the popular acceptance of State and local property tax relief
RECOMMENDATION D-2
programs rests on the basis that it helps in reforming the regressive tax
At the national level, adequate income maintenance or
structure at the State and local level, then why exclude other more
housing allowances to all lower income households is a
obviously regressive taxes such as the sales tax? Presently, New Mexico
preferred vehicle for Federal aid. Therefore, Federal
does include all State and local taxes in its Low Income Tax Credit (LITC).
intervention is not recommended in the form of property
Although the political acceptability of property tax relief is a reasonable
tax relief assistance, since -- in addition to the poorly
rationale for the continuing existence of present programs in the short-run,
focused benefits of existing programs - Federal action
the unique effort of New Mexico should be considered as a more equitable
in this area would encourage States to change their tax
alternative to States in the future.
structure to gain maximum Federal dollars and, therefore,
RECOMMENDATION D-1
to increase reliance on the property tax.
A credit or rebate against State and local taxes targeted at
lower income households, including both property and sales
taxes, should be considered as a replacement for existing
"circuit-breaker" and homestead exemption programs. Such
a credit or rebate should gradually diminish as income
rises. Consideration should be given to provision of
rebates to family units whose State income tax liability
is less than the amount of credit entitlement. Equity
requires that both the aged and non-aged be included.
(This was also presented in the context of the sales tax as
Recommendation C-2).
- 16 -
- 17 -
PART II
The purpose of the study is, therefore, to consider the impact on
ANALYSIS AND EVALUATION
the elderly of the three distinct aspects of the tax system and its
CHAPTER I - INTRODUCTION AND BACKGROUND
appendages:
The Congressional mandate that the Federal Council on the Aging
o The design of the basic structure provided to raise revenues;
undertake a study of the combined impact of all taxes on the elderly
o The system of preferences grafted on to the basic structure; and
provided the Council with the opportunity to explore, analyze and develop
o Related tax relief programs outside of the tax system itself.
recommendations in an area which may impinge on the well-being of the
Accordingly, the present study raises several questions which relate
elderly. This effort represents an assessment of the relative impact of
to the effect of the above three elements on the distribution of income
the tax structure on the income position of the population aged 65 years
between the aged and non-aged and among the aged:
of age and older. The substantive findings, in turn, have led to the
1. Does the tax system as a whole impact the elderly more or less
development of recommendations which are consistent with both advocacy for
heavily than it impacts the non-elderly?
the aged and the macro-economic interests of the nation as a whole.
2. How do specific taxes which comprise the tax system impact the
elderly relative to the non-elderly?
The Purpose of the Study
3. Are the specific taxes which make up the tax system based on
The tax system is essentially made up of two parts: one part consists
widely supported principles of "fairness" in taxation, such as
ability-to-pay? Put another way, are lower income households more
of the structural provisions necessary to raise revenues to finance
lightly burdened than higher income households (including both the
aged and non-aged)?
government administration and provision of public services, while the
4. Is the system of preferences or "tax expenditures" consistent
second part consists of a system of tax preferences or "tax expenditures"
with social notions of equity? That is, is financial assistance
greater for those with greater need?
through which government financial assistance programs are carried out
5. Are the related tax relief programs lying outside of the tax
through special tax provisions rather than through direct government
structure equitable, efficient and adequate? Do they target
greater assistance to those in greater need? Is the relief which
expenditures. Although the individual income tax at the Federal level is
is granted adequate? Are there alternative means of redistributing
income that are more efficient?
the tax most aptly described in these terms, these elements are present,
The assumption underlying each of these questions is that age
in many other taxes at the Federal and State-local levels. Third, in
(65+) is a good proxy measure of low income. Evidence indicating the
addition to the special tax provisions or tax expenditures which are
supporting basis for this contention and the necessary qualifications are
grafted on to existing tax structures, special tax relief programs exist
therefore in order.
or have been proposed, outside of the tax system itself (e.g., property
tax relief programs such as "circuit-breakers" or relief from payroll
taxes on post-retirement age earnings).
- 18 -
- 19
2. Income and Wealth Characteristics of the Elderly
Additionally, aged blacks fare less well than aged whites. Using
No matter how one measures income, certain observations are without
census-defined poverty threshold figures for the aged ($2,982 for a
dispute. First, the distribution of income is highly unequal, both among
two-person non-farm aged family), almost 8 percent of aged white families
the general population and among the elderly. Second, more so than any
were below the poverty level, while nearly 28 percent of black families
other age class, the elderly are disproportionately represented at the
were classified as poor. For unrelated individuals, the figures were
lower end of the income distribution. Table I-1 indicates the proportion
even higher; 29 percent of white single person aged houeholds were in
of households by age class which fell below the $5,000 money income
poverty versus more than 60 percent for similar black household units.
level in 1974.
Almost 50 percent of the elderly units are represented among house-
TABLE I-1: PERCENT OF HOUSEHOLDS 1/ BY AGE OF HEAD BELOW $5,000 MONEY
holds receiving less than $5,000 income. This is roughly five times the
INCOME 2/ (1974)
Age of Head
Percent Below $5,000
concentration of the 35 to 44 year old age group and almost twice the
14 to 24 years
27.1
concentration of the next most highly represented age group, 14 to 24
years of age.
25 to 34 years
11.6
Since the data are not adjusted by family size, and family size
35 to 44 years
9.5
tends to be smaller among the aged, the disparity in well-being between
45 to 54 years
11.0
aged and non-aged consuming units may be overstated. 2/
55 to 64 years
19.6
Median income 3/ figures by age also indicate that the distribution
more than 65 years
48.6
of income of elderly household units falls below those of every other
Total Households (all ages)
21.1
age class as well as below the distribution of all age groups combined
(Table I-2).
Source: U. S. Bureau of Census, "Money Income and Poverty Status of Families
and Persons in the United States: 1974." (Advance Report), Current
Population Reports, Series P-60, No. 99, derived from Table 11.
1/ This is not intended as a measure of income adequacy across all age
groups, particularly since households of varying sizes are included.
It is, however, roughly comparable to the 1974 poverty threshold for
a non-aged, non-farm family of four in 1974 ($5,038).
1/ Includes related family members and all unrelated persons who share a
housing unit.
2/ Census income data are also subject to underreporting and non-reporting,
particularly in the case of transfer and property income. Since these
2/ Includes earnings; Social Security and public assistance payments;
sources of income are more prevalent among the aged than non-aged
dividends, interest and rent; unemployment and workmens compensation;
groups, income of the aged may be relatively understated on these counts.
government and private employee pensions.
3/ This income figure divides the upper and lower fifty percent of the
income units in the group.
- 20
- 21 -
TABLE I-3: LOW INCOME 3/ STATUS OF AGED FAMILIES AND UNRELATED
INDIVIDUALS BY RACE (1974)*
TABLE I-2: MEDIAN MONEY INCOME OF FAMILIES AND UNRELATED INDIVIDUALS*
All Races
White
Black
Percent of total more than
65 years of age below low
Age Class
Families 1/
Individuals Unrelated 2/
income level
14 to 24 years
8,618
4,103
Families
9.5
7.7
27.7
Unrelated Individuals
31.8
28.9
60.5
25 to 34 years
13,000
8,019
35 to 44 years
15,117
8,430
Percent of total aged below
45 to 54 years
125 percent of low income
16,709
6,232
level
55 to 64 years
13,645
4,858
Families
16.8
14.3
43.1
Unrelated Individuals
49.8
46.6
80.3
More than 65 years
7,298
2,956
Total (all ages)
12,836
4,439
*Source: U. S. Bureau of the Census, "Money Income and Poverty Status
of Families and Persons in the United States: 1974," (Advance
Report), Current Population Reports, Series P-60, No. 99,
Tables 6, 17 and 18.
*Source: U. S. Bureau of the Census, "Money Income and Poverty Status
of Families and Persons in the United States: 1974," (Advance
Report), Current Population Reports, Series P-60, No. 99,
Tables 6, 17 and 18.
1/ Low income represents different dollar amounts depending upon family
size and composition, age, sex and farm-nonfarm residence.
1/ Includes 2 or more related individuals.
2/ Single person households or individuals who are part of larger house-
holds including one or more families or unrelated individuals.
- 22 -
- 23 -
Although it is clear that money income is unambiguously low for a
A recent study incorporating measures of potential claims in income
significant proportion of the elderly, it is important to note that
represented by net wealth holdings indicates that (1) many elderly would
current income status is not necessarily equivalent to economic status.
still be classified as "poor" by the official Social Security Administration
When economic status is thought of as command over goods and services,
definition, and (2) inclusion of net wealth considerations makes the distri-
then money income is but one component; net worth is also a significant
bution of income among the elderly more unequal. This suggests that although
determinant of consumption possibilities. Among the elderly, net worth
asset ownership is important among the elderly as a group, significant asset
is particularly important in measurements of economic circumstances,
holdings are concentrated among a small proportion of the elderly.
since average net worth is greater for aged families than for the non-aged.1/
3. The Tax Base
It has been estimated that (n)et worth holdings spread over an
Both income and net worth characteristics of the elderly are
average-aged family's remaining expected lifetime would add as much as
important in this study for several reasons:
thirty percent to its current money income each year. Both the absolute
First, in order to properly assess the burden of a tax on individuals in
amount of resources and the rankings of (aged) families by economic
different circumstances, a comprehensive definition of income, which includes
well-being are likely to vary when a more comprehensive measure (than
both current income and the potential claims on income represented by net
current income) is used."2/ Although the potential for dissaving through
worth, should be used. Second, since different taxes frequently have different
spending down asset accumulation adds another valuable dimension to mea-
tax bases, comparisons between the burdens of various taxes can be made
sures of economic well-being, measures of wealth are difficult to cal-
consistently only if the tax base used is comparable for each tax.
culate and few such estimates are available.3/ Even these estimates
Hence the individual income tax (based on taxable income), the
are subject to methodological differences and problems of reliability
payroll tax (based on income from covered earnings below a specified level),
and validity.
the sales tax (based on consumption expenditures regardless of income sources),
and the property tax (based on a selected wealth holding), -- the burden
1/ At the end of 1962, net worth averaged $30,124 for aged families
compared to $19,984 for all families. (Dorothy S. Projector Survey
of each may be compared to the other only if the definition of income includes
of Changes in Family Finances, Board of Governors of the Federal
Reserve System, 1968.)
all the relevant sources of income and wealth.
2/ Marilyn L. Moon, The Economic Welfare of the Aged and Income Secur-
A comprehensive concept of income is relied upon in this study subject
ty Programs, Institute for Research on Poverty, Univ. of Wisconsin,
1975.
to its availability and, in certain circumstances, its appropriateness.
3/ See, for instance, Projector and Weiss, Survey of Financial Char-
acteristics of Consumers, Board of Governors of the Federal Reserve
System, 1966, and Epstein and Murray, 1963 Survey of the Aged,
Social Security Administration, 1967.
- 24
CHAPTER II - THE AGGREGATE PICTURE
4. Taxes Selected for Inclusion
The initial overview of the impact of the tax structure on the
1. Introduction
elderly considers most government receipts from the household sector
The impact or burden of a tax is usually thought of as the effect
of the economy that may be classified as taxes. Included are the
it has on the distribution of real income of individuals and households.
individual income tax (Federal and State-local), the corporate income
There are different points of view from which the burden of the tax
tax, payroll taxes, sales and excise taxes, the (real) property tax,
system as a whole might be considered.
and personal property and motor vehicle taxes.1/ From among this listing,
First, one might ask what the effect of taxes is on various income
several taxes were selected for individual consideration based on one or
groups relative to a situation in which there were no taxes. This
more of the following criteria: (1) relative size of revenues and, there-
approach is not satisfactory primarily because it assumes that the size
fore, the general importance of the tax; (2) a priori judgements con-
of the pie 1/ that is to be distributed is unchanged. This is an
cerning the magnitude of its impact on the elderly, and (3) the existence
important omission because the imposition of a tax affects not only the
of current policy issues relevant to a specific tax and its impact on
income of individuals and households, but also the level of economic
the elderly. The taxes selected for individual treatment on this basis
activity in the nation as a whole, hence the amount of income available
include:
for distribution.
o The individual income tax
In order to avoid part of this difficulty, the percent of income
O The Social Security payroll tax
which is consumed by existing taxes among different income classes may
O The sales tax
be compared to a hypothetical tax structure which is proportional to
o The property tax
income. Government expenditures are assumed unchanged under the
hypothetical and the existing systems. The appropriate question to
ask concerns which income groups do relatively better and which groups
do relatively worse under the current system. Implicit in this approach
1/ Based on Joseph A. Pechman and Benjamin A. Okner, Who Bears the Tax
is the importance of the principle of ability-to-pay. This approach
Burden?, The Brookings Institution, 1974.
is consistent with the nature of actual policy decisions.
1/ The "pie" is Gross National Product (GNP), defined as the dollar
value of the flow of goods and services produced within a year,
valued at market prices.
- 26 -
- 27 -
Yet a third point of view exists. Revenues are collected via
2. The Combined Impact of All Taxes on the General Population
taxes in order to support government expenditures, and such expenditures
The Pechman-Okner Study: Concepts and Methodology
may benefit some income classes more than others. The third case
A recent study by Joseph Pechman and Benjamin Okner has provided
considers the combined effects of tax collections and government expend-
itures on various income groups. The "benefit principle," which
detailed estimates of the burden of the Federal, State and local tax
structure on individuals and families.1/ The data is derived from
suggests that it may be fair - to some degree - to pay taxes if some-
thing is received in return, is implicit in this approach. This approach
a statistical merge of the data from the Survey of Economic
Opportunity (SEO) and Internal Revenue Service individual income tax
entails unusual difficulty, since many government expenditures such as defense
spending, are not divisible among households.
files for the same year, 1966. This is the most recent year for
which adequate data is available for a comprehensive study. Although
The approach used in this chapter asks which households fare
relatively better and which fare relatively worse under the existing
changes in the tax structure have occurred since 1966, it is not
tax structure - the aged or the non-aged? It incorporates the
believed that the changes significantly affect the general pattern
of tax burdens. 2/ The total sample size is 72,000 individuals and
assumptions of the second point of view: (1) the level of government
expenditures is unchanged; (2) the level of GNP is unchanged.
families, which when properly weighted, are representative of the
entire U.S. population.
First, the combined impact of all taxes on the general population
by income class is discussed. Second, the burden the tax structure
The income concept employed is more comprehensive than definitions
imposes on the elderly is compared to the results for the general
found in familiar sources such as the Bureau of the Census. The census
population. Lastly, the reasons are suggested for the differences in
money income concept approximates the cash flow available to individuals
relative burdens between the elderly and non-elderly.
and families within a year; the Pechman-Okner income concept estimates
the cash flow during the year plus the claims on income represented by
asset ownership. It is somewhat similar to the income concept used in
the National Income Accounts compiled by the Bureau of Economic Analysis.
1/ Ibid.
2/ Ibid.
- 28 -
- 29 -
Moreover, the study encompases various points of view regarding
The most progressive assumption is that both the corporate income
the burden or incidence of different taxes. A tax may be shifted to
tax and the property tax impact income from capital ownership; the
producers or consumers of the taxed commodity through lower profits
or higher prices so that the tax liability and the tax burden differ.
least progressive assumption is that the burden of these taxes is
On the other hand, the burden may not be shifted and the tax liability
largely shifted to consumers of taxed commodities. The treatment of
and tax burden may coincide. In the case of many taxes, economists
other major taxes is as follows: the individual income tax is not
are in agreement about where a tax is shifted or if it is shifted at
shifted; sales and excise taxes are not shifted; the payroll tax on
all. There are, however, two major exceptions: the corporate income
employees is not shifted but the payroll tax on employers is shifted
tax and the property tax. Some believe that the burden of the
to employees through lower wages under the most progressive view,
corporate income tax falls primarily on the profits of producers;
while under the least progressive view one half the employer payroll
other believe it is shifted, all or in large part, to consumers
tax is shifted to employees and one half to consumption in general
of through higher prices. Similar disagreement exists about the shifting
through higher prices.
The Pechman-Okner Study: Findings
property tax liabilities. Conclusive evidence is not yet available
to resolve either issue.
The major conclusions of the Pechman-Okner study are two-fold:
The Pechman-Okner study impartially treats several gradations of
Conclusion 1. If the impact of the tax structure is observed by
difference in point of view about the incidence or burden of the major
income class, then the assumptions made about tax incidence - parti-
taxes mentioned above. The results which embody the most progressive
cularly the corporate income tax and property tax, will lead to
assumptions and the least progressive assumptions are presented here. 1/
somewhat different conclusions. Under the most progressive assumptions
(the two taxes impact income from capital), effective tax rates rise
steeply as income rises, reaching almost 50 percent of income for
1/ rises; With a with progressive a tax, the ratio of taxes to income rises
families with incomes of $1 million or more. Under the least progressive
income rises. regressive "Most tax, the ratio of taxes to income as income
the degree progressive" and "least falls as
of taxes being of progressivity discussed. or regressivity in progressive" the overall refers collection to
- 31 -
- 30 -
percent. Under the least progressive assumptions, maximum rates for
assumptions (the two taxes impact consumption) the highest effective
the lowest income levels peak at over 50 percent while the highest
rate is about 30 percent at incomes of $100,000 or more and is only
income levels are subjected to effective tax rates that peak at about
slightly different from the 28 percent rate at incomes below $3,000.
30 percent. (Table II-2)
The large middle range from $3,000 to $100,000 experiences an
In summary, although differences in income and effective tax rates are
effective tax rate in the neighborhood of 25 percent. (Table II-1)
large, examining them both in terms of the impact of the tax structure by
Conclusion 2. If the impact of the tax structure is observed by
income class and by population percentiles gives us an additional valuable
population percentiles arranged in ascending order by income, then the
insight: the total tax system may appear to be progressive or regressive
impact of all taxes combined affects all but the very lowest and very
depending upon the incidence assumptions, but when looked at in terms of the
highest income groups. in a similar manner: taxes absorb a similar
number of individuals and families that are impacted by differences in effective
fraction of income across most of the income range. Included are
tax rates, most families are treated similarly. Only 3 percent of families
incomes between $2,000 and #30,000 per year or 87 percent of all
at the upper end of the income distribution and about 10 percent of families
families. The least progressive assumptions result in rough
at the lower end of the income distribution have higher tax rates than average.
proportionality within the stated range, while the most progressive
3. The Combined Impact of All Taxes on the Elderly Relative to the
assumptions result in slight progressivity but the differences are
General Population
not large. This indicates that the tax structure has very little
The previous discussion indicated that the tax structure as a
effect on the relative distribution of income.
whole impacts 87 percent of all individuals and families in proportion
to their income and only the remaining 13 percent (10 percent of families
At both the high and low ends of the income distribution, effective
at lowest income levels and three percent at highest income levels)
tax rates rise sharply under both sets of assumptions. Under the most
experience higher than average effective tax rates. Under the most
progressive assumptions, effective tax rates at the very lowest income
levels ($2,000 and below) range from 18 percent up to 35 percent while
progressive assumptions, the lower end of the income scale pays a lower
proportion of their income in taxes than the highest income groups,
the maximum rate at highest income levels (over $30,000) is about 40
while the reverse is true under the least progressive assumptions.
32
33
Table II-1: ESTIMATES OF EFFECTIVE RATES OF FEDERAL, STATE, AND
TABLE II-2: AVERAGE EFFECTIVE RATES OF FEDERAL, STATE AND LOCAL TAXES
LOCAL TAXES BY INCOME CLASS, 1966
BY SELECTED POPULATION PERCENTILES, 1966
Population
Most-Progressive
Least Progressive
Adjusted
Percentile
Assumption
Assumption
Family
Income
Most Progressive
Least Progressive
(000)
Assumptions
Assumptions
3d
24.4
35.6
5th
18.2
28.9
0-3
18.7
28.1
10th
17.4
25.4
3-5
20.4
25.3
20th
20.6
25.5
5-10
22.6
25.9
25th
21.6
26.4
10-15
22.8
25.5
15-20
23.2
25.3
30th
22.1
26.1
20-25
24.0
25.1
40th
22.7
25.7
50th
22.9
26.0
25-30
25.1
24.3
60th
30-50
26.4
24.4
22.7
25.6
50-100
26.4
70th
22.9
25.4
31.5
100-500
41.8
30.3
500-1,000
48.0
30.3
75th
23.0
25.4
29.0
80th
22.9
25.6
1,000 and over
49.3
90th
24.0
25.0
All classes
25.2
25.9
91st
24.0
25.0
92nd
24.0
25.1
93d
23.9
25.3
94th
24.0
24.7
95th
24.5
24.1
96th
25.7
24.6
Source: Pechman and Okner, Who Bears the Tax Burden? Table 4-3, p.49.
97th
25.2
24.0
98th
26.7
24.4
99th
28.3
25.2
Top
39.2
28.6
Source: Pechman and Okner Who Bears the Tax Burden?, Table 4-4, p.51
- 34 -
- 35 -
The total picture is made up of weighted averages of many different
taxes, some of which represent a larger burden to low income groups and
TABLE II-3: ESTIMATES OF EFFECTIVE FEDERAL, STATE AND LOCAL TAX RATES
FOR AGED AND NON-AGED, BY TAX, 1966
some a larger burden to high income groups. Additionally, even individuals
and families within the same income class may be affected differently
since specific taxes may be more or less important among families.
Aged
Non-Aged
In 1966, 19 percent of all families had an aged head of household.
Tax
Most
Least
Most
Least
Under both incidence assumptions, these families paid higher corporation
Progressive
Progressive
Progressive
Progressive
income and property taxes, but lower individual income, sales and pay-
Assumptions
Assumptions
Assumptions
Assumptions
roll taxes than non-aged households. (Table II-3) The relative total
Individual Income Tax
6.9
7.2
8.7
8.6
burden of the aged versus the non-aged depends largely upon the
Corporation Income Tax
8.2
6.6
3.2
4.1
assumptions made about the corporation income tax and the property tax.
Property Tax
5.9
4.4
2.5
3.2
Under the most progressive assumptions, the aged pay 27.6 percent of
Sales and Excise Taxes
4.5
4.7
5.2
5.1
Payroll Taxes
1.9
2.8
4.9
4.6
their income in taxes; the non-aged pay 24.8. Under the least
Personal Property and
progressive assumptions, the aged pay the same proportion of their
Motor Vehicle Taxes
0.2
0.2
0.3
0.3
income in taxes as the non-aged, 25.9 percent.
Total Taxes
27.6
25.9
24.8
25.9
Source: Pechman and Okner, Who Bears the Tax Burden?, Table 5-3, p. 72
- 36 -
- 37
Let us again consider the implications of the assumptions labeled
Most would agree that a household's economic circumstances should
"most progressive" and "least progressive." In the former case, the
be judged not only on the basis of current income, but also by their
larger burden relative to income falls on higher income households;
wealth holdings. According to this view, the figures presented in the
in the latter case, the larger burden relative to income falls on low
Pechman-Okner study are satisfactory, since they measure tax burdens
income groups. With this distinction in mind, it may appear contra-
by considering a comprehensive measure of "economic circumstances."
dictory that the aged as a group with a disproportionate representation
Accordingly, the implications inferred by the Pechman-Okner study
of lower income families should fare worse under assumptions that are
findings are that only those elderly households which have significant
supposed to impact high income households to a greater extent than low
property holdings or wealth are more severely impacted by the tax
income households, while they do no better than the non-aged under
structure on average; therefore the policy conclusion would appear to
assumptions that are supposed to more harshly impact lower income families.
be do nothing!
An explanation is in order.
On the other hand, some might argue that in the case of the elderly,
As previously stated, the income concept used in the Pechman-Okner
asset accumulation which represents a lifetime of effort should, to
study incorporates not only the current year's cash flow, but also the
some degree, be safeguarded. This is frequently supported on three
claims on income represented by asset ownership. Asset ownership, or
grounds:
more precisely, net-worth, is higher on average among the elderly than
1. Many assets, particularly homes, are not divisible into
yearly income unless the entire asset is relinquished.
the non-elderly population. 1/ This should not be surprising, since
2. Policies which assume that assets held in later years of
older age groups have had more time to accumulate equity in homes and
life when current income has diminished should be "consumed"
(i.e., transformed into cash holdings for current use) may
other assets and to pay off debts.
impair work effort in earlier years - to the detriment of
the entire economy.
3. Assets are required by the elderly for a "rainy day,"
since they cannot rely upon future increase in income
1/ At the end of 1962, net worth averaged $30,124 for aged families
and life expectancy is uncertain.
compared to $19,984 for all families. Part of the difference is
accounted for by the higher than average rate of homeownership
For those who lean towards the second viewpoint, the Pechman-Okner study
among the elderly, although other asset holdings such as corporate
stock are significant asset holdings. The figures would be larger
if calculated in current dollars. (figures from: Dorothy S. Projector,
may understate the burden of all taxes on the elderly. On this basis, however,
Survey of Changes in Family Finances, Board of Governors of the
logical consistency requires that asset accumulation be treated favorably
Federal Reserve System, 1968)
in earlier years of life as well as later years of life, since the existence
- 38
CHAPTER III - THE IMPACT OF SPECIFIC TAXES ON THE ELDERLY
A. THE INDIVIDUAL INCOME TAX
of assets among the aged requires the incentive for accumulation in earlier
1. Introduction
years. Therefore, in the extreme, the circumstances of all households,
The natural first step in examining the impact of the tax structure
regardless of age, should be judged on the basis of current income alone.
This position, then, reduces to a direct contradiction of the view that
on the income position of the elderly is to explore the effect of the
"economic circumstances" are best judged by the income and wealth position
largest source of Federal revenues--the individual income tax. Without
exception, the elderly are treated preferentially at all income levels
of households.
Both positions have merit: the reconciliation between the principle of
by the Federal income tax structure. This is due not only to the
equal treatment of households in similar circumstances and the arguments for
disproportionate incidence of low current incomes among the elderly,
consideration of the special position of the elderly are a matter of social
but also to the double exemption permitted and the preferential treat-
ment of major sources of retirement income which are either lightly
policy.
Clearly, abstract arguments are not always helpful in suggesting what,
taxed or not taxed at all.
if anything, should be done on an operational basis. The overall effect of
State and local individual income taxes do not act to change this
the tax structure would generally appear to have no more impact on the elderly
conclusion. Although six States have not yet implemented an individual
than the non-elderly. This is not the same as saying that it does not affect
income tax, those that do, have a mechanism which is similar in principle
the income position of all the aged. Since the low income aged are of particular
to the Federal version.
concern, an overview of the "average" effect of the tax system on the elderly
However, a close look at the tax preferences granted to elderly
is insufficient. The manner in which low income groups are impacted depends on
taxpayers, indicates that a major portion of the benefits accrue to
several factors: The level and source of income; consumption patterns of lower
tax filing units with incomes above $10,000 per year, while no benefits
income groups, as well as differences in local tax structure. In order to
are conferred upon those individuals with incomes too low to file tax
determine the ways in which the lower income elderly - and lower income groups in
returns. Tax expenditures, regardless of age target, frequently have
general, are harmed or benefited by taxes relative to other groups, several
questionable distributional consequences and cause serious erosion
major taxes will be examined in turn: the individual income tax, the payroll
of the tax base, forcing tax rates to rise. Therefore, no further
tax, sales taxes, and the property tax.
preferential treatment of the elderly via the Federal individual
income tax system is recommended.
- 41
- 40
2. Estimates of the Relative Burden of Individual Income Taxes on
Federal Versus State and Local Individual Income Taxes
the Elderly
Before discussing the cumulative burden of Federal and State and
The appropriate way to estimate the burden of a tax is in terms of
local individual income taxes, it would be desirable to picture the
its effect on the distribution of income. There is little disagreement
relationship between the size of the impact of Federal versus State
in the case of the individual income tax that the burden rests on income
and local tax collections. The relative burdens imposed by the two
recipients; therefore, the legal tax liability and the tax burden
levels of government on the general population are presented in the
coincide. However, estimates of the burden may diverge with the use of
Table III-A-1. Although the data reflects 1966, it is not believed
different income concepts. The most conceptually satisfying definition
that changes in the tax structure since that time effect the general
gives a comprehensive picture of the economic circumstances of a family
pattern of tax burdens at the Federal level. However, eight States
unit by including money income, in-kind income and the claims on income
have added the individual income tax as a revenue source since 1966
represented by assest ownership. This is essentially the same as the
so that the relative magnitudes may slightly understate the impact
definition of income preferred by economists, i.e., consumption plus
at the State and local level on a current basis. (See Table III-A-2)
tax payments plus (or minus) the net increase (or decrease) in the
Table III-A-1 indicates that Federal income taxes amount to 9.2
value of assets during the year. Although no continuing income data
percent of income for the total tax filing population, while State
of the Federal government is consistent with this concept, estimates
and local income taxes combined equal only 0.9 percent of income.
of tax burdens based on this comprehensive definition are available
The tax at both levels of government is progressive, that is, the
from the Brookings Institution MERGE file. 2/ The estimates include
tax impacts upper income classes more heavily than lower income
Federal and State and local individual income taxes.
classes. In addition, the tax burden is relatively modest for most
families. The highest average effective tax rate at the Federal
level is 20.7 percent for families with incomes from one-half million
1/ Benjamin A. Okner, "Individual Taxes and the Distribution of Income,"
dollars to one million dollars; the highest average effective tax rate
The Personal Distribution of Income and Wealth, James D. Smith, ed.,
National Bureau of Economic Research, 1975
at the State and Local level is only 1.9 percent. Roughly 95 percent
2/ See Chapter II of this study for a description of the MERGE file.
of all families had incomes less than $25,000; at this income level,
the maximum tax rates at the Federal and State and local levels were
9.9 percent and 1.1 percent, respectively.
- 42
- 43 -
Table III-A-2
Table III-A-1
DATES OF ADOPTION OF MAJOR STATE TAXES
Effective Rates of Federal and State and Local Individual
INDIVIDUAL INCOME*
Income Taxes.ᵃ by Family Income Classes. 1966
Before 1911
1911-20
1921-30
1931-40
1941-60
Since 1961
(percent)
Hawaii, 1901;
Wisconsin, 1911;
North Carolina, 1921;
Idaho, 1931;
Alaska, 1949;
New Jersey, 1961³;
total, 1.
Mississippi, 1912;
South Carolina, 1922;
Tennessee, 1931²;
total, 1.
West Virginia, 1961;
Federal
State and Local
Total
Oklahoma, 1915;
Family
New Hampshire, 1923 2;
Utah, 1931;
Indiana, 1963;
Massachusetts, 1916;
Arkansas, 1929;
Vermont, 1931;
Income Before
Individual
Individual
Individual
Michigan, 1967;
Virginia, 1916;
Georgia, 1929;
Alabama, 1933;
Nebraska, 1967;
Transfers
Income
Income
Income
Delaware, 1917;
Oregon, 1930;
Arizona, 1933;
Connecticut, 19694;
($000)
Tax
Taxes
Taxes
Missouri, 1917;
total, 6.
Kansas, 1933;
Illinois, 1969;
New York, 1919;
Minnesota,
Maine, 1969;
North Dakota, 1919;
1933;
Ohio, 1971;
0.
3ᵇ
2.7
0.2
3.0
total, 9.
Montana, 1933;
Pennsylvania, 1971;
3-
5
4.6
0.4
5.0
New Mexico,
Rhode Island, 1971;
1933;
5- 10
6.7
7.2
total, 11.
0.6
lowa, 1934;
10-
15
8.1
0.8
8.9
Louisiana, 1934;
15- 20
9.1
0.9
10.0
California, 1935;
Kentucky, 1936;
20- 25
9.9
1.1
11.0
Colorado, 1937;
Broad-based tax, 40.
25- 50
11.4
1.2
12.6
Maryland, 1937;
50- 100
17.3
1.7
19.0
total, 16.
Grand total, 44.
100- 500
19.6
1.9
21.5
500-1,000
20.7
1.9
22.7
*States without an individual income tax: Florida; Nevada; South Dakota; Texas; Washington; Wyoming, States with limited tax: Conn. (capital gains);
N.H. (interest dividends, and commuter tax); N.J. (commuter tax); Tenn. (interest and dividends).
1,000 and over
19.0
1.8
20.8
All classes
9.2
0.9
10.2
NOTE: Details may not add to totals because of rounding.
a Effective tax rates are calculated on the basis of family income before transfers,
excluding the amount of corporation income tax allocated to families in the MERGE
File.
Source: Advisory Commission on Intergovernmental Relations, Federal-
b Excludes families H ith negative incomes.
State-Local Finances: Significant Features of Fiscal Federalism,
U.S. Government Printing Office, February 1974.
Source: Benjamin A. Okner, "Individual Taxes and the Distribution of
Income," The Personal Distribution of Income and Wealth,
James D. Smith, ed., National Bureau of Economic Research, 1975
- 44
45
Table III-A-3
-
The Relative Burden of the Elderly
Aged families pay significantly less income taxes as a percent
Effective Rates of Individual Income Taxesa by Age of Family Head and Size of Family, by Family Income Classes, 1966
(percent)
of income than do the non-aged at all income levels. On average,
Family
All Families
Nonaged Familiesᵇ
Aged Familiesᵇ
the aged pay 6.2 percent of their income while non-aged households
Income
Before
Family Size
Family Size
Family Size
Transfers
All
All
All
pay 10.5 percent. (See Table III-A-3.)
($000)
Sizes
I
2
3
4
5+
Sizes
/
2
3
4
5+
Sizes
I
2
3
4
5+
0-
3c
3.0
4.1
2.5
2.0
1.8
1.7
3.9
5.5
3.7
2.3
1.9
1.9
1.7
2.0
1.7
0.7
1.1
d
When the effective tax rates of the aged and non-aged are compared
3-
5
5.0
8.5
4.3
4.2
2.9
1.6
5.6
10.0
5.4
4.4
2.7
1.5
3.1
3.8
2.7
2.8
4.8
2.2
5-
10
7.2
11.5
8.2
7.4
6.1
3.9
7.4
12.4
8.9
7.5
6.1
3.9
5.5
4.9
5.7
6.0
5.4
4.5
10-
15
8.9
13.8
10.6
9.7
8.2
6.7
9.0
15.1
10.9
9.7
8.2
6.7
8.2
7.4
8.3
8.8
8.7
6.1
by family size, two distinct patterns emerge. First, within each family
15-
20
10.0
12.6
11.4
10.4
9.8
8.6
10.1
14.2
12.0
10.7
9.8
8.6
8.3
8.2
7.8
8.6
9.8
8.5
20-
25
11.0
12.7
12.7
11.1
10.8
9.9
11.3
16.8
13.5
11.6
10.9
9.9
7.6
5.0
7.7
6.9
9.2
10.5
25-
50
12.6
11.4
12.5
13.4
12.8
12.5
13.1
16.1
13.8
13.7
12.8
12.5
8.0
6.1
7.2
10.3
12.6
6.0
size, rates are generally lower for the aged. This is consistent with
50-
100
19.0
21.7
17.1
18.9
20.2
20.0
20.2
23.3
20.7
19.0
20.3
20.0
4.6
9.6
4.3
d
3.5
-
100
500
21.5
16.4
22.0
24.7
24.1
20.3
21.6
16.4
22.1
24.7
24.1
20.3
10.3
-
10.4
-
-
-
500-1,000
22.7
19.4
23.1
23.7
25.9
23.0
22.7
19.4
23.1
23.7
25.9
23.0
-
-
-
-
-
-
the relative difference in average tax rates noted above. However, a
1,000 and over
20.8
19.8
20.3
23.8
21.0
21.7
20.8
19.8
20.3
23.8
21.0
21.7
-
-
-
--
-
-
All classes
10.2
11.6
11.3
10.5
9.8
8.7
10.5
13.3
12.5
10.7
9.8
8.7
6.2
5.0
5.8
7.7
8.5
6.6
second interesting pattern is observable. Effective tax rates rise
a Effective tax rates are calculated on the basis of family income before transfers, excluding the amount of corporation income tax allocated to
families in the MERGE File.
somewhat with family size among the elderly, while this is not a
Families headed by an individual age 64 or under are considered nonaged; those headed by an individual age 65 or over are classified as aged.
c
Excludes families with negative incomes.
d
Less than half of 1 percent.
systematic pattern among the non-aged. This is most likely due to the
increased probability of additional earners in larger elderly house-
1/ The exclusion of transfer payments, which are a major source of
income among most elderly, implies that the estimates of income
holds while larger household size among the non-aged carries with it
tax burdens for aged families is probably overstated, particularly
for low income aged families.
the increased probability of more dependents.
Source: Benjamin A. Okner, "Individual Taxes and the Distribution of
The Variability of Effective Tax Rates Within Income Classes
Income," The Personal Distribution of Income and Wealth,
James D. Smith, ed., National Bureau of Economic Research, 1975.
The structural features of the individual income tax permit wide
variations in tax liabilities not only across income levels, but also
for family units with similar incomes. This occurs because the individual
income tax is designed to distinguish between family units on the basis
of many characteristics in addition to income. For instance, particular
- 46 -
- 47
family characteristics such as marital status of the family head, family
Since tax preferences may be thought of as government expenditures
size, homeownership, medical expenses, contributions, and so forth, - all
or subsidies to affected groups, they may also be directly translated
contribute to a modification of tax liabilities over and above the
into expenditure programs and evaluated accordingly. Three major
criterion of income differences alone. Particularly important to the
preferences granted to the elderly are the additional exemption, the
elderly is the differential treatment of income from different sources.
retirement income credit, and the exclusion of Old Age and Survivors
Some income such as Social Security and Railroad Retirement benefits
Insurance (OASI or Social Security) from taxable income. The amount
is not taxed at all, while other contributory retirement income is
of revenues foregone by the Federal Government in fiscal 1974 for
in many cases taxed at preferential rates. Taxable income from
these three tax expenditures alone was in excess of $4 billion. 1/
earnings, which is of secondary or tertiary importance to most employed
Presumably, the major intent in granting these tax preferences was
retirees, is taxed in full. Realized capital gains are generally taxed
to alter the income distribution between the aged and the non-aged and
at less than half the rates imposed on income from earnings, but even
in particular, to distribute benefits among the aged in a manner favorable
in this case the elderly receive preferential treatment on the realized
to lower income aged. Estimates of the distribution by adjusted gross
gains from the sale of a home (limited to once-in-a-lifetime). A
income class is presented in Table III-A-4. Several preliminary observa-
selected listing of provisions in the Federal income tax code which
tions may be made: (1) Benefits accrue to all adjusted gross income
grant preferential treatment to the elderly is contained in the
classes; (2) Benefits are not concentrated on lower income aged tax filers.
Appendix.
This is particularly noticeable in the case of the additional exemption
3. The Distribution of "Tax Expenditures"
and the retirement income credit. However, the figures in Table III-A-4
The term "tax expenditure gives explicit recognition to the fact
are deficient in an important respect which severely understates the
that special tax relief is analagous to a government expenditure. The
inequitable distribution of tax benefits: the actual number of taxpayers
reasoning behind the tax expenditure concept consists of two parts:
in each income class diverges sharply between lower and upper income
first, an imputed tax payment that would have been made in the absence
classes. Table III-A-5 adjusts for this deficiency and presents per
of the special provision is assumed, and second, the simultaneous payment
capita benefits by adjusted gross income class.
of the resulting tax revenue is directly granted to the individual
benefitted by the special provision. Special tax provisions take the
U.S. Department of the Treasury, Office of the Secretary of the
Treasury, Office of Tax Analysis, unpublished estimates.
form of exclusions from income, exemptions, deductions, credits against
tax liabilities, preferential rates of tax, and deferrals of tax.
TABLE III - A 4
Estimated Distribution of Selected Tax Expenditures of Individuals
by Adjusted Gross Income Class
Fiscal Year 1974
($ Millions)
(1)
(2)
(3)
(4)
(5)
(6)
Adjusted
Additional
Retirement
Exclusion of
Exclusion of
Gross
Exemption
Income
Social Security
Social Security
Income
for Age 65
Credit
Benefits for
Benefits for
Class
or Over
Aged
Dependents and
($000)
Survivors
Total
0-3
$
7
$ 1
$ 470
$ 80
$ 558
3-5
95
18
460
75
648
5-7
185
22
380
60
647
7-10
268
20
470
75
833
10-15
196
19
330
55
600
15-20
106
9
140
20
275
20-50
211
10
215
35
471
50-100
56
1
45
5
107
100 and Over
26
*
20
5
51
Total
$ 1,150
$ 100
$2,530
$ 410
$4,190
Source: U.S. Department of the Treasury, Office of the Secretary of the Treasury,
Office of Tax Analysis, Unpublished estimates.
I
TABLE III - A - 5
Estimated Distribution of Selected Per Capita Tax Expenditures
by Adjusted Gross Income Class
Fiscal Year 1974
(Dollars per tax filing individual age 65 and over and eligible (6) spouse)
(1)
(2)
(4)
(5)
(7)
(8)
(3)
Adjusted
Number of
Percent of
Additional
Retirement
Exclusion
Exclusion
Total
Gross
Exemption
Income
of Social
of Social
Additional
Age 65 Plus
Age 65 Plus
Exemptions
for Age 65
Credit
Security
Security
Exemption,
Income
Exemptions by
and Over
Benefits
Benefits
Retirement
Class
Income
in Each
for Aged
for Depend-
Income
Class
Income Class
ents and
Credit
Survivors*
and
OASI
($000)
1,966
21.4
$ 3.56
$ .51
$ 239.06
$ 40.69
$ 283.82
0-3
3-5
2,006
22.8
47.36
8.97
229.31
37.39
323.03
5-7
1,451
15.8-
127.50
15.16
261.89
41.35
445.90
7-10
203.34
15.17
356.61
56.90
632.02
1,318
14.3
300.55
50.09
546.45
10-15
1,098
11.9
178.51
17.30
15-20-
495
5.4
214.14
18.18
282.83
40.40
555.55
20-50
686
7.5
307.58
14.58
313.41
51.02
686.59
50-100
1.4
430.77
7.69
346.15
38.46
823.07
130
0.5
553.19
**
769.23
106.38
1,428.80
100 and Over
47
--
--
|
9,197
100.0
--
--
Total
$ 229.55
$ 12.20
$ 344.33
$ 51.41
$ 636.14
--
Average
--
Note: Details may not add to totals because of rounding.
*Total tax expenditures by income class in this category are divided by the number of extra exemptions taken on the basis
of age on the assumption that the number of eligible dependents and survivors are distributed in the same relative pro-
portions as the aged tax filing population.
Source: U.S. Department of the Treasury, Office of the Secretary, Office of Tax Analysis,
Derived from unpublished estimates.
- 50
- 51 -
The vertical inequities suggested previously are accentuated
when tax expenditures are presented on a per capita basis (Table III-A-5).
Significantly, the number of individuals who filed for the
The aggregate tax expenditures in Table III-A-4 (column 6) show that
allowable extra exemption as head-of-household and eligible spouse,
the general tendency is for total tax expenditures to decline as income
aged 65 or over, totalled slightly over 9 million persons. This
rises (with the exception of a slight rise after the $0 to $3,000
represents less than one-half of the 65 plus population in 1973.
adjusted gross income category and a peak in the $7,000 to $10,000
This suggests that over eleven million elderly did not receive
dollar range). Total benefits in the lowest income range are eleven
any benefit at all from the extra exemption.
times as great as in the highest income range; the highest income group
The probable reasons are two-fold: first, in the case in which
receives only slightly in excess of one percent of all benefits. This
the elderly live in a dependency status with non-aged relatives, the
is, however, an erroneous picture.
non-aged tax filer cannot claim the extra exemption for the aged
If the same totals (Table III-A-4, Column 6) are adjusted by
dependent. However, between 60 percent and 80 percent of the elderly
the number of tax filing individuals and eligible spouses aged 65 and
have living arrangements with no relative present. 1/ Of those who
over (Table III-A-5, Column 8) the results are just the opposite;
do live with relatives, not all are dependent by Internal Revenue
the highest income individuals receive far greater benefits than the
Service definition. Hence, dependency status is unlikely to account
lowest income individuals - $1,429 to $284, respectively. The aged
for a large proportion of the non-filers.
with incomes of $100,000 and over receive five times as much in
The second, and most important reason for non-filing, is that
per capita benefits as those with incomes under $3,000. This general
many elderly have incomes too low to be required to file a tax return.
pattern is repeated when the per capita distribution is examined
After exclusion of Social Security benefits, it is not unlikely that
separately for each preference item. The most extreme distribution
perhaps as many as nine million elderly do not receive benefits from
occurs in the case of the additional exemption for individuals aged
most other preference items because their incomes are below the
65 and over. Average benefits are more than 155 times as great for
taxable level. Therefore, those most in need of financial assistance
those with incomes above $100,000 as they are for those with incomes
are excluded from many benefit provisions of the income tax system.
below $3,000, - approximately $553. to $3.50, respectively.
Janet Murray, "Living Arrangements of People Aged 65 and Older,"
Preliminary Findings from Social Security Survey of the Aged, 1968,
1/ "Vertical equity" refers to differences in treatment of individuals
Report No. 4, Social Security Administration, September 1971.
or families in different circumstances; the principle suggests that
people in greater need should be given greater benefits.
- 52
- 53
In essence, the tax preferences translate into a program of
the absence of such "loopholes." 1/ This works against any redistributional
financial assistance which in general, grants higher per capita benefits
intent on the part of the architects of tax preferences and argues in favor
to upper income classes, and no benefits at all to those whose income
of serious tax reform measures.
is so low that they are not subject to the income tax mechanism. A direct
Conclusions and Recommendations
cash allowance proposal with these features would hardly be taken seriously.
The aged as a group are treated more favorably than the non-aged
Criticism of three important preferences granted to the elderly
by the individual income tax-but the middle and upper income elderly
does not mean that they are the only inequitable tax expenditures, nor
do better than the lower income elderly under existing preferential
are they singled out as the worst examples possible. The estimated
provisions. Because of the limitations inherent in the use of the
$4 billion dollars in expenditures represented through lost revenue is
income tax system as a device to render financial relief to those in
but a small part of estimates of over $57 billion 1/ in tax preferences
need, it is recommended that no further preferences for the elderly
granted the business and household sectors of the economy in fiscal 1974.
be sought via the existing individual income tax system. Explicit
Similar charges of inequity may be properly levied against most other
expenditure programs or a negative income tax system are better suited
tax preferences. 2/
to attaining redistributional goals.
Of the many vices attributed to tax expenditures, one in particular
deserves careful attention. Tax preferences erode the tax base and
reduce revenues, thereby keeping tax rates higher than they might be in
1/ U.S. Department of the Treasury, ibid. Caution is suggested in
interpreting totals: items may be interactive and are therefore not
necessarily additive. Additionally, totals may differ due to
differences in judgement as to which items should be included and
which items excluded.
2/ For a more extensive discussion of tax expenditures, see:
Stanley S. Surrey, "Tax Subsidies as a Device for Implementing
1/ See Joseph A. Pechman and Benjamin A. Okner, "Individual Income Tax
Government Policy: A Comparison with Direct Government Expenditures,"
Erosion by Income Class," The Economics of Federal Subsidy Programs,
The Economics of Federal Subsidy Programs, Part 1, General Study
Part 1, General Study Papers, Joint Economic Committee, May 1972.
Papers, Joint Economic Committee, May 1972.
- 54 -
- 55
B. THE PAYROLL TAX
1. Introduction
of the same program. Increases in benefits required increases in size until
The payroll or employment tax which finances the Social Security system
the system matured, thereby enabling each working generation to pay for their
is the most significant in size of all general payroll taxes; revenues are
own retirement benefits. This approach was gradually modified, and by the
second in size only to those of the individual income tax. Payroll tax revenues
1960's became in effect a pay-as-you-go system which required the current working
from covered employment are earmarked to finance the federal program of Old
generation to finance the legislated benefits to the current retired generation.
Age, Survivors and Disability Insurance (OASDI or Social Security) and in
Nevertheless, Congress has always strongly believed that the tax schedule
part, the health insurance segment of the program (Medicare) which was added
in the law should make the system self-supporting as nearly as can be foreseen
in 1966. 1/
and, therefore, actuarially sound."
The elderly as a group pay lower payroll taxes than the non-elderly,
Accordingly, in addition to short-term estimates, 75 year projections
largely due to their lower rate of labor force participation. Nevertheless,
are made by simulating expected benefits levels in future years which consider
because the tax represents a larger burden to low income households than to
changes in the size and composition of the retired population, the labor force,
upper income households, some suggest that the elderly who elect to remain
wage rates and price levels. Simultaneous consideration is given to the inter-
in the labor force past the age of retirement and benefit eligibility be
action between benefit levels, tax rates and the taxable base in order to
relieved of the payroll tax burden. Evaluation of this proposition requires
maintain approximate equality between revenues and expenditures over time.
further discussion of significant Social Security program features.
Distinct from short-run fluctuations which may create a temporary surplus
2. The Social Security System
or a deficit in revenues relative to benefit payout, recent long-run projections
Financing
have indicated that under present law, higher rates of contribution as well
Soon after its inception in 1935, Social Security was modified to make
as upward adjustment of taxable income ceilings will be required in the future
it a social insurance plan which provided legally enforceable rights to benefits
to maintain actuarial balance within a closed system. This is especially
after retirement in recognition of contributions (tax) during one's working
true due to an apparent unintended coupling of cost-of-living and wage increases
life. From this point of view, the tax and the benefits are inseparable parts
in the benefit formula. However, upward adjustments have not been unknown
in the prior history of the program.
1/ The Federal-State system of Unemployment Compensation is also financed by
a general tax on the employer's payroll, but is far less significant in size
and will be disregarded in the present discussion.
Additionally, public retirement programs other than Social Security cover
employees of the Federal Government, State and local governments, military
1/ U.S. Congress, Senate, Social Security Amendments of 1960, 86th Cong.,
personnel and railroad employees. The financing arrangements of these retire-
2d Sess., S. Rept. 1956, p. 37.
ment income programs are also excluded from consideration.
- 56
57 -
Currently, covered workers comprise significantly over 90 percent of the
The system has undergone numerous changes since 1935, largely due to
labor force; the majority of the remainder are covered by other public
the growth and change in composition of the population, changes in the level
retirement programs. By 1973, 86 percent of the elderly aged sixty-five
of productivity and wage rates, expanded coverage, and the impact of inflation
and over were recipients of Social Security benefits. By 1980, the
on real purchasing power. The original legislation levied a combined employee-
precentage of elderly recipients is expected to rise to 90 percent.
employer rate of two percent on the first $3,000 of wages of all workers under
Benefit Levels
age sixty-five in commerce and industry (except railroads) in the United States.
The benefit level of a retiring worker depends upon his or her
At that time, this represented total earnings for about 95 percent of covered
earnings history, and is calculated in two steps. First, an average
workers. A comparable figure for 1975 would be above $20,000. However, both
monthly taxable wage (AMW) in covered employment is calculated. The AMW
the tax rate and the taxable income ceiling as well as benefit levels have
is based upon earnings since 1951 for practically all workers with the
continued to rise, either by legislative mandate, or as is most recently the
five years of lowest earnings excluded. Second, the primary insurance
case, by automatic cost-of-living increases and concurrent upward revision
amount (PIA) is derived from a tabular benefit conversion formula which is
of taxable income ceilings built into the 1972 amendments. The combined tax
included in the law. The conversion formula replaces fixed percentages of
rate is currently 11.7 percent, which is levied on the first dollar of
the preretirement AMW with the replacement percentage declining as the
earnings up to the maximum taxable income ceiling of $14,100, which will be
AMW rises over graduated intervals and a stipulated minimum benefit of
raised to $15,300 as of January 1, 1976. Of the total 11.7 percent tax, 9.9
$101.40 at low average earnings. Actual benefits depend upon the PIA--
percent is earmarked for financing of OASDI, and 1.8 percent for Medicare.
the retirement benefit for a single worker at age sixty-five. Those
Nominally, employees pay 5.85 percent of the tax out of wages and earnings
individuals who retire at age sixty-two receive 80 percent of the PIA;
and employers pay the additional 5.85 percent.
those who retire at age sixty-five with dependent spouses also aged
Coverage
sixty-five receive 150 percent of the PIA, surviving spouses of deceased
Additionally, significant changes in coverage have occurred during the
workers get 100 percent of the PIA. The most recent (June 1975) benefit
40 year history of the Social Security program. In 1950, regularly employed
levels are presented in Table III-B-1. Potential monthly benefits for a
farm and domestic workers as well as nonfarm self-employed (except profes-
single retired worker aged sixty-five range from $101.40 to $522.80 and
sionals) were extended coverage; in 1956, the disabled were included and in
from $152.10 to $784.20 for a retired couple both aged sixty-five.
1965 self-employed professionals were granted participation rights.
Although the dollar amount of benefits are higher at higher earnings up
to the taxable income ceiling, the replacement rate is greater at low
earnings levels.
TABLE III-B-1
Ratio of Old Age and Survivors Insurance Benefits
to Selected Average Monthly Earnings, Effective June 1975
Single Retired Worker
Couple
Age 65
Both age 65
Average Monthly
Monthly
Ratio of Benefit
Annual
Earnings for
Ratio of
Benefits
to Average
Earnings
OASDI Benefit
Monthly
Benefit to
(PIA)
Monthly Earnings**
Benefit
Prior Earnings
$
912 or less
$
76/ or less
$101.40
above 1.33
$152.10
above 2.00
1,200
100
130.50
1.31
195.80
1.96
3,000
250
209.70
.84
314.60
1.26
4,800
400
279.80
.70
419.70
1.05
6,600
550
345.90
.63
518.90
.94
9,000
58 I
750*
425.00
.57
637.50
.85
10,800
900*
461.00
.51
691.50
.77
12,000
1,000*
485.00
.49
727.50
.73
13,200
1,100*
506.60
.46
759.90
.69
14,100
1,175*
522.80
.44
784.20
.67
Source: Social Security Bulletin, Vol. 38, No. 7, July 1975
possible is $585 for a male worker retiring at age 65 and $613 for a woman.
*Projected estimates based on 1975 rate schedule. At the beginning of 1976, the highest average monthly earnings
**The ratio of benefits to most recent earnings is considerably lower than those presented in the table.
system.
average or have interrupted work histories.)
important to women who either enter the labor force later than
contributions to obtain eligibility? (This may be particularly
o How many elderly depend upon post retirement earnings and
The answer depends upon many complicated issues:
ment age be excused from further contributions towards the Social Security
ation of the suggestion that the elderly who voluntarily work past retire-
The discussion up to this point is offered as a background for evalu-
3. Should the Elderly be Relieved of the Payroll Tax?
active effect on the system as a whole.
retirement age cannot be considered without also considering the inter-
preferential relief from contributions for the elderly who work past
self-supporting nature of the system prevails, then consideration of
continue to rise in the future. If the strong sentiment to maintain the
In summary, both benefit levels and tax rates may be expected to
those who retired in earlier years when average earnings were lower.
both reasons, recent retirees generally have higher benefit levels than
sionally legislated across-the-board increases in benefit levels. For
earnings on which benefit calculations are based, and in part to congres-
in part to the steady rise in wage rates and hence the average monthly
Benefit levels have risen substantially in recent years. This is due
59
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How would benefit levels of those workers currently past retirement
Additionally, for those who voluntarily postpone benefits due to
age be affected in the future?
continued labor force participation, it is likely that in some cases the
Would benefit levels of future retirees be affected?
generally higher wage rates in recent years as opposed to earlier earnings
How would this affect the long-term actuarial balance of the system?
would significantly raise benefit levels when employment is partially or
Will the method of financing Social Security be altered?
completely terminated and benefit awards accepted. This is particularly
How will payroll tax relief affect labor force participation by the
important when one considers the provision for complete substitutability
elderly? By the non-elderly?
of high earnings years for the five years of lowest earnings. It is
Would selective taxation on the basis of age be constitutional?
therefore not necessarily true that relief from payroll contributions will
First, it is assumed that voluntary relief from payroll taxes would not
be beneficial to all aged over the long run, especially since lifetime
be a desirable program element since the uncertainty it would introduce
benefits may exceed lifetime contributions among lower earnings groups.
would complicate program operation and forecasting of benefits and revenues.
In addition, the loss in revenues will have an adverse impact on
Compulsory termination of payroll tax payments at and above a specified age
is preferable from the point of view of program administration.
program financing. Currently, the short-run problem of the slower rise
in payroll tax revenues relative to benefit payments due to the economic
Second, the answers to many of the questions suggested above are not
clear. Assuming that income from which no contributions were made would
downturn argues against consideration of measures which would reinforce
not be counted in calculating eligibility and benefits as is currently
the difficulty. Proposals for augmenting revenues through general finance
the case, further research would be required to determine how many elderly
measures have not been unanimously well received, nor is it likely that
with shorter than average employment histories would lose eligibility
serious consideration would-or should--be given to raising tax rates
altogether. Undoubtedly, this would more harshly impact women who enter
or reducing benefits at the present time.
the labor force in later years and those who are involved in seasonal
Over the long run, however, tax rates, taxable income ceilings and
employment or prone to cyclical variations in employment and may therefore
benefit levels are subject to change. Erosion of the taxable income base
not have acquired sufficient quarters for eligibility prior to age sixty-two
by selective exclusion from tax liabilities on the basis of age may work
through age seventy-two.
to reduce benefits of future retirees or to raise tax rates and taxable
income ceilings. Although the magnitude of the effect is unknown, the
direction of the possible effects in the case of tax rates and benefit
levels is clearly undesirable.
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Therefore, it is not clear that relief from payroll tax obligations
C. SALES AND EXCISE TAXES
on post-retirement age earnings would be beneficial to all elderly, to
the Social Security program or to the nation.
1. Introduction
Further study should be directed towards comparisons of the costs to
The general sales tax represents a major revenue source at the State
the system and the fairness to participants under various options:
and local level of government. The State is the primary user of this form
1. The payroll tax is terminated on post-retirement age earnings;
of taxation and it is frequently the dominant source of State revenues.
O credit is given on such untaxed earnings towards
Local governments rely mainly on real property taxation, but general sales
eligibility and benefit payments;
taxes are not unknown at the local level. Nearly one half of the States
o no credit is given for untaxed earnings;
in 1971-72 had local jurisdictions which imposed a sales tax in addition
o no credit is given on untaxed earnings but an actuarial
to the State level tax, but the amounts collected at the local level were
increase in benefit levels is included to compensate for
relatively small. 1/ General sales taxes are frequently criticized on the
the shorter period of benefit collection.
grounds that they are regressive because the poor spend a larger fraction
2. The payroll tax on post-retirement age earnings is continued;
of their income on consumption than do the rich.
o both post-retirement earnings and an actuarial increase
Excise taxes 2/, which exist at both Federal and State levels, may be
in benefit levels to compensate for the shorter period
either regressive or progressive, depending upon whether the taxed commodity
of benefit collection are included in benefit calculations.
is primarily consumed by lower income groups or upper income groups. On
Within each of these options, it is important to know who among the
balance, excise taxes tend to be regressive since they are usually levied on
employed elderly will benefit most. Additionally, options should be studied
mass consumption items such as alcohol, tobacco and various highway and
within the larger context of the impact of the payroll tax on lower income
automobile related items. An excise tax may be preferred on grounds other
workers of all ages.
than ability-to-pay. The purpose may be to discourage certain forms of
It is therefore recommended that action to relieve the elderly worker
consumption which are socially undesirable, for instance, liqour consumption.
of the payroll tax should be deferred: further study should be directed
In the case of highways and highway related "user" charges such as gasoline
towards alternative means of relieving the burden of the payroll tax on all
levies, the tax affects only those consumers who receive the benefits of the
lower income earners, taking into account the impact on the elderly worker
and the costs to the system.
1/ See appendix to Chapter III, Section c, for summary presentation of State
and local sales tax rates, excluded items and dates of adoption of sales
tax.
An excise tax is a selective sales tax which is levied on a specified
commodity or group of commodities.
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commodity and may be considered equitable on these grounds. Excise taxes
3. Alternatives to the Sales Tax: Evaluation and Recommendations
are the primary form of consumption tax at the federal level, but a
General and selective sales taxes provided an average of almost
relatively minor source of revenue. The concern over the regressivity of
three times more revenue than did the State personal income tax. As
consumption taxes are therefore focused on reliance placed on these taxes
of 1972, six States did not have an income tax and five states had not
at the State and local level.
imposed a general sales tax. From a State's vantage point, the choice
2. The Burden of Sales and Excise Taxes on the Elderly
between the regressive sales tax and an income tax based on ability-to-pay
Estimates for 1966 indicate that the aged as a group were less harshly
is not clear cut.
burdened by consumption taxes on average than the non-aged. Approximately
The State Income Tax as an Alternative
4.5 percent of the income of the elderly compared to 5.2 percent of the
The arguments in favor of the personal income tax include the following:
income of the non-elderly was extracted by consumption taxes. 1/ The
1. It considers ability-to-pay and may be designed so that low income
relatively lighter burden of the elderly is attributable in part to their
households bear no burdens or very modest burdens.
relatively lower consumption of highly taxed items such as liquor, tobacco,
2. Revenues grow automatically with growth in population or with
gasoline and automobiles, and in part to their relatively lower average
increases in productivity.
incomes and the relatively larger impact of other State and local taxes, both
From the State's point of view, the personal income tax also presents
of which act to limit their consumption expenditures in general. However,
hazards to its fiscal position:
discussing the relative position of the aged to the non-aged in the context
1. To derive the same amount of revenue as collected by a broad based
of the sales tax is similar to comparing two individuals, one of whom is
sales tax would require higher marginal income tax rates, thus
a little pregnant while the other is pregnant.
driving out higher income residents.
The general concensus about the sales tax is that it does adversely
2. Just as revenues grow automatically with increases in population
affect the ability of all lower income groups to purchase the basic essentials
or productivity, they decline during unhealthy economic climates.
of living by raising prices. The more necessary the taxed commodity, the
Economic declines usually generate higher demands for many State
less likely it is that the purchase can be avoided, and the more likely
and local services, particularly public assistance and unemploy-
it is that the sales tax weighs heavily in low-income budgets. What,
ment compensation.
then, are the alternatives to the sales tax?
1/ Pechman and Okner, Who Bears the Tax Burden?
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- 67 -
Therefore, with some justification, States have been concerned about
Full Federal provision of welfare benefits and services with an
the possible erosion of their tax base by the loss of high income residents
appropriate degree of uniformity also has much to recommend it:
and about the instability of income tax revenues. Widespread adoption of
1. It would remove from State responsibility a volatile source of
State personal income tax works against the possibility of undesirable
fluctuations in State expenditures that are primarily caused
out-migration but the instability of this source of revenue remains. There
not by the actions of States themselves, but by the level of
are options available at the federal level which would enhance the
economic health of the economy as a whole.
stability of State revenues, and therefore the desirability of the personal
2. States and localities would be able to generate sufficient
income tax:
revenues to cover other public services at much lower rates than
1. The Federal Government could institute a program of counter-
currently exist or they would be able to offer more services
cyclical revenue sharing.
or initiate desirable new services or some combination of the
2. The Federal Government could assume full responsibility for
above two possibilities.
the welfare function.
3. Differences in treatment of people in similar circumstances due
Counter-cyclical revenue sharing has many factors to recommend it:
to the accident of geographic location and the consequent
1. Federal aid could be targeted only when there is a need and only
differences in States' ability or willingness to provide welfare
where there is a need. The potential difficulty of turning off
payments and related services would be eliminated.
a program - which is present in most categorical grants - is
4. To the extent that differences in welfare benefit levels and
absent.
eligibility criteria play a role in providing an incentive for
2. It is consistent with the Federal responsibility to stabilize the
migration of the poor to more generous States, this difficulty
economy.
would be eliminated. No State would be required to bear more
3. Part of Federal aid could be tied to reduction or elimination
than its "fair share" of welfare costs, as is presently the
of reliance on the sales tax. This provision would simultaneously
case.
work against both recession and inflation.
4. It would represent a step towards equalizing the fiscal disparity
between rich and poor States.
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- 69
5. Centralization of the proliferation of programs which currently
2. It treats families with the same income, regardless of family
exist at the Federal, State and local levels would avoid much of
size, on the same basis, thereby penalizing larger families
the "notch" problem. 1/
and violating the principle of vertical equity.
Reducing the Regressivity of the State and Local Sales Tax
As long as any of the positions which support the imposition of sales
The arguments in favor of the sales tax are as follows:
taxes are attractive to States, it is unlikely that they will be eliminated.
1. It is a relatively stable source of revenues.
With the growing demands on State revenues, it also is not practical to
2. Some of the burden of the sales tax may be "exported"
eliminate a fertile source of revenue. However, incentives to reduce
to residents of other States who make purchases within
reliance on the sales tax relative to the income tax and efforts to reduce
the sales tax locale, but reside elsewhere. This is a
the regressivity of the tax are in order. This may be accomplished with
compelling argument particularly for those States which
only minimal federal assistance:
rely heavily on the tourist industry.
1. Disallow deductibility 1/ of State and local sales taxes in
3. A specified level of revenues can be collected at lower
calculating federal liabilities. This will deny States the
rates under a broad based sales tax than under a graduated
"tax expenditure" subsidy and provide an incentive to decrease
income tax. The sales tax as an alternative to the income
reliance on sales taxes.
tax is therefore preferred by upper income households.
2. Accompany the above action by using the revenue gains to the
4. It is not as "visible" as an income tax since it is not
Federal Government to provide a credit 1/ against Federal income
deducted in a lump sum from earnings. It is extracted
tax liabilities with a maximum ceiling per household which
in small amounts and may never be summed to its total over
declines as income rises. This will provide an incentive to
the year. Less public opposition than otherwise is likely.
States to increase reliance on the personal income tax, since
Compelling arguments against the sales tax include:
it will be more favorably received by State residents.
1. It is regressive and impacts the poor more heavily than the
rich, and
Deductions are worth more to high income households than low income
1/ As the diversity of programs currently operate, eligibility for some
households. A one dollar deduction for a household in the 14 percent
Federal income tax bracket will reduce liabilities by 14 cents; the
programs creates an entitlement for benefits from other programs.
same dollar deduction will reduce liabilities for a household in the
Additionally, the benefit levels between programs are frequently
50 percent bracket by 50 cents. Credits, if properly targeted, may be
inter-dependent. Loss of eligibility for a single program or small
worth more to lower income households.
amount of additional benefits from another program or from working
may mean a substantial loss in overall benefits rather than the
desired increment in benefits. This situation may be compared to one
in which there is a tax on income that may exceed 100 percent. The
point at which the abrupt change in benefits takes place is referred
to as the "notch."
71
- 70 -
This would suggest that:
At the State level, exemption of basic essentials such as food and
2. A credit or rebate against State and local taxes targeted at
drugs would significantly reduce regressivity. As of 1973, of the 45
lower income households should include both sales and property
States and the District of Columbia which imposed a sales tax, only 19
taxes and should be considered as a replacement for existing
exempted food. 1/ In many cases, the exemption of food and drugs can only
"Circuit-breaker" and Homestead exemption programs.
be accomplished by a loss of substantial revenue to the State, and would
3. Consideration should be given to provision of rebates to
benefit not only needy households but also those households who are not
family units whose State income tax liability is less than
in need by any standards. An alternative which would accomplish the same
the amount of credit entitlement.
objective at less cost to the State would be the following:
4. Equity requires that both the aged and non-aged be included.
1. Provide a tax credit against State income tax liabilities
The loss in revenue to States could be substantially mitigated by
or a tax rebate which gradually diminishes as income rises
broadening the tax base to include additional items such as "services"
until it becomes zero at some specified income ceiling.
which are primarily consumed by upper income groups, and if necessary,
This is similar in concept to the popular "Circuit-Breaker" programs
basic essentials such as food and drugs. Although inclusion of "basic"
which operate in many States to relieve property tax "overload". In fact
one State (New Mexico) operates a program which is nominally a "circuit-
items may not be desirable since the initial outlay required would act
as a hardship to low income families even if refunded later, the inherent
breaker" but is more comprehensive than those designed for property tax
regressivity of State and local taxes would be reduced if not eliminated.
relief. It includes both the property tax and sales tax, and avoids the
adminstrative complexity of proof of claim requirements. Instead, the
New Mexico Low Income Tax Credit provides average estimates of all State
and local taxes at various income levels and family sizes and credits or
rebates a pre-determined "standard" sum to eligible households. By
"averaging" the burdens of State and local taxes within income classes,
it avoids the difficulty inherent in property tax relief alone where,
within any income class, higher benefits go to those with more valuable
homes. 2/
1/ See Appendix to this section, Table 1.
2/ See discussion in Section D-5 of this chapter.
STATE AND LOCAL SALES TAXES, JULY 1, 1973 - SUMMARY TABLE
(Percentage Rate)
Local
Income
Local
State
Income
State
rate
Food
tax
State
State
rate
Food
tax
rate
(max.)
exempt
credit
rate
(max.)
exempt
credit
Alabama
4
3a
Nebraska
2½
1
Alaska
X
5bc
Nevada
2
1½°f
Arizona
3
2c
New Jersey
5
Arkansas
X
3
1
New Mexico
4
1/2"
California
4%
1%°d
X
New York
4
3°
Colorado
X
3
3a
x
North Carolina
3
1°
Connecticut
6.5
X
North Dakota
4
Florida
4
Xj
X
Ohio
4
Georgia
0.5°
X
3
1
Oklahoma
2
Hawaii
2°
4
X
Oregon
Idaho
e
3
X
Pennsylvania
6
Illinois
X
4
1
Rhode Island
Indiana
5
X
4
X
South Carolina
4
lows
3
South Dakota
4
Kansas
2*
3
½
Tennessee
3.5
Kentucky
1.75°
5
X
Texas
4
Louisiana
1*
X
3
3c
(food-2%)
Utah
4
Maine
0.5°
5
X
Vermont
3
Maryland
X
4
X
X
Virginia
3
1°
Table 1
72
Massachusetts
3
X
X
Washington
4.5
Michigan
0.5°
4
West Virginia
3
Minnesota
4
1
X
Wisconsin
4
Mississippi
0.5e
X
5
Wyoming
Missouri
3
1e
3
1°
District of Columbia
5
Xi
X
Uniform State-collection of local sales taxes.
4. Appendix: Selected Characteristics of States' Sales Tax Structure
Locally-collected in some jurisdictions, State-collected in others.
The combined city-borough reta.
All local taxes self-edministered.
d A 1%% sales tax is levied by all counties in the state.
Local tax authorized. but none presently Imposed.
A one percent county tax is mandatory.
Food is taxed at two percent
Limited
Source aderation of Tax Administrators, Tax Administrators News, Vol. 32, No. 10 October 1968): updeted by ACIR staff,
Source: Advisory Commission on Intergovernmental Relations, Federal-State-Local Finances:
February 1974.
Significant Features of Fiscal Federalism, U.S. Government Printing Office,
STATE GENERAL SALES TAX RATES, JULY 1, 1973
(Percent)
3
3.5
4
4+
5
Over 5
2
2.5
Tennessee
Alabama
California
Kentucky
Pennsylvania (6%)
Nevada'
Nebraska
Arizona
Arkansas
Florida
(4-%)
Maine
Connecticut (6.5%)
Oklahoma
Colorado
Hawaii
Washington
Mississippi
Georgia
Illinois
(4-1/2)
New Jersey
Indiana
Rhode Island
Idaho
Maryland
District of Columbia
lowa
Kansas
Michigan
Louisiana
Minnesota
Massachusetts
New Mexico
Missouri
New York
73
North Carolina
North Dakota
Table 2
Vermont
Ohio
Virginia
South Carolina
West Virginia
South Dakota
Wyoming
Texas
Utah
Wisconsin
Total 2
1
15
1
17
2
6
2
Excludes the one percent mandatory county tax.
Source: ACIR staff compilation based on Commerce Clearing House, State Tax Reporter.
Source: Advisory Commission on Intergovernmental Relations, Federa1-State-Local Finances:
Significant Features of Fiscal Federalism, U.S. Government Printing Office,
February 1974.
- 74 -
- 75
Table 3
D. THE PROPERTY TAX
1. Overview
Public support of property tax relief, particularly for elderly persons,
has increased significantly in recent years. The unpopularity of the tax -
which is the mainstay of local government finance - rests on the belief that
DATES OF ADOPTION OF MAJOR STATE TAXES
the tax is regressive, 1/ administered unevenly, and particularly burdensome
GENERAL SALES*
to elderly people with low incomes. Although public distaste for the effects
1931-40
1941.50
1951-60
Since 1961
Mississippi, 1932; Arizona, 1933; California,
of the residential property tax has elevated discussions of property tax
1933; Illinois, 1933; Indiana, 1933 Iowa,
Connecticut, 1947; Maryland,
Georgia, 1951; Maine,
1947; Rhode Island, 1947;
Texas, 1961. Wisconsin,
1933; Michigan, 1933; New Mexico, 1933; North
1951; Carolina,
Carolina, 1933; Oklahoma, 1933; South Dakota,
Tennessee, 1947; Florida,
1961; Idaho, 1905. New
relief to the Federal level, there is no consensus on the need for and/or
1349;
1951; Pennsylvania,
York, 1965 Massachu
1933; Utah, 1933; Washington, 1933; West
1953; Nevada, 1955;
Virginia, 1933; Missouri, 1934; Ohio, 1934;
total, 5.
setts, 1966 New Jersey.
Kentucky, 1960;
1966: Virginia. 1966.
nature of Federal involvement.
Arkansas, 1935; Colorado, 1935; Hawaii, 1935;
total, 6.
Minnesota, 1967; Ne
North Dakota, 1935; Wyoming, 1935; Alabama,
braska, 1967; Vermont,
1936; Kansas, 1937; Louisiana, 1938;
1969;
This study examines alternative propositions and presents evidence to
total, 24.
total, 10
Grand total. 457.
support the view that property tax liabilities are a burden to the lower income
*States without a general sales tax: Alaska: Delaware: Montana: New Hampshire: Oregon.
aged - as well as all lower income groups, but that property tax relief in
existing forms is inequitable and is, in any case, an inefficient and
insufficient means of attacking the underlying problem of current income
inadequacy.
Homeownership and housing characteristics of the elderly suggest that
the problem is not one of inadequate housing per se, but one of inadequate
Source: Advisory Commission on Intergovernmental Relations,
current income.
of Federal-State-Local Finances: Significant Features
Fiscal Federalism, U.S. Government Printing Office,
Neither the claim that the property tax is regressive or that it is
February 1974.
progressive can be resolved due to lack of data availability and hence,
empirical support. Additionally, if the proper concept of income (average
income over five years or more) is employed in measuring property tax
burdens, the tax appears to be roughly proportional to income. Evidence
1/ A regressive tax is one which takes proportionately more from low income
groups than higher income groups; a progressive tax is one which takes
proportionately more from high income groups than lower income groups,
and a proportional tax is one which takes the same proportion of income
from all income classes.
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- 77 -
further supports the view that property tax liabilities do impact the
If the popular acceptance of State and local property tax relief programs
elderly disproportionately in terms of current income; property tax burdens
rests on the basis that it helps in reforming the regressive tax structure
have a disproportionate impact on the elderly regardless of whether the tax
at the State and local level, then why exclude other more obviously regressive
is viewed as regressive or progressive.
taxes such as the sales tax? One State does include all State and local taxes
Current forms of property tax relief which are described later in this
in its relief program, 1/ and the example provided by this unique effort
section, are not consistent with any existing theory of property tax burdens,
should be studied for application in other States.
but are analagous to "back-door" income maintenance or housing allowance
Federal intervention in the form of property tax relief is not recommended.
programs. As such, they are seriously flawed.
Under proposed legislation, undesirable and unintended effects may occur.
As long as property tax liabilities enter into the calculations,
States will be encouraged to increase reliance on property taxes.
greater benefits go to those with greater net worth within any income class;
Federal programs may be more costly than anticipated if States
this is not consistent with equity considerations. Other inequities exist
increase reliance on the property tax.
which violate the principle of ability-to-pay, the equal treatment of house-
Owners and renters will not be treated equally within the same
holds in similar circumstances (horizontal equity), and the notion that
jurisdiction. A uniform percentage-of-rent will overstate the
households in greater need should receive greater benefits (vertical equity).
impact on renters in low tax areas and understate the impact in
Attempts to correct the "unfair" program elements result in unfortunate
high tax areas: the opposite effect will occur in the case of
tradeoffs - either other inequities result or the programs may become
homeowners.
administratively complex and unwieldly, or excessively costly.
Proposals to channel relief through the Federal income tax
In any case, average annual benefits ($143 for circuit-breakers; $173
mechanism may not reach otherwise eligible applicants who do
for homestead exemptions) are not sufficient to merit a program with this
not file income tax returns. This group is likely to include
degree of complexity. Once property tax relief programs are considered as
the poor and the aged.
housing allowances or income maintenance programs, it is less clear why
one particular cost of housing has been singled out for relief. In fact,
1/ New Mexico Low-Income Tax Credit (LITC)
property tax relief does not require that benefits, i.e., funds that are
freed for other uses, be spent in any particular manner. Hence, income
maintenance, which provides assistance to those deemed needy and deserving,
to purchase adequate housing or other basic essentials may be a more direct,
efficient and equitable form of relief.
- 78 -
- 79
The political acceptability of property tax relief programs is a
In fact, contrary to arguments that excessive tax burdens force house-
reasonable rationale for the continuing existence of present programs in
holds to move, the elderly rarely move for any reason. 1/ The likelihood
the short run. However, in the light of their poorly focused benefits, the
of changing residence is lowest among households living in owner-occupied
Federal Government should not lend it support. Alternative means of
single family detached units, less than 1.5 perecnt per year. Owners are
channeling assistance to lower income households should be sought.
approximately one-fourth as likely to move as renters.
2. Homeownership and Housing Characteristics of the Elderly
In sum, the typical housing conditions of the elderly are above
In contrast to the below average annual income position of most elderly
average in a number of important ways: (1) rate of homeownership;
households, homeownership is above average - frequently mortgage free.
(2) probability of being mortgage-free; (3) number of rooms per-person,
Although ownership rates peak in the 60 to 65 age bracket, 64 percent of
and (4) stability of location. Certainly, not all the elderly are so
the elderly above that age owned their own homes, compared with 60 percent
fortunate, but many are. Blacks in particular are unlikely to be as well-
of the general population in 1972. 1/ Blacks were at least 40 percent less
off as their aged white counterparts. This is in part due to lower life-
likely to own their own homes than whites; the disparity is slightly less
time earnings and in part to housing discrimination in past years.
between aged blacks and whites.
The favorable "average" housing conditions of the elderly relative to
The majority of elderly homeowners have completed mortgage payments.
the non-elderly should be interpreted carefully. Measures of the "average"
Only 15 percent of elderly homeowners have a mortgage remaining, while
do not tell us anything about either the best or the worst housing conditions
nearly three-quarters of non-aged homeowners have a mortgaged home. Among
experienced by the elderly. Instead, they suggest that although the housing
those with existing mortgages, the amount of equity is higher for the elderly
conditions of many aged households may be deplorable, the situation may not
than for the non-elderly mortgagee.
be more serious for the elderly than the non-elderly.
Housing consumption of the elderly is also above average. The median
One complaint that frequently occurs among the aged, concerns their
number of rooms is 50 percent greater among the elderly than it is among the
inability to provide proper maintenance for the housing they do have. This
population at large. This is in part a reflection of housing needs in
complaint, coupled with the preceding discussion is indicative of both the
earlier years before younger family members departed. It also suggests that
diminished physical abilities of many elderly and the low level of their
many of the elderly do retain their homes past the years of family formation
incomes - rather than a housing problem in and of itself.
and development.
1/ Abt Associates, Draft Report of Property Tax Relief Programs for the Elderly:
An Evaluation, Prepared for U.S. Department of Housing and Urban Development,
Office of Policy Development and Research, forthcoming, 1976. The assistance
1/ Bureau of Labor Statistics, Consumer E> inditure Survey, 1972-73,
of the Office of Policy Development and Research in granting access to the
Tabulations Based on First-Year Diary, ess Release, May 15, 1975.
three volume Draft Report is gratefully acknowledged.
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3. Property Tax Incidence: Theory
complex adjustment process takes place determines the final resting place
The incidence or burden of a tax concerns the effect a tax has on the
of the tax. The "burden" of a tax is borne by those affected after the
distribution of real income for private use. The term "real income" refers
adjustment process. If a tax falls on owners of capital (residential,
not only to the dollar amount of income, but also the purchasing power it
business and commercial property, etc.) it is considered progressive, since
represents. Real income may change in several ways:
most capital owners are in higher income brackets; if it falls on consumers,
1. the number of dollars received by individuals may change with
it is considered "regressive," since consumption takes a larger fraction
the prices of goods and services unchanged;
of income from lower income households than higher income groups.
2. relative prices of goods and services may change with individual
The Property Tax: Regressive or Progressive?
dollar income unchanged;
The adjustment process related to the property tax is a matter of some
3. both relative prices and the dollar amount of income may remain
dispute. It is a matter of importance in this discussion for several reasons:
unchanged, but the general price level may change (Pure Inflation),
1. arguments against the property tax cite its regressivity or
and
unfairness relative to ability-to-pay;
4. a combination of the above may occur.
2. proper treatment of homeowners and renters in property tax relief
Incidence theory and measurement is concerned with the combined effects
programs requires knowledge of the manner in which they are
of 1. and 2., changes in dollar income and in relative prices. The house-
burdened by the tax.
holds whose dollar income and/or consumption pattern is affected bear the
The Traditional View: The Property Tax is Regressive
burden of a tax.
The traditional view of the incidence of the property tax has been that
Tax "Liability" versus Tax "Burden"
renters pay the tax in the form of higher rents, owner-occupants in their
As clear cut as the burden may appear to the average taxpayer, it is
role as consumers of housing services, and consumers in general pay the
the "liability" and not the "burden" which is usually clear. The taxpayer
property tax on commercial and industrial property in the form of higher
who writes the check bears the liability, but in response he may change his
prices for the goods they buy. This view assumes that property taxes, as a
behavior in an effort to avoid the tax or to pass it on to others. In
cost of producing housing services (and other goods and services), reduces
response to a tax; firms and individuals may adjust their prices, sales,
the rate-of-return or profit to investors, thereby reducing investment in
and purchases, thereby affecting individuals in their capacity as owners,
residential structures (and the production of other taxed goods and services)
producers or consumers of the taxed commodity. The manner in which the
- 83 -
- 82 -
If the property tax is shifted to all capital owners, then the burden
until prices rise sufficiently to restore the pre-tax profit level.
of the tax falls on individuals roughly in proportion to the value of their
Therefore the burden falls on consumers of housing services (owner-
capital. For the vast majority of persons, homeownership represents the
occupiers and renters) and in a more general way on all consumers of
largest asset; individuals in their role as renters are not affected.
goods and services. Since housing expenditures and outlays for consumer
Under both the traditional and the new view, the analysis applies only
goods tend to absorb a much larger fraction of current incomes of the
to reproducible capital such as structures. Land is immobile; hence, that
poor than of the rich, such a tax would appear to be highly regressive.
portion of the tax which falls on land is born by the owners of land regard-
The New View: The Property Tax is Progressive
less of the assumptions relating to the remaining portion of the tax.
A more recent view holds that taxes on structures (both residential
However, the total incidence of the tax is yet an unresolved issue.
and commercial) divert investment into more profitable sectors of the
The Measurement of Income
economy, without affecting the total level of investment, thereby lowering
The conventional wisdom that the property tax is regressive is subject
the rate of return to all capital owners. Under this view, the tax is
to criticism on yet other grounds. Economists generally agree that the
progressive since capital owners are concentrated in higher income brackets.
economic circumstances of households are not accurately measured by annual
Additionally, there are complicated effects arising out of inter-juris-
income; household incomes may be unusually high or low over a single year.
dictional differences in tax rates. Investors in high tax areas can be entice
For most consumption expenditures, some short term adjustments can be made
into producing housing and other local goods and services only if they
when income fluctuates; for housing expenditures, this is not the case.
receive sufficient profits to cover the higher than average local tax rate.
Housing expenditures, more so than other types of consumption, tend to be
This may be accomplished through lower wages, higher prices or lower land
related to long-term average income or "normal" income. It follows that
rents. Lower than'average tax rates, on the other hand, may generate higher
if tax burdens are to be allocated according to housing expenditures,
wages and land rents and lower prices. Residents of high tax communities
then property taxes are related to normal income, not annual income.
may therefore experience real income losses and residents of low tax
communities may receive additional benefits. The literature suggests that
the deviations from the average rate of tax may reinforce rather than offset
the progressive nature of the tax. 1/ More research is necessary to determine
the actual effects of differences in tax rate between jurisdictions and the
effects of the adjustment process on the overall level of investment.
1/ Henry Aaron, "A New View of Property Tax Incidence," The American Economic
Review. Papers and Proceedings, May, 1974.
- 84 -
- 85 -
This is of crucial importance for the following reasons:
Relevance to Policy Considerations
1. Low income brackets are more likely to include households with
Of what policy significance is the controversy over the progressivity
substantially lower incomes than previously experienced or
or regressivity - or proportionality, if "normal" income is used - of the
anticipated rather than temporarily higher income;
property tax?
2. High income brackets are more likely to include households
If the tax is progressive and represents the largest burden to
with higher-than-usual incomes, rather than lower-than-usual
individuals with the highest net worth or wealth not limited to real
incomes.
property holdings - then relief from current liabilities bears no relation-
Since this is the case, measured on an annual basis,
ship to the burden of the tax - and hence the problem is misspecified.
3. Average housing expenditure in lower income groups include the
If the tax is regressive, then the large question should concern the
higher housing outlays (and hence, higher property taxes)
degree of reliance placed on raising local revenues in this manner.
of those whose income is only temporarily depressed. This
However, regressivity alone - or progressivity alone for that matter, are
makes it appear as if lower income groups generally spend 8
insufficient grounds for determining the "fairness" of a tax; the economic
higher proportion of income for property taxes than in fact,
incentives which result and the pattern of benefits must be examined as well
they do.
as available alternative sources of revenue. If relief is offered, this
4. Average housing expenditures and the ratio of taxes to current
view indicates that owners and renters, regardless of age should be included.
income will be biased downward in upper income groups for
Discussion of the proportionally of residential property taxes to normal
similar reasoning
income directly raises the issue of what the terms of judging ability-to-pay
The importance of this observation is that it lessens the credibility
should be and on what terms relief if any - should be granted.
of the argument that the poor spend a larger proportion of their income on
4. The Measurement of Property Tax Liabilities and Burdens
housing and therefore on residential property taxes than the rich do - which
Studies of the distribution of tax burdens by income class come to
is the basis for the traditional conclusion that the tax is regressive:
significantly different conclusions depending upon the assumptions made about
Evidence points to a rough proportionality between housing expenditures and
the incidence of the tax. Additionally, estimates may differ even under the
normal income. 1/
same set of assumptions when different income concepts or different years
are used. The results of a number of such efforts are reported here.
1/ For example, Henry Aaron, Shelter and Subsidies: Who benefits from
Federal Housing Policies? The Brookings Institution, 1972. Appendix C,
p. 213.
- 86 -
- 87 -
However, none of these estimates are intended to serve as a precise
representation of the absolute magnitudes involved. Instead, they are
TABLE III-D-1 ESTIMATES OF PROPERTY TAX BURDENS, TOTAL POPULATION, 19661/
presented as an illustration of the general direction and the relative
Income classes in thousands of dollars; tax rates
as percent of family income.
size of burdens under different income concepts and different assumptions
about the incidence or burden of the tax.
Estimates of the Tax Burden for the General Population
Adjusted
(1)
(2)
Family
Progressivity
Regressivity
Pechman and Okner, 1/ have provided estimates of the burden of the
Income
Assumption
Assumption
property tax in their exhaustive study of Federal, State, and local tax
0-3
2.5
6.5
burdens. Fortunately for present purposes, they have made calculations
3-5
2.7
4.8
5.10
2.0
under differing sets of assumptions about the incidence of tax, two of
3.6
10-15
1.7
3.2
which parallel the previous theoretical discussion of progressivity or
15-20
2.0
3.2
regressivity of the property tax. Table III-D-1 indicates that if the
20-25
2.6
3.1
25-30
3.7
burden is assumed to fall on all capital owners (Column 1), the tax as
3.1
30-50
4.5
3.0
a percent of income rises as income rises. Assuming that the tax falls on
50-100
6.2
2.8
consumers of housing and other taxes goods and services (Column 2), the
100-500
8.2
2.4
500-1000
9.6
burden is reduced as income rises. The direction and size of the numbers
1.7
1000 and over
10.1
0.8
are in approximate accord with estimates prepared by the Musgraves 2/
for the year 1968, using a conceptually similar income concept and roughly
Average:
All Classes
3.0
similar theoretical assumptions.
3.4
Non-Aged
2.5
3.2
Although tabulations of the burden of the property tax on the aged
Aged
5.9
4.4
population are not presented by income class, average tax rates as a
percent of income are available for the elderly and the non-elderly.
(Table III-D-1))
Source: Joseph A. Pechman and Benjamin A. Okner, Who Bears the Tax Burden?
The Brookings Institution, 1974. Table 4-8, p. 59.
1/ Joseph A. Pechman and Benjamin A. Okner, Who Bears the Tax Burden? The
study is summarized in Chapter II of this report.
2/ Richard A. Musgrave and Peggy B. Musgrave, Public Finance in Theory and
Practice, McGraw-Hill, 1973. Tables 15-1 and 15-2, pp. 368 and 370.
- 88 -
- 89 -
If the tax is assumed to be regressive, the average tax rate of the
Under the progressivity assumption, that is, a higher proportion of
elderly is greater than both the average for the population as a whole and
the income of the rich than of the poor is extracted, the burden of the
the non-elderly; 4.4 percent, 3.4 percent and 3.2 percent, respectively.
tax on the elderly appears larger than under the regressivity assumption.
This is almost half the size of the average burden reported by the Advisory
Considering the relatively low current money income position of the elderly,
Commission on Intergovernmental Relations (ACIR) (Table III-D-2). Both the
the results may come as a surprise to many: it indicates that some of the
Pechman and Okner and the ACIR estimates are based on income over the
aged possess significant property holdings, e.g., real estate, corporate
period of a year. Although the estimates are for different years (1966 and
stock, insurance assets, etc. This is not unreasonable when one considers
1970), this is probably a minor part of the explanation. The ACIR estimates
the above average homeownership rates of the elderly and that older persons
cover single family homeowners only, which may account for part of the
have had the advantage of a lifetime to accumulate equity in a home and to
difference. Perhaps more important, different concepts of income are
acquire savings or investments. Nevertheless, the fact remains that the
employed. The ACIR uses current money income, while the Pechman-Okner
elderly have significantly low current incomes.
Estimates of Homeowner Tax Liabilities
study uses a comprehensive income definition which includes the potential
claims on income represented by asset ownership. The difference, simply
The ACIR takes the position that the ... "regressivity issue is some-
stated, points out that if two households have the same current incomes,
thing of a red herring
...
There would be a need for property tax relief
but only one household owns a home, corporate securities, and insurance
even if the tax were proportional - or even progressive - if the absolute
or pension equity, the two households are not in the same economic circum-
level of the tax worked hardship on some persons." 1/ The observation that
stances. The Pechman-Okner income concept considers these differences and
the level of a current tax liability may present hardship to lower income
includes estimates, albeit crude, of the income on an annual basis that
groups is without dispute; the form of relief that will adequately relieve
such assets or wealth would represent. This suggests that census money
the difficulty is less clear.
income figures may, on average, understate the economic circumstances of the
Table III-D-2 substantiates the position that on average, the elderly
aged population.
not only pay more tax as a percent of current income than the non-elderly
Table III-D-1 also indicates that if the tax is assumed progressive,
(8.1 percent to 4.1 percent), but also that the tax liability removes
the average tax rate for the elderly of 5.9 percent is twice that of the
visibly large percentages of the income of low income groups of all ages.
population as a whole, 3.0 percent. The difference is even greater when the
elderly are compared with the non-elderly alone; 5.9 percent to 2.5 percent.
1/ Advisory Commission on Intergovernmental Relations, Property Tax Circuit
Breakers: Current Status and Policy Issues, February, 1975.
- 90 -
- 91
What is not captured by the figures in Table III-D-2, is that there are more
TABLE III-D-2 ESTIMATES OF PROPERTY TAX LIABILITIES, ELDERLY AND NON-
elderly than non-elderly single-family homeowners represented in the lower
ELDERLY 1970 SINGLE-FAMILY HOMEOWNERS
income brackets. Homeownership among the non-elderly appears to be more
(Property Tax as a Percent of Current Income)
strongly related to current income than it is for the elderly. The vast
majority of non-aged homeowners are concentrated in middle and upper money
income brackets; the majority of aged homeowners are in lower money income
Income Classes in Thousands of Dollars
brackets. 1/
Tax as Percent of Family Income
Average patterns of income, family size and composition, and housing
Family
Money
Elderly
Non-Elderly
expenditures are most clearly reflected in the three budgets for lower,
Income
(65 and over)
(under 65)
moderate and higher living standards prepared by the Bureau of Labor
Less than 2
15.8
18.9
2-3
9.5
10.1
Statistics (BLS). The hypothetical family depicted for the non-aged
3-4
8.0
7.2
includes a husband and wife with two children.
The aged family consists
4-5
7.3
5.5
of an urban retired couple, defined as a husband, age 65 and over, and his
5-6
6.2
5.1
5.8
6-7
4.3
wife. Precise characteristics are defined for each group that are repre-
4.8
7-9
4.1
sentative of the real world, based on the dicennial Consumer Expenditure
3.9
10-15
3.7
3.3
Survey conducted by the Bureau of the Census for BLS. Table III-D-3
15-25
3.3
2.7
25 or more
2.9
clearly shows that housing claims a greater share of the elderly household's
budget at every standard of living than it does for the non-elderly.
Average Tax:
At similar standards of living, the elderly spend roughly one and one-
All incomes
8.1
4.1
half times as great a proportion of income on housing as do the non-elderly,
even though they are more likely to be mortgage free. One explanation is
that actual housing expenditures of the elderly reflect higher home values
Source: Advisory Commission on Intergovernmental Relations, Property
(and hence higher property taxes) for puchases made on the basis of
Tax Circuit Breakers: Current Status and Policy Issues, 1975
previously higher incomes. This, in combination with lower average incomes
at the same standard of living due to differences in average family size,
may explain the aged/non-aged differences.
- 92 -
- 93
Interestingly, the share of housing expenses in the household budget
does not vary significantly as income increases. Since the typical elderly
TABLE III-D-3 HOUSING EXPENSES AS SHARE OF STANDARD HOUSEHOLD BUDGETS
and non-elderly families are considered separately, life-cycle fluctuations
in income have been removed, and the pattern remaining supports the belief
Housing Share
that housing expenditures are indeed related to average or "normal" income
Budget Level
of
of Household
Total Budget
Housing Budget
Total Budget
and on that basis, are proportional for all income classes.
(dollars)
(dollars)
(percent)
Lower Budget
A similar pattern of proportionality is reflected in figures isolating
Elderly:
property taxes as a share of housing costs and as a share of total budgets
1967
$ 2,671
$
939
35.2
1973
3,763
1,276
33.9
(Table III-D-4). Property taxes for the elderly represent approximately one-
Non-Elderly:
third to one-half of all housing costs, and are the single largest housing
1967
5,915
1,303
22.0
1973
8,181
1,627
19.9
cost, aside from utilities. Property taxes represent from eight percent to
Moderate Budget
nine percent of their total budget.
Elderly:
1967
In sum, the elderly bear the burden of the property tax, regardless of
3,857
1,330
34.5
1973
5,088
1,839
36.1
whether it is assumed to be progressive or regressive. In the former case,
Non-Elderly:
1967
they bear the burden primarily due to high rates of homeownership among the
9,076
1,756
19.3
1973
12,626
2,908
23.0
elderly; in the latter case, they bear the burden as consumers of housing
Higher Budget
with low annual income.
Elderly:
6,039
2,066
34.2
1967
8,043
Although each point of view above has policy significance, the argument
2,873
35.7
1973
was presented that in any case, tax liabilities present hardship to the
Non-Elderly:
1967
13,050
elderly based on diminished incomes. Because of low current incomes, the
3,340
25.6
1973
18,201
4,386
24.1
aged spend a larger fraction of their incomes for housing and property
taxes than do the non-aged at similar standards-of-living (Table III-D-3), but
not necessarily more than the non-aged at similar income levels (Table III-D-2)
Source: Bureau of Labor Statistics, Three Budgets for a Retired Couple in
Urban Areas of the United States, 1967-68, and Supplement, 1973;
Three Standards of Living for an Urban Family of Four Persons,
1967, and Supplement, 1973.
94 -
- 95 -
5. Current Forms of Property Tax Relief: Description and Evaluation
General Feature of Typical Property Tax Relief Programs
TABLE III-D-4 PROPERTY TAXES IN THE ELDERLY BUDGET
(Homeowners)
At present, 48 States and the District of Columbia operate, or permit
localities to operate, a total of 83 different property tax relief programs.
"Circuit-breakers" have been rising in popularity and represented a
total expenditure of nearly half a billion dollars in benefits to 3.5
million beneficiaries in 1974. The average payment was $143. Homestead
Property Taxes
Property Taxes
As a Share of
As a Share of
exemption programs, which pre-date the circuit breaker approach, disburse
Structure-Related
Total
Budget Level
Housing Costs
Budget Costs
substantially greater sums of property tax relief benefits to more
recipients: over a billion dollars in benefits were distributed to six
Lower
36.8%
9.2%
million recipients with an average benefit of $173. Though not as widely
used, tax deferral and tax freeze mechanisms are also in operation. A
Moderate
42.7%
8.7%
description of the major forms follows:
Circuit Breakers
According to the ACIR, "Property tax circuit-breakers are tax relief
Higher
45.9%
8.2%
programs designed to protect family income from property tax "overload"
the same way that an electrical circuit-breaker protects the family home
from current overload." Benefits are paid in the form of a credit against
State income tax liability or in the form of a direct rebate.
Source: Bureau of Labor Statistics, Three Budgets for a Retired Couple in
The coverage may vary:
Urban Areas of the United States, 1967-68.
o "Basic" circuit-breakers are limited to elderly homeowners,
typically age 65 and over.
- 96
- 97 -
o "Expanded" circuit-breakers include elderly renters along
Homestead Exemption Programs
with homeowners. A proportion of rent-typically 15 to 25
Homestead exemptions operate through a fixed percentage reduction in
percent is assumed to be the property tax equivalent.
the assessed value or the actual tax bill. Renters, since they receive
O "General" circuit breakers include the aged and non-aged,
no property tax bills, are not included in the program. Although income
homeowners and renters.
may be used as a relief eligibility criterion under this program, it is
The benefits may vary depending upon the formula approach used:
not used as a factor in determining the amount of relief to be provided.
O The threshold approach provides relief only to households
Typically income eligibility limits are set at or below a specified
whose property tax liability exceeds some set percentage
maximum income level, or tax as a percentage of income defines eligibility
of household income. Frequently, the threshold percentage
limits.
rises as income rises; either a different fixed percentage
Tax Freezes
applies to different income classes, or the increases may
These programs, which are directed at the elderly, hold tax rates at
be graduated so that successively higher percentages apply
a set level, - usually the level that was applicable at age 65. The
to increments in income (similar to the Federal income tax).
participant is excused from the liability of tax increases which may occur;
The sliding scale approach provides relief on the basis of
lowering of tax liabilities is not disallowed.
a fixed percentage of property tax (whether high or low) for
Tax Deferral Programs
each eligible household within a given income class: the
The deferral program operates in a manner similar to a loan program.
rebate percentage usually declines as income rises.
Those who are eligible may defer all or part of their property taxes in
exchange for a property lien. When the property title is transferred to
Benefit levels are also sensitive to the relief limits set and/or the
a buyer or an heir, the loan-consisting of cumulative deferred taxes
maximum income specified for eligibility as well as the level of taxes in
(plus interest in some States), must be repaid to the taxing jurisdiction.
a jurisdiction and home values and assessment practices.
Evaluation of Existing Programs
Property Tax Relief Programs as a Form of Income Maintenance
States differ in tax structure, tax rates and intra-State income
distributions and due to the proliferation of programs, the different mix
of programs among States, the different eligibility criteria, benefit levels,
- 98
- 99
If the tax is progressive, then the burden falls on owners of all types
formulas, and participation rates, - state-by-state comparisons or general-
of property roughly in proportion to wealth holdings. Renters per se are
izations about the effectiveness of the total program is difficult if not
not included and the burden has no relationshilp to current property tax
impossible. 1/ Then, too, there has been a very brief experience with this
liabilities as a determinant of eligibility or benefit levels.
public policy initiative. However, if the major relief programs - circuit-
2. The use of tax liabilities in relation to current income is
breakers and homestead exemptions are viewed by analogy as percent-of-rent
incompatible with the generally accepted premise that housing
expenditure decisions and therefore tax liabilities relate to the
housing allowances and income maintenance programs to lower income groups,
average level of past-income or expected income over periods of
longer than a year. Under this view, the property tax is at least
it can be shown that they function quite imperfectly.
proportional, perhaps slightly progressive.
The analogy to housing allowances and income maintenance programs
It has been argued that where one has been (past average income) or where
are justified for several reasons:
one is going (average expected income) matters little when faced with the
1. The pattern of benefits generated by relief programs is
harsh reality of property taxes that consume a large percentage of the low-
inconsistent with existing theories of property tax burdens -
regardless of which point of view one holds.
income family's budget." 1/ The author of this sentiment goes on to say that
If the tax is regressive, the analysis holds that the burden is borne
" in a real sense, the regressivity issue is a red herring." It might
by renters, owner occupants and other consumers of goods and services which
well be added that the progressivity issue is also a red herring.
are produced with taxed nonresidential property. Relief should then be
The concern of most circuit breaker programs is with current tax liabilities
granted to all owners and renters in their roles as both consumers of
and current income. Obviously, it is difficult to measure anything else and
housing services and other taxed goods and services. States are far from
present economic circumstances do count. Even economists who engage in
consistent on this matter; seven states out of a total of 25 states exclude
calculations using "normal" income are careful to weight current income more
renters, all homestead exemptions exclude renters, the non-aged are included
heavily than those of former years.
in fewer programs than the aged, and several States have made eligibility
3. That the programs function as an income maintenance scheme is
implicitly embodied in the behavior of at least two States:
provisions for the disabled. This is far from consistent with the point of
Connecticut and Wisconsin. Relief is granted to occupants of
subsidized or untaxed housing, - which are already receiving
view that claims owners and renters - regardless of age or other physical
preferential treatment through tax abatements, reductions, or
tax forgiveness. 2/
characteristics bear the burden of the tax.
1/ ACIR, Property Tax Circuit-Breakers: Current Status and Policy Issues.
2/ ABT Associates, Property Tax Relief Programs for the Elderly.
1/ For a comprehensive discussion of state-by-state programs and a
comprehensive evaluation, see ABT Associates, Property Tax Relief
Programs for the Elderly.
- 100 -
- 101 -
None of the discussion is meant to suggest that relief, because it is
No program may be expected to achieve all objectives equally well:
so poorly focused in the light of theoretical insights, should not be granted
trade-offs, for instance, between administrative simplicity and equity,
to affected groups. However, if property tax relief programs are in reality
adequate levels of relief and program costs, or program efficiency and
a form of income maintenance 1/ then the appropriate question to ask concerns
political feasibility are the rule rather than the exception. It is
how well they perform that function.
within the purview of the decision-maker to determine exactly what these
2. Evaluation Criteria
trade-offs will be.
There are a number of ways by which program effectiveness may be judged:
3. Who gets the Benefits?
1. Target Efficiency: Does the program target aid to those most
The distribution of benefits and the amount of benefits depends upon
in need?
a mixture of the following factors:
2. Overall Efficiency: Does the program reach its objective at less
O Age
cost than alternative programs?
O Tenure (Homeowner or Renter)
3. Horizontal Equity: Are people in similar circumstances treated
o Income Limits
similarly?
o Income Definition
4. Vertical Equity: Are people in greater need given greater benefits?
o Net Worth
5. Adequacy: Are the benefits sufficient to provide an adequate
O Deductibles or Coinsurance
level of relief?
o Benefit Formulas
6. Administrative Simplicity: Is the operation of the program -
o Maximum Benefits
determination of eligibility, level of benefits and manner of
o Household Unit definition
payment simple? Does it avoid difficult judgements or costly
o
Total program monies available
procedures?
O Length of Residence in Jurisdiction
1/ It is recognized that other motivations exist, among which attaining
support for local school finance may be prominent. Although not
necessarily a subsidiary issue, it is not totally consistent with either
the current forms of state and local property tax relief, or the major
concerns of this study.
- 102 -
- 103
One result of the program mechanism is that it is possible to target
most aid to lower income groups - but in all programs, within each income
class, participants with the greater net worth receive greater benefits.
An example will illustrate the point. Suppose households are exempted from
property tax liability in excess of the following fractions in income: 1/
Income
Property tax in excess of
$3,000 or less
3 percent
$3,001 to $7,000
4 percent
281
210
196
193
203
201
$7,001 to $10,000
5 percent
$10,001 to $15,000
6 percent
The ceiling is set at $15,000 in this case; maximum benefits are $500,
and there is no net worth test. The distribution of benefits resembles
TABLE III-D-5 AVERAGE ASSISTANCE PER HOUSEHOLD BY INCOME AND NET WORTH CLASS
Net worth class
Less than $0 $0-10,000 $10,000-20,000 Over $20,000
298
145
111
102
123
124
123
113
93
85
q
103
those of Table III-D-5: The results violate the most commonly held notions
of equity and efficiency; households with greater net worth receive greater
9
122
92
83
q
95
benefits within each income class. This not only violates the ability-to-
pay principle, but may also be unnecessarily costly. Homestead exemptions
All
net worth
classes
216
133
122
122
191
129
are subject to this criticism even more obviously than circuit-breakers.
Although most State plans are less generous than the example presented,
a. Income is equal to Census money income plus realized capital gains.
those that restrict aid to the elderly will exhibit this pattern even more
(1972 dollars)
Income class
Less than $0
3,000 -0-
$ 3,000- 5,000
$ 5,000-10,000
$10,000-15,000
Average
Source: Brookings MERGE file, updated to 1972 values.
b. Cell contains fewer than 10 sampling observations.
clearly than those States which do not. The elderly have greater net worth
$
Source: Henry Aaron, What Do Circuit-Breaker Laws Accomplish? Reprint 277,
at each income level than the non-elderly.
The Brookings Institution, 1973.
1/ These are the figures from the Muskie-Percy bill (S.1255) which was
intended to support state tax relief efforts. It is used as a hypothetical
example which is not untypical of state programs.
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In the case of circuit-breakers, similar difficulties arise in the
credits up to a fixed amount of home value, no matter what proportion
treatment of homeowners and renters. If renters are not included - and
of the home value the amount represents. Nevertheless, the difficulty
many States do not include them - then, equity is again violated. Since
in determining what the "fair share" for the renter should be is
an owned home is a part of net worth (and the largest part for most lower
unresolved; states that include renters resort to rough rules-of-thumb.
income families) which renters do not have, equity considerations would
Other important questions remain: what income, how much income and
argue that renters and not owners should receive preferential treatment.
whose income should be considered in determining eligibility?
Where both are included, the same line of reasoning would suggest that
Generally, comprehensive definitions of income are more difficult
renters receive higher benefits since they may have higher housing costs.
and costly to obtain and validate than simple ones such as "taxable income."
Homeowners are likely to have accumulated principal on their mortgages,
Most states do attempt to include most types of income which are important
to pay less since costs were determined at earlier less inflationary
in determining ability-to-pay, but differences remain. Some differences
periods, or to have paid off their mortgages completely.
are probably related to the states program size and hence the costs and
All this would suggest that an asset test is in order, but this
benefits to the state of using more refined definitions and more costly
presents other difficulties. First, what assets should be considered?
verification procedures.
If the home is included as an asset, such a test is inconsistent with
Income ceilings are not an essential element of circuit-breakers
maintenance of homeownership.
since maximum credits or rebates may serve the purpose of restricting aid.
All assets are difficult to value and present enormous verification
Income ceilings may serve to limit aid to low income families, but in so
problems and add to administrative complexity and costs. Residential
doing may exclude some equally overburdened families in higher tax
property assessment is particularly subject to error; practices differ,
districts within a state. Equity would call for different income ceilings
difficult judgements are involved, and sloppiness is not unknown.
within a state related to the differences in the tax rates among juris-
Additionally, regardless of how assets are computed, an asset test may
dictions. Again, administrative cost and complexity weigh against equity
still violate horizontal equity. A minor difference in assets may
considerations.
determine one household eligible and completely exclude another household
that is in approximately similar circumstances. Many states have opted
to forego asset tests altogether or use partial tests such as allowing
106 -
- 107 -
In asking whose income shall be included, most States have a simple
6. Effects of Federal Intervention
answer. The household unit is usually defined as claimant and spouse.
From the taxpayer's viewpoint, the residential property tax has been
Both the costs that result from larger family size and the benefits that
a particularly unpopular item in the menu of taxes ever since its inception.
result from income of additional family members are often neglected. Thus,
A shift away from the property tax occurred during the depression of the 1930's;
distortions of vertical and horizontal equity may occur. The alternative
the shift away from property taxation has been visible during the past decade.
is more administrative difficulties and higher administrative costs.
This tendency is reinforced by the growth of State and local property tax
In general, programs are less costly if aid is restricted to the elderly.
relief programs. Federal programs or Federal participation in State and
The arguments in favor of preferential assistance to the elderly are based
local programs may reverse this trend.
both on diminished incomes and psycho-social bases suggesting that their
First, Federal intervention whether phrased in terms of relief to
lifestyle should to as great an extent as possible remain unchanged. Some
individuals through credits and rebates via the Federal income tax system
would suggest that many elderly are better off than non-aged families at
or direct subsidy of State property tax relief costs - act as a form of
the same income level since the younger age groups have larger families
revenue sharing. From the Federal stance, the distributional effects across
and greater family responsibilities and costs associated with working, while
States are important.
older age groups rely more heavily on tax-exempt sources of income and
A uniform Federal program for relief from property tax liabilities
benefit additionally from double exemptions on the Federal individual income
across all States will reward States differentially (or the residents of each
tax. On equity grounds, both elderly and non-elderly should be included.
State) in several ways:
In summary, (1) fine-tuning of programs result in trade-offs between
1. States (or state residents) will be rewarded relative to the degree
to which States rely on property tax collections relative to other
horizontal and vertical equity, program efficiency and introduce complex
sources of revenue;
and unwieldy administrative problems; (2) refinement of program elements
2. According to the size of State's residential property tax base
relative to non-residential property tax base;
cannot be accomplished on a uniform basis, either across States or within
3. In part according to the average value of residential structures
States; (3) the general tendency of the inclusion of "property tax liability"
(wealth) of the State (or of individuals).
in calculating benefits is to grant greater relief to those with higher net
These are not mutually exclusive categories, nor are they a comprehensive
worth within any income category and (4) the average level of benefits
listing of all the distributional effects of Federal participation on a uniform
($143 for circuit breakers and $173 for homestead exemption programs) is
basis across all States. The stated effects are sufficient, however, to make
unlikely to significantly upgrade any household's standard of living.
an important point: the distributional effect is not neutral.
- 108 -
- 109
For example, Table III-D-6 illustrates the distributional pattern
TABLE III-D-6
under the property tax relief cost-sharing bill introduced by Senators
Muskie and Percy in 1973. The Northeast is overwhelmingly favored while
DISTRIBUTION OF CIRCUIT-BREAKER BENEFITS UNDER S. 1255
the South enjoys considerably less benefits than any other region in the
(PROPOSED) BY CENSUS REGION
nation. The South, has traditionally had less reliance on property taxes
as a source of revenue than other regions. This may be in part due to
the observation that the South contains relatively larger proportion of
the poverty population, and hence a relatively smaller tax base, and in
part due to its ordering of priorities. 1/
Total benefits
Percent of total
Average benefit
Census Region
(millions of dollars)
benefits
The likely result of uniform treatment under a federally sponsored
(dollars)
Northeast
917
44
164
program is that states will be encouraged to place greater reliance on
North Central
594
29
124
South
140
7
58
property taxes relative to other forms of taxation, since some of the cost
West
413
20
130
National
will be shifted to the Federal level. This is particularly true for those
2,064
100
129
Source: Brookings MERGE file, updated to 1972 values.
areas that currently have below-average reliance on the property tax.
This is inconsistent with reducing the impact of property taxes on lower
income households.
Second, if proposed programs are costed out on the basis of existing
tax structures, and states are provided with incentives to change that
tax structure - cost estimates may be wide of the mark. A Federal program
could be far more costly than anticipated since states may change their tax
Source: Henry Aaron, What do Circuit Breakers Laws Accomplish?
structure to gain maximum Federal dollars.
If aid is restricted to the elderly, similar tendencies will result;
only the scale will change. However, equity requires that aid include all
lower income households.
1/ As an aside, the pattern of benefits across States illustrates why
property tax relief in current forms as a vehicle to correct inequities
in local school finance will behave perversely: it directs aid to
property rich areas.
- 110 -
- 111 -
The effect of uniform treatment among homeowners and among renters
APPENDIX
would also distribute benefits differently between taxpayers in the same
FEDERAL INCOME TAX TREATMENT OF THE ELDERLY*
region. Among homeowners, those in high tax regions would receive greater
Generally, Federal income tax laws apply equally to all taxpayers
benefits than those in low tax regions. For renters, the opposite occurs.
regardless of age. However, there are some income tax provisions which
A uniform percentage of rent considered to be the renters share of taxes
are specifically geared toward the elderly. Family members who support
will overstate the impact on renters in low tax areas and understate the
aged relatives are also provided special tax treatment in some cases.
impact on renters in high tax areas. Thus two households within the
In addition, there are some provisions of general applicability which
same community and in similar economic circumstances, - one a homeowner
may be of particular benefit to the elderly. A number of these types
and one a renter, will be treated differently.
of provisions are outlined below.
Another objection may be raised in addition to the other considerations
mentioned above. Proposals which operate through the Federal income tax
1. Social Security and Railroad Retirement Benefits
system for reasons of administrative simplicity, may overlook those house-
Social security benefits received, monthly or in a lump sum, from
holds most in need. The Federal income tax population consists of
the Federal Government or from a State under the Federal social security
individuals with taxable income. It will not reach many households whose
program are not taxable. Railroad retirement benefits are also
income is too low to file a return or whose income source is tax exempt,
excluded from taxation.
i.e., the poverty population and the aged.
2. Personal Exemptions
For all of the above reasons, Federal intervention is not recommended
In addition to the standard personal exemption of $750, a taxpayer
in the form of property tax relief assistance. Adequate income maintenance
is allowed an exemption of $750 if he was 65 years of age or over on
or housing allowances to all lower income households is a preferred
the last day of the year. An additional $750 exemption is also allowed
vehicle for Federal aid.
if a taxpayer was blind on the last day of the year.
# Prepared by Ann Marley, Analyst in Taxation and Fiscal Policy, Congressional
Research Service, Library of Congress, August 1972. Updated to 1975.
- 112 -
- 113 -
A taxpayer may claim a personal exemption for any dependent with
4. Pensions and Annuities
less than $750 of gross income and for whom he provided over half the
What portion of the pension or annuity payments received each
support. Frequently, this exemption arises in the case of a taxpayer
year is taxable usually depends upon whether the retiree contributed
supporting an elderly parent. In applying the "$750 gross income
to the cost of the pension or annuity and, if so, whether the retiree's
test," tax exempt income, such as social security and railroad
part of the cost will be recovered within three years from the date
retirement benefits, is not included in gross income for tax purposes.
he received the first payment. If a retiree did not contribute to the
However, excludable income is counted in determining whether the
cost of his pension, and it was fully paid by his employer, usually he
taxpayer has furnished over half of the dependent's support. A
is taxed on the full amount he receives each year.
taxpayer may not claim the age and blindness exemptions for a dependent.
If a retiree contributed all or part of the cost of his pension
3. Low Income Allowance
or annuity, only part of each periodic payment he receives will be
For individuals who do not itemize their personal deductions,
taxed, whether he obtained his pension from a commercial organization
present law provides a percentage standard deduction of 16 percent of
or in connection with his employment.
adjusted gross income with a maximum allowable deduction of $2,300
If both the retiree and his employer contributed to the cost of
for single persons and $2,600 for joint returns, or a low income
his employee pension or annuity, and the retiree will recover his
allowance of $1,600 for single persons and $1,900 for joint returns,
contribution within three years after the date he receives the first
whichever results in a larger deduction. The low income allowance
payment, no part of the payments he receives is taxable until his
is designed so that used in conjunction with the personal exemption,
cost is recovered. After his cost has been recovered, all amounts
it will free persons below the estimated "poverty level" from income
he receives are included in gross income. If the retiree will not
tax. This provision may be of special importance to elderly individuals
recover his cost within three years, generally the pension or annuity
living on fixed retirement incomes.
payments he receives each year are partially taxable and partially
nontaxable.
- 114 -
- 115
5. Retirement Income Credit 1/
Individuals who are under 65, but who are retired under a public
Present tax law provides the taxpayer 65 years of age or over
retirement system, are allowed a similar credit on amounts up to
with a credit against income tax equal to 15 percent of the total
$1,524 of pensions and annuities received under a public retirement
retirement income received from pensions, interest, rents, dividends
system. They are not entitled to a credit for such income as dividends,
or other passive income. For purposes of computing the credit,
interest, or rents, however. If the individual is also under 62, the
retirement income may not exceed $1,524. The maximum benefit for a
retirement income limitation is reduced dollar for dollar for earnings
single person is $228.60.
above $900.
To qualify for the credit an individual must have received more
[The current tax reform bill (1975) reported from the House Ways
than $600 of earned income in each of any 10 calendar years before
and Means Committee includes important changes in the Retirement Income
the current year.
Credit such as an increase in size of the credit and restructuring to
remove many complications in the existing provision. It was made a
The income eligible for the credit is reduced by nontaxable
tax credit available to all taxpayers age 65 or over regardless of
pensions, such as social security and railroad retirement benefits.
whether they have retirement income or earned income.
Eligible income is also reduced by 50 percent of earnings over $1,200
and 100 percent of earning over $1,700. This earnings limitation does
The maximum amount on which the credit is computed would be
not apply to individuals 72 and over. For most married couples, the
increased to $2,500 for single persons age 65 or over an to #3,750
limitation on retirement income eligible for application of the credit
for married couples filing joint returns where both are 65 or over.
is $2,286, which is equal to one and one-half times the limitation
allowed a single person. However, in some cases where both spouses
can qualify for the credit, a credit limitation of up to twice that
of a single person is permitted.
1/ A more detailed discussion of tax provisions concerning pensions,
annuities and the retirement income credit are included in
Internal Revenue Service Publication 524, Retirement Income and
Retirement Income Credit.
- 116 -
- 117 -
The maximum amounts for computing the credit would be reduced
7. Expenses for Care of Certain Dependents
by Social Security benefits and other exempt pension income. The
A taxpayer who maintains a household may claim a deduction for
amount on which the credit is based would be phased out above income
employment-related expenses incurred in obtaining care for a dependent
levels of $7,500 for single persons and above $10,000 for married
who is physically or mentally disabled or for a disabled spouse.
couples. Above these income levels, the amount on which the credit
Employment-related expenses include expenses for household services
is computed would be reduced by $1 for each $2 of adjusted gross
and expenses for the care of the disabled dependent or spouse which
income above the indicated levels. ] 1/
are incurred in order to permit the taxpayer to be gainfully employed.
These expenses are deductible only if incurred for services in a
6. Disability Pension 2/
taxpayer's household. 1/
If an employer's accident and health plan provides for the
payment of a disability pension when an employee becomes permanently
The maximum deduction is $400 a month. The deduction is fully
disabled due to sickness or injury before he reaches retirement age,
available both for an unmarried taxpayer and for married taxpayers
he will be able to exclude from gross income all or a part of the
if their combined adjusted gross income is not above $35,000.
amounts he receives, under the rules for the sick pay exclusion, up
(Married couples must file a joint return in order to be eligible for
to the time he reaches retirement age. After he reaches retirement
the deduction.) For taxpayers with incomes above $ $35,000, the other-
age, he may still be able to exclude payments he receives or he may
wise allowable deduction must be reduced 50 cents for each dollar of
be required to include them in gross income. The extent to which
income above $35,000.
he excludes such amounts depends on how his pension was financed.
1/ The Senate Finance Committee gave as one reason for the allowance
1/ Joint Committee on Internal Revenue Taxation, Retirement Income
of a deduction for household help in the case of an incapacitated
Credit, Child Care Deduction. Qualified Stock Options, and Sick
dependent (or spouse) its belief: " that to the extent
Pay Exclusion, Committee Print, September 22, 1975. Errors or
possible it is desirable to make provisions for the care of
omissions in this insert are the responsibility of the study
incapacitated dependents in the home rather than institutions
author, and are not to be attributed to Ms. Marley.
outside of the home." (Sen. Rept. 437 to accompany H.R. 10947,
The Revenue Act of 1971).
2/ A more detailed discussion of this provision is included in
Internal Revenue Service Publication 522, Adjustments to
Income for Sick Pay.
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- 119 -
The employment-related expenses deduction in the case of a
the eight year period ending on the date of sale. Taxpayers meeting
disabled dependent must be reduced by the amount which such an
these two requirements can elect to exclude their entire gain if the
individual's adjusted gross income and nontaxable disability payments
adjusted sales price is $20,000 or less. If the adjusted sales price
received during the year exceed $750. In the case of a disabled
is over $20,000, an election may be made to exclude part of the gain.
spouse, the deduction must be reduced by the amount of disability
The adjusted sales price is the amount realized from the sale after
payments received by the spouse during the year. The expenses to
commissions and other selling expenses minus certain fixing-up
be offset are only those expenses solely attributable to the
expenses. The taxpayer can avail himself of this provision only
disability of the individuals and are not to include the household
once during his life.
service expenses which would be allowable in the absence of the
individuals for whom the disability dependent care deduction is taken.
8. Nursing Homes, Homes for the Aged
If an individual is in a nursing home or a home for the aged
because of his physical condition, and the availability of medical
care is a principal reason for his being there, the entire cost of
maintenance (including meals and lodging) may be included in medical
expenses for purposes of the medical expense deduction.
9. Sale or Exchange of Residence
Present tax law permits a taxpayer to elect to exclude from gross
income any gain from the sale or exchange of his residence, provided
(1) the taxpayer was at least 65 years of age before the date of the
sale or exchange, and (2) he owned and occupied the property as his
principal residence for a period totalling at least five years within
DEPARTMENT OF
HEALTH, EDUCATION, AND WELFARE
POSTAGE AND FEES PAID
WASHINGTON, D.C. 20201
U.S. DEPARTMENT OF H.E.W.
U.S.MAIL
OFFICIAL BUSINESS
HEW-391
DHEW Publication No. (OHD) 76-20954
The
Interrelationships
of Benefit Programs
for the Elderly
FORD & LIBRARY GERALD
####, ****** ####
Federal Council on the Aging
FEDERAL COUNCIL ON THE AGING
WASHINGTON, D.C. 20201
December 29, 1975
-
of Benefit Programs
for the Elderly
The President
The White House
Washington, D.C. 20025
Dear Mr. President:
On behalf of the Federal Council on the Aging, I am pleased
to submit a "Study of the Interrelationships of Benefit Pro-
grams for the Elderly."
This study was undertaken to fulfill the legislative mandate
of the 1973 Amendments to the Older Americans Act, Section
205 (g) :
The Council shall undertake a study of the inter-
relationships of benefit programs for the elderly
operated by Federal, State, and local government
agencies. Following the completion of this study,
but no later than eighteen months after enactment
of this Act, the President shall submit to Congress
recommendations for bringing about greater uniform-
ity of eligibility standards, and for eliminating
the negative impact that one program's standards
may have upon another.
The 1975 amendments to the Older Americans Act extended the
time by which the President is to submit recommendations to
January 1, 1976.
Recommendations based on the findings of this study are also
included for your consideration.
sincerely,
Bertha S. Adkins
Chairman
The
Interrelationships
of Benefit Programs
for the Elderly
December 29, 1975
FEDERAL COUNCIL ON THE AGING
WASHINGTON D.C. 20201
9dT
TABLE OF CONTENTS
eqidenoitsismistal
emsigor9 titens8 to
Page No.
vhebl3 sdi not
I. Preface
i
II. Philosophy and Scope of Work
1
III. Recommendations
6
es
A. Reduction in Benefits in One Program
Resulting from Increasing Benefits in
Another
6
B. Income Tests
16
C. Asset Tests
26
D. Participation of Eligibles
33
E. Administration and Program Assessment
40
Annex: Description of Programs Considered
47
i
I. PREFACE
The 1973 Amendments to the Older Americans Act direct the Federal
Council on the Aging to:
"Undertake a study of the interrelationships of
benefit programs for the elderly operated by Federal,
State, and local government agencies. Following the
completion of this study, but no later than eighteen
months after enactment of this Act, the President
shall submit to Congress recommendations for bringing
about greater uniformity of eligibility standards,
and for eliminating the negative impact that one
program's standards may have on another."
The 1975 amendments to the Older Americans Act extended the time by which
the President is to submit recommendations to January 1, 1976.
The Council contracted with the Urban Institute on June 25, 1975 to
carry out the study under contract #HEW-100-75-0120. The staff of the Human
Resources and Income Security Project of the Institute compiled the supporting
data for this activity which is contained in the three Appendices described
briefly as follows:
Appendix I - "Handbook of Federal Programs Benefiting Older Americans"
presents each of 34 programs in a consistent framework
based primarily upon common program elements, such as
mode of financing, eligibility criteria, benefit formulae,
magnitude of program cost and number of beneficiaries.
Appendix II - "Programs for Older Americans in Four States: A Case
Study of Federal, State, and Local Benefit Programs"
reports on visits to four States for the purpose of
identifying and describing benefit programs for the
elderly which would be illustrative, although not nec-
essarily statistically representative of State-level
activities nationwide.
Appendix III - "The Combined Impact of Selected Benefit Programs on
Older Americans: A TRIM Analysis" focuses on the inter-
relationships among selected benefit programs for the
elderly and attempts to measure the level and extent of
these interrelationships. It contains the results of the
computer simulation model utilized for the analysis.
- ii -
- 1
The conclusions and recommendations herewith presented, while based upon
the findings of the Urban Institute study, reflect the formal unanimous action
II. PHILOSOPHY AND SCOPE OF WORK
of the Federal Council on the Aging taken at its meeting of December 3-5, 1975
Over the past 15 years government expenditures on social welfare
in Washington, D.C.
programs have increased dramatically. Much of this growth has been due to
The Secretary of the Department of Health, Education, and Welfare and
increased participation in and the expansion of coverage of the public
the Commissioner on Aging are ex-officio members of the Council, but they do
assistance programs enacted in the 1930s. Equally important, however, has
not participate in the development of recommendations by the Council because
been growth resulting from the creation of new programs. While new programs
of the fact that such recommendations are made, under the law, to them, to the
have most often been established in response to a real need, very little
President, and to the Congress.
concern has been shown for the relationships among programs. Not only is
each individual program complex, but each program's specific provisions are
often unique, even though its goals might be similar to those of another
program. This has led to administrative complexity and expense, inequities
in the distribution of benefits and requirements for eligibility, and
confusion among the potential recipients. Indeed, in some cases there has
been great divergence between planned and actual impact. The situation has
been made even more complicated and confusing by the tangled mix of benefits,
which now include cash, food, housing, and medical care, as well as a long
list of services. Different kinds of benefits flow from different programs.
Clearly the present situation should be improved. However, no simple
solutions are available. One major difficulty is the lack of information
about the extent and, in some cases, the nature of the problem.
The objective of this study is to provide information and make
recommendations regarding the effects of the interrelationships of benefit
programs for the elderly. The elderly are a particularly significant group
to consider because they have special needs, a high incidence of poverty,
- 3
- 2
impinge directly on each other. These include social security
are the focus of several programs, and are particularly likely to participate
(OASDI), veterans benefits, old age assistance, medicare,
medicaid, low rent public housing, Federally assisted private
in more than one benefit program. Having surveyed Federal programs nation-
housing (Section 202, 236), food stamps, and manpower training.
wide and State programs in four States, and after analyzing the interaction
At the present, problems occur when older people are
eligible for assistance from more than one of these programs.
of the major Federal programs affecting the elderly (via the Transfer Income
For instance, when there is an increase in social security
benefits, an individual who receives both social security and
Model and other analysis), we have now developed a set of recommendations
old age assistance may, unless corrective action is taken
each time there is an increase, receive no increase in total
which would mitigate or eliminate the most serious problem arising from
income since his old age assistance benefit is reduced to
take account of his increase in social security. The study
the complex of overlapping programs for 01der Americans.
called for in these amendments should provide the information
necessary to come up with a comprehensive solution to this
Our recommendations flow largely from the nationwide study since the
and to similar problems that occur in other areas."
State studies were limited to four States. TRIM analysis has demonstrated
We have, therefore, limited the scope of our work to the existing
that in 1975 approximately 22 percent of older Americans will receive
framework of programs. In particular, we have not attempted to design
assistance from at least one of the three income-conditioned programs - SSI,
a new set of programs to provide income and services for the elderly.
Food Stamps and Medicaid. Of these beneficiaries, 49 percent are estimated
The set of recommendations given here is far more modest.
to participate in only one program, 34 percent in two programs and 17 percent
We have made no effort to address the issue of what constitutes a
fair share of the national income for the elderly. Wherever possible, the
in all three programs. The most significant overlap is between SSI and
recommendations made in this report are intended to be neutral with respect
Medicaid with 41 percent of the recipient units receiving assistance from
both. The Food Stamp/Medicaid overlap affects 26 percent of the recipient
to this issue. In no case have we made a recommendation whose sole purpose
units while the Food Stamp/SSI overlap involves only 18 percent. Thus,
was to increase or decrease the fraction of national income going to the
aged population. Wherever accurate data were available either from outside
considerable overlap exists between programs. Over 50 percent of the
participants, nearly 3.5 million units, receive benefits from 2 or more
sources or from analysis performed by The Urban Institute, we have made
programs, and all of these units are likely at some time to be affected by
estimates of costs associated with our recommendations.
Our underlying philosophy has been to make recommendations which would
program interactions.
The purpose of this study is spelled out in the report of the House
move our society towards a system in which all elderly individuals in similar
Education and Labor Committee that accompanied the 1973 Amendments to the
economic circumstances would be treated the same. Often the failure of the
Older Americans Act:
existing set of programs to meet this standard is caused by the
"
the Council is to undertake a study of the interrelation-
interrelationships among the programs. It is in this area that most of
ships of benefit programs for the elderly operated by Federal,
State and local government agencies. At least nine major pro-
our recommendations are focused. However, if a program fails to meet this
grams, operated by five Federal departments and agencies,
standard even if another program is not involved, we have sometimes made
1See "The Combined Impact of Selected Benefit Programs of Older
Americans" for a description of the Transfer Income Model, Appendix I.
recommendations for change.
- 4
- 5
The issue of racial and other discrimination in administration of
from program to program. We recommend study of changes which would at
benefit programs was beyond the scope of this study. This is not to say
least partially remove the inequities caused by the asset tests currently
that there is no racial discrimination in the provision of benefits to the
used.
elderly.
Fourth, we note that several programs have low rates of participation.
Our recommendations fall into five broad areas. First, we consider
This leads to a situation where some persons are getting benefits, while
the implications of the ways in which some programs count income received
other similarly situated persons are not. We recommend study of changes
from other programs. Some programs reduce their benefit as benefits from
which should bring about increased participation and, thus, diminish the
other programs increase. While the principle underlying this benefit
degree of inequality.
reduction is sound, it can lead to (1) the failure to pass through cost-
Fifth, we consider administration and program evaluation. Currently,
of-living adjustments, and (2) high cumulative benefit reduction rates on
the application process for the needs-tested programs is spread across
earnings and other non-transfer income. In some cases (the State supplements
several agencies. We recommend consideration of consolidating this process.
to the Supplemental Security Income (SSI) program) this may have been
In addition, we recommend that a study be undertaken to consider the larger
intentional. However, where the benefit reduction rules have led to inequity,
issue of what an ideal set of programs for the elderly should be.
we have recommended changes in the rules.
Second, we consider the income tests used in the program for older
Americans with low incomes. Currently some of the tests (1) do not always
take into account changes in the cost of living, (2) vary substantially (even
in their definition of income) from program to program and (3) do not always
phase out benefits smoothly as income increases. In some programs the
standard income tests is waived entirely if a person is already receiving
benefits from another program. We recommend changes which would at least
partially remove inequities caused by the income tests currently used.
Third, we consider the asset tests used in most programs for older
Americans with low incomes. Currently the tests (1) do not phase out
benefits smoothly as assets increase, (2) treat homeowners and renters
differently, (3) may discriminate against the elderly versus the nonelderly
and (4) vary substantially (both in the treatment and definition of assets)
6
- 7
III. RECOMMENDATIONS
from collecting full benefits simultaneously from a whole set of programs
and, thereby collecting more than a reasonable level of transfer payments--
A. Reduction in Benefits in One Program Resulting
from Increasing Benefits in Another
given their income from other sources. (Of course, it also holds down the
cost of the programs by providing reduced benefits.) For a program such as
Introduction
SSI whose purpose, in part, is to fill gaps left by other programs, a
Many of the programs which provide income for older Americans reduce
100 percent benefit reduction rate on income received from other programs
their level of support as the individual's income from other sources
is entirely appropriate. However, such benefit reduction can have
increases. Usually benefits are reduced by less than a dollar for every
undesirable side-effects if it is not designed carefully. Two of these
dollar of income from other sources. There are even cases where benefits
side-effects are the cancelling out of cost-of-living increases and high,
are reduced by more than one dollar when income from other sources rise by
cumulative rates of taxation of earned income.
one dollar. Benefits must be reduced as income rises if the program is to
be restricted to the low-income group. However, high rates of benefit
Cancelling Out Cost of Living Increases
reduction discourage a person from helping himself.
During periods of price stability, the level of benefits received by
Examples
participants from all programs would remain the same--barring a change in
Often, the benefit from one program depends upon the income received
the laws or a change in individual circumstances. During periods of price
from other programs. Examples include the following: (1) SSI reduces its
inflation, however, the total benefits of some recipients rise at the same
benefits by one dollar for every dollar of benefits received from other
rate as the Consumer Price Index (CPI), while the total benefits of other
cash benefit programs except the State supplemental SSI payments (and a
recipients do not increase at all. The latter happens to all persons who
$20 per month exclusion). (2) The mandatory State portion of the SSI
receive benefits from two or more programs, one of which does not automatically
program reduces its benefits by one dollar for every dollar of benefits
increase its benefit levels and, in addition, reduces its benefits by one
received from all other cash benefit programs (including the Federal SSI
dollar for every dollar of benefits received from other programs which are
program). (3) The Food Stamp program reduces the bonus value of the
indexed to the CPI.
stamps by approximately 30 cents for every dollar of benefits received
One important example of this situation is the relationship between
from cash benefit programs. (4) The Veterans' Pension program reduces
SSI State supplements, on the one hand, and the Federal SSI payments and
benefits by 36 cents to 96 cents for every dollar from unemployment
compensation benefits. This form of benefit reduction prevents recipients
- 8
9
elderly in the States which paid no supplement will be just as well off as
before. In order to reduce the inequity of this situation, we make the fol-
Social Security retirement benefits on the other. 1 The SSI State supplements
lowing recommendation.
are not as a rule increased at the same rate as the CPI.² Furthermore, SSI
RECOMMENDATION 1: We recommend that mandatory SSI State supplements remain un-
Federal payments and Social Security payments are considered to be part of
changed when benefits from Federal social insurance and needs-tested programs
countable income. The result is that as long as the individual is entitled
(including SSI and Social Security) are increased due to increases in the cost
to a supplement, that supplement will be reduced by the amount his SSI
of living.
Federal payment and Social Security income is increased (except for the few
If mandatory SSI payments had not been reduced due to cost-of-living
States where the supplements themselves are indexed). In other words,
ad justments in the Federal SSI program, the total cost of. mandatory SSI
every additional dollar the Federal government gives to the recipient to
payments would be at most $150 million per year greater in 1975 than it is
compensate him for the increase in the cost of living is taken away
without them. Over time annual costs of this change will rise as the amount of
by the State government.
inflation experienced since the program's inception rises. However, by the
Over time, if there is continuing inflation and States do not increase
year 2000 the annual cost of this change will have fallen to near zero since
their supplemental incomerstandards, the level of lemental will
the mandatory supplemental payments are made only to persons receiving payments
decrease and ultimately stop altogether. A uniform national standard will
from the State-administered Old Age Assistance programs before SSI began.
have been reached, but the elderly in the States which had been paying
High Cumulative Rates of Benefit Reduction
supplements will be worse off than they were before the inflation. The
High cumulative rates of benefit reduction can occur when two programs
There are two types of SSI State supplements--optional and mandatory.
Congress authorized the States to pay supplements which would be excluded
simultaneously reduce their benefits as a third source of income increases.
from countable income in calculating the Federal SSI benefit. This allowed
the States to supplement the Federal payments if they so desired. Later
A further complication occurs if one of the two programs reduces its benefits
Congress required States to pay all persons who had been receiving State
public assistance the difference between the benefit a recipient would be
as benefits from the other program increase.
getting currently if the State's public assistance program were still in
effect plus other income (the sum of the two being the State income standard)
This occurs when a person is receiving Social Security and a Veteran's
and the Federal SSI payments plus other income (the sum of the two being
the Federal income standard). (This provision was intended to make sure
Pension for a Non-service-connected Disability. In this case suppose there
that no one's income was reduced as a result of the changeover to SSI.)
Many States have elected not to provide optional supplements. There are
is an elderly couple eligible for the minimum Social Security payment in 1975 of
a few States which have mandatory supplements but not optional supplements.
²The mandatory supplements are increased only if the CPI declines,
$152.10 per month (two-thirds being his entitlement and one-third hers) who
since this is the only instance in which the Federal SSI payments would
are also eligible for a Veteran's Pension for a Non-service-connected
decline. Some of the optional supplements may be increased if the actual
rent or other expense of a recipient goes up. Only three States increase
Disability. This example is shown in Table 1. Because the wife's Social
their optional supplements at the same rate as the CPI.
- 10
- 11
TABLE 1
MONTHLY INCOME DETERMINATION FOR A
COUPLE RECEIVING SOCIAL SECURITY
BENEFIT SCHEDULE
AND A VETERANS' PENS ION*
PENSIONS FOR VETERANS WITH NON-SERVICE-CONNECTED DISABILITIES
1
2
3
4
5
6
Countable
Total
1
Social
Income
Veteran's
Income
Benefit
Monthly countable income:
Monthly Benefit
Security
for Veteran's
Benefit (from
(Cols. 1
Reduction
Earnings
Benefit**
Benefits
Benefit Schedule)
+ 2 + 4)
Rate
$0 to $41.67
$172.
$0
$152.10
$ 86.19
$157.97
$310.07
$41.68 to $58.33
$172, less 24% of monthly income
40%
in excess of $41.67.
100
152.10
186.19
117.63
369.73
$58.34 to $150.00
$168, less 36% of monthly income
53%
in excess of $58.33.
210
152.10
296.19
59.29
421.39
$150.01 to $250.00
$135, less 48% of monthly income
105%
in excess of $150.00.
250
132.10
324.86
37.14
419.24
$250.01 to $291.67
$87, less 60% of monthly income
114%
in excess of $250.00.
270
122.10
339.19
24.37
416.48
$291.68 to $316.67
$62, less 72% of monthly income
172%
in excess of $291.67.
290
112.10
353.52
0
402.10
$316.68 to $333.33
$44, less 84% of monthly income
50%
in excess of $316.67.
310
102.10
367.86
0
412.10
50%
$333.34 to $350.00
$30, less 96% of monthly income
330
92.10
382.19
0
in excess of $333.33
422.10
$350.00
$14.
50%
474.20
20.00
482.87
0
494.20
50%
$350.01 and above
$0.
514.20
0
514.20
0
514.20
¹For veteran and spouse.
0%
550.00
0
550.00
0
550.20
0%
558.20
0
558.20
0
558.20
*The figures in this example would be substantially changed if the couple were
also receiving income from a private pension.
**One-third of this benefit belongs to the wife and is, therefore, not included
in countable income. In addition, 10 percent of the total benefit is not included
in countable income.
- 12
- 13
Security benefit and 10 percent of the total Social Security benefit for the couple
As earnings continue to increase, the question of his retirement status
are not counted for purposes of calculating the veteran's benefit, only $86.19 per
progressively takes on more relevance. Benefits continue to decline by a
month is considered part of countable income. 1 This is $1,034 per year and
larger amount, so that by the time earnings have reached $290 per month,
entitles them to a veteran's pension of $157.97 per month, which, when added
total income has dropped to $402.10 per month--$19 per month lower than
to their Social Security benefits, yields a total monthly income of $310.07.
If the husband decides to work and earns $100 per month, their Social
when the husband was earning only $210 per month. As earnings increase
Security benefit remains unchanged, but their countable income grows by $100
from $270 to $290 per month, the benefit reduction rate is 172 percent.
to $186.19 per month, thus reducing their veteran's pension to $117.63--a
After becoming ineligible for veteran's benefits, the couple's benefit
benefit reduction rate of 40 percent.
reduction rate drops to the 50 percent rate used by Social Security. Total
As earnings rise by another $110 (to $210) per month, the veteran's pension
income rises back to $422.10 by the time earnings reach $330 per month.
This means that over the range of monthly earnings from about $210 up
drops by $58.34 to $59.29 as countable income increases to $296.19. This
to $290 per month, total income does not increase.
is a benefit reduction rate of 53 percent. Total income reaches $421.39
High benefit reduction rates discourage the elderly from working to
per month.
support themselves. Benefit reduction rates which exceed 100 percent
When earnings increase by another $40 (to $250), the question arises
actually punish persons who work to help themselves.
as to the husband's "retirement" status. Social Security benefits for husband
RECOMMENDATION 2. We recommend that the President direct the Veterans
and wife are reduced by $20 per month and the husband continues to receive
Administration to study the problem of the high benefit reduction rates caused
two-thirds of the Social Security benefit and the wife one-third. Since
by simultaneous receipt of benefits from Pensions for Veterans with Non-service-
the wife's benefit and 10 percent of the total benefit are not counted,
connected Disabilities and other Federal programs (particularly Social Security
only $74.86 of the Social Security benefit is included along with the $250
payments) because in our findings there appears to be an inequity.
earnings as countable income for the veterans program. Thus, countable income
is $324.86 per month, and the veteran's benefit is, therefore, reduced to
An example of how these benefit reduction rates in excess of 100 percent
$37.14. Since the sum of the reduction in Social Security payments and
could be eliminated is illustrated in Table 2. In this example we have
veteran's pension exceeds $40 per month, the benefit reduction rate is greater
substituted SSI's basic cash guarantee and its treatment of earned and
than 100 percent, and total income has actually declined by about $2.
unearned income for the schedule of benefits and the treatment of income
¹The veterans program treats private pension income and Social Security
currently used by the Veteran's Pensions for Non-service-connected Disabilities.
benefits in the same way. Social Security, however, does not count private
pension income in calculating benefits.
A 50 percent benefit reduction rate has been applied to earnings in excess
- 15
14
TABLE 2
of $65 per month, and a 100 percent benefit reduction rate has been applied
HYPOTHETICAL INCOME DETERMINATION FOR A COUPLE RECEIVING SOCIAL
to other income in excess of $20 per month. This change generally results
SECURITY AND A VETERAN"S PENSION
(Assuming basic cash guarantee and treatment of earned
in benefit reduction rates of 50 percent being applied as long as the veteran
and unearned income used by SSI)
is receiving payments from either of the two programs. However, some beneficiaries
1
2
3
4
5
6
7
8
would have smaller total incomes under this hypothetical example as can be seen
Countable
Basic
Veterans
Total
Change in
Social
Income for
Cash
Benefit
Income
Benefit
Total Income
(Column 4
Reduction
from the last column of Table 2.
Security
Veteran's
Guaran-
(Cols.
Over Exist-
Earnings
Benefit
Benefits
tee
minus Column 3)
1+2+5)
Rate
ing Rules
Whatever changes are made, the benefit schedule should be modified in such
$0
$152.10
$132.10
$236.60
$104.50
$256.60
$53.47
18%
a way as to keep total costs of the program the same as they are now.
100
152.10
149.60
236.60
87.00
339.10
30.63
50%
210
152.10
204.60
236.60
32.00
394.10
27.29
50%
250
132.10
204.60
236.60
32.00
414.10
-
5.14
50%
270
122.10
204.60
236.60
32.00
424.10
+
7.62
50%
290
112.10
204.60
236.60
32.00
434.10
+ 32.00
50%
310
102.10
204.60
236.60
32.00
444.10
+ 32.00
50%
330
92.10
204.60
236.60
32.00
454.10
+ 32.00
50%
474.20
20.00
204.60
236.60
32.00
526.20
+ 32.00
75%
514.20
0
214.60
236.60
22.00
536.20
+ 22.00
50%
550.00
0
232.50
236.60
4.10
554.10
+
4.10
50%
558.20
0
236.60
236.60
0
558.20
0
- 16
17
For Medicaid recipients eligible by virtue of receiving SSI payments,
B. Income Tests
allowable levels of income are increased at the same rate as the cost of
living since SSI income standards are adjusted. For other Medicaid
Adjusting for Changes in the Cost of Living
recipients, income standards are not generally adjusted. Since the program
Many of the transfer programs for the elderly do not adjust their allowable
pays the full cost of medical expenses to eligibles who have met the income
levels of income or their benefit levels for changes in the cost of living.
test, there is no need to adjust benefits for changes in the cost of living.
Pensions for Veterans with Non-service-connected Disabilities and
Since benefit levels usually depend upon the level of countable income (with
Pensions for Widows and Children of Veterans do not automatically increase
benefits eventually reaching zero when countable income reaches a certain
with the cost of living.
point), these two problems can be considered together.
If benefits and allowable levels of income are fully adjusted for
RECOMMENDATION 3, We recommend that the income standards, benefit schedules,
changes in the cost of living, the real level of income being paid to
income disregards, allowable asset levels, and exclusions from assets of the
recipients remains constant regardless of what is happening in the rest of
SSI, Food Stamps, Medicaid, Pensions for Veterans with Non-service-connected
the economy. However, if benefits and allowable levels of income are not
Disabilities, and Pensions for Widows and Children of Veterans programs be
adjusted for changes in the cost of living, all recipients will experience
increased at the same rate as the cost of living.
a decline in their real level of income during periods of inflation, and some
Programs providing particular types of goods or services rather than money
should use the increase in the price of goods or services they provide
recipients will lose eligibility altogether.
rather than the overall Consumer Price Index. According to the Transfer
In the Federal SSI program benefits and allowable levels of income are
increased at the same rate as the overall increase in the cost of living,
Income Model, SSI would cost about 2 percent more (an increase of about
$72 million) in 1976 if the amount of earned and unearned income which is
but the amount of earned and unearned income which is not counted as part
of income for purposes of the income test remains at a fixed level regardless
not counted by SSI for purposes of the income test had been increased at
the same rate as the cost of living since the program's inception. The cost
of inflation. In addition, allowable levels of assets remain at a fixed level.
of Pensions for Veterans with Non-service-connected Disabilities and Pensions
Similarly, for Food Stamps, the face value of coupons awarded and the income
for Widows and Children of Veterans programs would probably be less in 1975
standards are increased at the same rate as the cost of food. However, the
if automatic adjustments for the cost of living were made. This is because
wage and salary income exclusion is fixed at a maximum of $30 per month.
legislated changes in the benefit schedules have exceeded changes in the
In addition, allowable levels of assets remain at a fixed level.
cost of living.
The increased cost of Food Stamps resulting from the proposed change
19
- 18 -
was not calculated, but we estimate the percentage increase to be about the
application process and, in addition, results in persons in similar
same as for SSI--namely about 2 percent in 1976.
economic circumstances but receiving benefits from different programs
Because of the diversity of Medicaid rules, we have been unable to
being treated differently.
estimate the increased cost resulting from the recommendation. Since Medicaid
Examples of the lack of uniformity are many. SSI excludes
income standards are not generally increased at the same rate as the cost of
from countable income $20 per month of Social Security benefits if they
living currently, the percentage increase in costs would probably exceed
are the sole alternative source of income, while Pensions for Veterans
2 percent.
with Non-service-connected Disabilities excludes 10 percent. SSI includes
To adjust allowable levels of assets, ideally one would use a price
50 percent of the earnings of both the recipient and spouse, while the
deflator particular to the type of asset being deflated. For example, the
veterans program totally excludes the earnings of the spouse. This means, in this
$25,000 limit on owner-occupied housing in SSI would be increased by the same
example, that families with widely different incomes can receive the same benefit.
percentage as a housing price index (preferably an index specific to the area
SSI and Food Stamps each have about a dozen categories of income excluded
where the person lived although currently separate indexes do not exist
from their income tests. However, only in one case (infrequently earned
for all areas). However, in the interests of simplicity the Consumer
income up to $30 per quarter) are the exclusions the same. For Medicaid
Price Index (CPI) would probably suffice. According to our analysis, if
the standards differ widely from one State to another.
the SSI homeowner exemption had been increased at the same rate as the
The philosophical justification for exclusions is that certain
overall cost of living, total benefits paid out by the Federal SSI program
'expenditures of income (e.g., food, medical expenses, educational expenses)
would have increased in 1975 by about 1.6 percent (approximately a
are essential or highly desirable and should, therefore, not be included
$58 million increase). Although we have not calculated the increase in costs
as part of countable income. Since the programs were designed by different
resulting from similar changes in the other benefit programs, the percentage
Congressional committees at different times under different Administrations,
increase in costs should be roughly the same.
it is not surprising that the lists of exclusions are not identical or
defined in the same way.
Uniformity in Definition of Income
However, the widely varying rules have created a very confusing and
Uniformity Across Programs
complex situation from the standpoint of administration. While we recognize
An additional problem with income tests of the low-income programs
that some heterogeneity among the programs may be necessary, we feel that
is the lack of uniformity of the definition of countable income for
all of the programs should be viewed together and that adjustments in
purposes of the income test. This lack of uniformity complicates the
definitions of countable income be made to achieve greater uniformity
wherever possible. One promising way to deal with this problem is to allow
20
21
a "standard deduction" from income in lieu of a set of particular exclusions.
for Medicaid. In order to prevent this from happening while, at the same
This approach is being recommended in currently pending legislation to alter
time, treating persons similarly who are in similar economic circumstances,
the Food Stamps Program.
uniform national income standards could be established to determine
eligibility for Medicaid. However, the costs, changes in caseloads, and
RECOMMENDATION 4. In order to reduce complexity as well as improve equity,
distribution of benefits of taking this step are not known.
we recommend that what is included in countable income and allowable exclusions
RECOMMENDATION 5. We, therefore, recommend that the Department of Health,
be made more uniform across the income-conditioned programs.
Education, and Welfare study the advisability of breaking the eligibility
The cost implications of these changes would depend upon the exact
link between SSI, on the one hand, and Food Stamps and Medicaid on the
other, the administrative complications of breaking these links; and - in
nature of the changes. However, there are many combinations of changes
relation to such removal of links the advisability of establishing uniform
which would involve no change in total costs.
national standards for determining eligibility for Medicaid.
Links in Eligibility Between Programs
If national standards are established, a provision should be included
Another problem with the income tests occurs because in certain cases with
that will permit persons who currently qualify for Medicaid under the
Medicaid and Food Stamps the program's income standards are entirely ignored
current standards to continue to receive benefits even if they do not
in establishing eligibility. In most States receipt of SSI payments results
qualify under the new national standards.
in automatic eligibility for Medicaid. In all States receipt of SSI payments
The cost of this change will depend upon the national standards
results in eligibility for Food Stamps if all members of the household are
which are chosen and, therefore, should be estimated as part of the study.
eligible for SSI. This means that a person whose income is comprised of
earned income and Social Security benefits might fail to qualify for Medicaid
Smoothing the Phase out of Benefits
or Food Stamps, while a person with equal total income comprised of SSI and
In all means-tested programs there are income tests which result in all
earned income would qualify for both programs.
benefits being cut off if income rises above some level. In some cases,
If the link between Medicaid and SSI were broken, one consequence would
notably the Federal SSI program, benefits decline smoothly as income rises.
be a dramatic increase in lack of uniformity among the States of eligibility
In other programs, including Medicaid, Food Stamps, Pensions for Veterans
criteria for Medicaid. This is because the States have a great deal of
with Non-service-connected Disabilities, Pensions for Widows and Children
leeway in establishing eligibility for Medicaid for persons who are not
of Veterans, Low Rent Public Housing and the Rent Supplement Programs, a
receiving benefits from SSI or the Aid to Families with Dependent Children
benefit ranging from a few dollars up to hundreds of dollars per year can
(AFDC) program. The result would be a large decline in persons eligible
be cut off if income increases by a small amount (in some cases even by
one dollar).
- 22
- 23
Medicaid
Food Stamps
In many States an elderly person's eligibility for Medicaid depends
In the case of Food Stamps the benefits received at a level of income
upon whether he is eligible for SSI. 1 If an elderly person's income
just below the cut-off point is small enough that the loss in benefits as
increases enough to make him ineligible for SSI, he also becomes ineligible
income rises by one dollar total income is minimal. For example, when an
for Medicaid. In 1973 the average monthly Medicaid payment to persons age 65 and
elderly (over 65) person's earnings rise from $376 to $377 per month, he
over who received medical services was $154. This benefit can be wiped out by an
becomes ineligible for SSI. If his eligibility for Food Stamps depends
increase in monthly income of a few dollars if that increase makes the
upon his being on SSI, he loses a Food Stamp benefit worth $10 per month. 1
recipient ineligible for SSI. In other States the medically needy are
As the result of the $1 increase, his total income has actually dropped by
eligible for Medicaid even if they are not eligible for SSI. However, the
$9 per month. The abrupt cessation of benefits in the Food Stamps program as
income test for being found medically needy is often more stringent than the
income increases could be eliminated easily by changing the benefit
income test for SSI (if the State pays substantial supplemental benefits).
schedule slightly. The amount of money involved is so small, however, that
Thus, if a person in one of these States loses eligibility for SSI, he may
we do not recommend a change.
be forced to spend all of his income in excess of the medically needy income
Pensions for Veterans with Non-service-connected
standard to meet his medical expenses before becoming eligible again for
Disabilities and Pensions for Widows and
Children of Veterans
Medicaid. This person could be forced to spend on medical expenses
all of his income between the SSI and the medically needy income standards
Pensions for Veterans with Non-service-connected Disabilities are
because of a slight increase in countable money income.
limited to veterans with $250 or less in countable monthly income. If
One possible way to eliminate this abrupt decrease would be to allow
monthly income rises by a small amount (even one dollar), benefits fall
elderly persons to establish eligibility for Medicaid by spending all income
from $5 per month to zero. For veterans with one dependent benefits fall
in excess of the SSI income limit or the State medically needy standard
from $14 per month to zero if income increases from $350 to $351. Pensions
(whichever is greater) on medical expenses. 2 However, this proposal would
for Widows and Children of Veterans are handled similarly.
probably cause a substantial change in the cost of the Medicaid program by,
in effect, setting national standards for all elderly persons. The cost,
The abrupt cessation of benefits in the Pensions for Veterans with
caseload, and distribution of benefits could all be estimated in the
Non-service-connected Disabilities could be eliminated by gradually
study outlined earlier in Recommendation 5.
reducing benefits as countable income approaches the maximum allowable
¹According to TRIM analysis approximately 1,600,000 elderly families
level. The amount of money involved is so small, however, that we do not
receive SSI payments and qualify for Medicaid as well.
²This assumes that the link between Medicaid eligibility and SSI
recommend a change.
eligibility is retained. If not, a uniform national standard could be used
in lieu of the SSI standard. See Recommendation 5 (above). The Federal
eligibility standards for SSI are currently uniform nationwide. The standards
¹According to TRIM analysis approximately 80,000 elderly families
for Medicaid vary widely from State to State.
receive both SSI and Food Stamp benefits.
24
- 25
Low-Rent Public Housing and Rent
eligibility could lead to a $10 per month loss of a subsidy. This probably
Supplement Programs
does not occur very often in practice but could easily be eliminated, if
In the Low-Rent Public Housing program income ceilings are set by local
this were deemed desirable, by eliminating the floor on the payment and
housing authorities. Thus, there exist in each local jurisdiction some
gradually decreasing the benefit as income rose.
ceiling beyond which the tenant becomes ineligible for the program and (in
theory, at least) could be forced to leave the project. In practice this
ceiling may be flexible and allow for individual circumstances, but the
law itself provides no protection against a full loss of benefits to the
tenant whose increase in income makes him ineligible.
There is, in effect, up to a 25 percent benefit reduction rate applied
to income since tenants generally are obliged to pay only one-quarter of
their income for rent (in some cases less). At some point, this subsidy
ceases and the tenant pays the full rent charged by the authority, If the
housing unit is being rented at market value, then there is no subsidy at
this point and, therefore, a smooth reduction in benefits. If, however,
rents are set below market value, the tenant is receiving a subsidy even
though he is paying the full rental charge. This subsidy is then entirely
cut off if income eligibility is lost and the tenant has to move.
The Rent Supplement Program generally uses the same income standard as
public housing. However, tenants do not have to move if they lose
eligibility. They merely pay the full market rent to their landlords.
However, since the minimum supplement is 10 percent of the full market rent,
there is an abrupt cessation of benefits when a tenant becomes ineligible.
For example, if a tenant were paying $90 per month of a $100 per month rent,
a one dollar increase in income which resulted in the tenant losing
26 - -
- 27
non-excluded assets. (A couple is allowed $2,250.) Excluded assets include
C. Asset Tests
a home worth up to $25,000, non-liquid income-producing property,
How Programs Treat Assets and the Resulting Inequities
household goods and personal effects up to $1,500, an automobile worth less
than $1,200, and the cash surrender value of life insurance up to $1,500.
Several programs which help 01der Americans, including SSI, Medicaid,
If assets rise beyond the asset limit they must be disposed of and used for support,
Food Stamps, Pensions for Veterans with Non-service-connected Disabilities, and
and until that is done all benefits are lost. For example, a reassessment
some housing programs, use asset tests as well as income tests in determining
of a house triggered by inflation could push a family over the $25,000
eligibility for participation. The rationale for employing an asset test
exclusion and force the family to sell the house. Selling the house and
is that persons with substantial wealth should not be helped even if their
using most of the proceeds to purchase a less expensive house or to pay
measured income is low since assets can either be sold and used for support
living expenses can re-establish eligibility as long as not over $1500 remain.
or be converted into income-producing assets (if they are not already).
These are both wrenching and expensive procedures for an elderly person to
Asset tests as presently used cause four types of inequities. First,
undertake. Furthermore, the elderly in some areas may be unable to sell their
a small increase in a person's assets (in theory even one dollar) can result
houses.
in loss of eligibility for a program yielding sizable benefits. For example,
Even so the homeowner with no mortgage is treated better than the renter.
an individual with $1,500 worth of stocks and bonds and no other assets
The homeowner with no mortgage lives rent-free and pays only taxes, insurance,
would be eligible for SSI provided he met all the other tests, while an
and maintenance. 1 (In many States property taxes are substantially reduced for
individual with $1,501 worth of stocks and bonds and no other assets would
the elderly homeowner.) Yearly taxes, insurance, and maintenance expenses
be ineligible even though his income might be the same or lower than
usually amount to about 5 percent of the market value of a house. (For example, the
the first individual's income. Second, because there is usually an exemption
yearly taxes, insurance, and maintenance expenses on a $25,000 house would be approx-
for owner-occupied housing, asset tests discriminate against persons who rent
imately $1,250 per year.) However, the annual rent for a house is usually about
rather than own housing. Third, asset tests discriminate against the aging
10 percent of its market value. (For example, the yearly rent on a $25,000
vis a vis the non-aging since elderly persons of a given economic status are
house would be approximately $2,500 per year.) The homeowner, who pays no
more likely to have accumulated wealth than the young and middle-aged and
rent but does pay taxes, insurance, and maintenance expenses, is getting
are more dependent upon wealth income. Finally, definitions of countable
approximately a 5 percent implicit return on his house. (For example, the
assets vary among the programs, leading to inconsistencies and complexities
owner of a $25,000 house would have to pay $2,500 per year in rent to live
among the programs.
1 Homeowners with sizable mortgages are in effect paying rent in the form
An individual receiving SSI benefits may have no more than $1,500 in
of interest payments. In the following discussion, therefore, they resemble
renters rather than homeowners.
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in a comparable house which he did not own. In fact, he pays only $1,250
is less stringent than the asset test for SSI, both have a limit to total
assets and a set of excluded assets. Thus, the same objections apply in
per year in taxes, insurance, and maintenance. He, therefore, is getting
this case as in the SSI case discussed above.
$1,250 per year in implicit income from owning his own house.) Neither the
For Pensions for Veterans with Non-service-connected Disabilities,
asset nor its return is considered in determining eligibility for SSI. If a
homeowner receiving SSI benefits were no longer able to maintain a $25,000
there is an asset test which depends upon whether the veteran's assets are small
house due to illness, for example, and sold the house, he would then have
enough to be depleted during his remaining lifetime. If so, he is eligible.
$25,000 in assets other than a house. Although his true economic condition
Survivors are subject to the same test. A dwelling, lot, and personal affects are
excluded. Even though this case is less well-defined than SSI, the same
would be unchanged, he would become ineligible for SSI unless he spent most
objections apply.
of those assets. Alternatively a renter with the same income but with
The Low-rent Public Housing program has no Federal asset test. However,
$25,000 of liquid assets would be ineligible for SSI. However, by purchasing
the Department of Housing and Urban Development encourages local housing
a $25,000 house, he could establish eligibility. Furthermore, a renter with
authorities to establish limits. Wherever HUD's recommendation is followed,
no assets can be getting exactly the same SSI payment as a homeowner with
there will be an abrupt cessation of benefits as assets rise in value. In
the rent supplement program and the low-interest housing program there is a
$25,000 in assets if their countable incomes are the same. Since the
similar problem since assets for the elderly are limited to $5,000 (with
homeowner is getting rent-free housing (even after paying taxes, insurance,
no housing exclusion, obviously). However, since the asset limit is only
and maintenance expenses) while the renter is spending income on housing,
$2,000 for the nonelderly, framers of the legislation have taken into
this would seem inequitable.
account the argument that the elderly should be penalized less for asset-
The Medicaid program's treatment of assets is similar to that of SSI.
holding than the rest of the population.
In fact, for those persons qualifying for Medicaid because of their eligibility
Reducing the Inequities of Asset Tests
for SSI, the treatment is identical and the same inequities result. For those
persons attempting to qualify under the "medically needy" criteria, the rules
In all of the above cases applying a cost-of-living adjustment to the
vary from State to State but usually include asset tests with sizable
asset limitation would keep constant over time the relationship between
exemptions. As long as there is a limit to total assets there will be an abrupt
real asset levels and benefit levels. This was recommended as part of
cossation of benefits as assets rise in value, and, as long as certain types
Recommendation 3 (above).
of assets are excluded, persons in similar economic circumstances will be
While this recommendation would prevent persons from creeping across
treated differently.
asset limits with no change in real asset holdings, it would not address
The elderly can qualify for Food Stamps by meeting either the SSI or the
the more fundamental problems caused by the absolute limit to assets and the
Food Stamp eligibility criteria. While the asset test for Food Stamps
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exclusions, as well as the unfair treatment of the elderly vis a vis the
A third issue is whether the owner-occupied home should get special
treatment by the asset test. As was noted above, exclusions for owner-
remainder of the population.
occupied housing can discriminate against renters. However, rules which
FCA ACTION 1. The Federal Council on the Aging will initiate a study of the
encourage homeowners to sell their houses may impose hardships. The
philosophical and administrative rationale connected with the way in which
assets and asset income are considered in determining eligibility for benefit
difficulty is compounded by the problem of making a fair determination
programs and the various options available to reduce the inequities in the
of the market value of a house. In some areas assessed value may be only a
small fraction of market value, while in declining areas, assessed value
existing asset tests.
In carrying out this study, the Federal Council on the Aging will draw
may exceed market value.
upon existing analysis and data and work closely with concerned Federal
Finally, as part of this study there should be a survey of a
departments and agencies.
representative sample of the aged population (including both program
Several important issues will have to be addressed by this study.
recipients and non-recipients) which would gather detailed data on the value
First, what is the best way to phase out benefits as asset holdings increase?
of assets by type of asset and transfer income by type, as well as the
One alternative is to include in countable income some fraction of asset
usual demographic and economic data. This survey would provide valuable
holdings and eliminate the asset test. Another alternative is to allow
information on the likely impacts upon caseloads, costs, and the distribution
persons to exclude assets from the asset test by converting them into
of benefits of changing the asset tests currently used by transfer programs
irrevocable life annuities. Yet, a third alternative would be to have a benefit
serving the elderly.
schedule in which the level of benefits depended upon both countable income
Because there is a strong tendency for persons to under report asset
and assets (with benefits decreasing as either income or assets increased).
holdings when they are surveyed, an attempt should be made to estimate
In this study these and other alternatives should be studied as to their
the degree of under reporting and adjust the survey data for this problem.
effects and feasibility of operation.
One way in which this might be accomplished would be to examine audit
information collected in the course of checking to see the error rates in
A second issue to be addressed should be the degree to which a
calculating benefits for the various programs. (SSI has conducted a
beneficiary should be required or encouraged to consume his assets during
sizeable investigation of the degree to which there are overpayments and
his lifetime, rather than passing the assets on to his/her heirs. Almost
underpayments of benefits due to inaccurate information on application
any asset test provides some incentive for the elderly person to consume
forms. Accuracy was checked by auditing beneficiaries' checking and
or give away part of his/her asset holdings. However, the tests can be
savings accounts.)
designed to provide little incentive, a large incentive, or even compel
Furthermore, the Office of the Assistant Secretary for Planning and
consumption as a condition of receiving benefits.
Evaluation within the Department of Health, Education, and Welfare is planning
to undertake an annual, comprehensive income survey. The Federal Council on
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32
the Aging supports their efforts and urges them to pay special attention
D. Participation of Eligibles
to the problem of assets. The Council will cooperate with this effort, in
particular in regard to the assets study which the Council plans to undertake.
Programs for the elderly can be grouped under three broad categories: re-
The cost of implementing the recommendations resulting from this
tirement programs (including Social Security), other entitlement programs which
recommended study will depend upon the particular recommendations made.
are categorical in nature (e.g. one must have low income, or be disabled, or be
However, it will be possible to design the recommendations in such a way as
a veteran to qualify), and programs which have closed-ended funding and thus must
to leave costs unchanged.
ration their benefits to less than the number eligible. In the latter two groups
1
of programs, the issue of participation arises. Consider first the entitlement
programs which have categorical eligibility requirements. These include SSI,
Food Stamps, Pensions for Veterans with Non-Service Connected Disabilities,
Pensions for Widows and Children of Veterans, Medicare and Medicaid. All have
open-ended funding, and those who qualify are legally entitled to benefits. Yet
a large number of eligible older Americans do not receive benefits from some of
these programs. The two most outstanding cases are the SSI and Food Stamp programs.
When SSI was implemented in January 1974, DHEW estimated that about 3.8
million non-institutionalized units (families or single individuals) age 65 or
over would be eligible for Federal benefits. However, about half this number
actually received SSI benefits in the first six months of operation (January -
June, 1974). Our analysis using the TRIM model suggests that there will be about
2
a 65 percent participation rate (ratio of recipients to eligibles) in 1975.
1 There is a set of issues which might be broadly regarded as participation
issues involving retirement programs for older Americans, such as vested rights,
the relationships of contributions to benefits, and whether everyone who is entitled
to benefits actually receives them. However, the scope of this section will be
limited to the more common concept of participation, that being in the other types
of programs available to the elderly.
2 This figure is not directly comparable to the former because it is for 1975.
Also, the CPS does not provide the value of owner-occupied homes, a critical factor
in the number eligible for SSI (persons with homes valued in excess of $25,000 are
ineligible for SSI payments). We therefore used the 1970 Census Public Use Sample,
which has information on the value of owner-occupied homes, to make adjustments
to the number of eligibles calculated from the CPS.
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35
The precise numbers are not as important as the fact that, by any estimate, a
Information
large number of older low-income people who are eligible for SSI are not re-
ceiving benefits.
There is a need to know not only how many eligibles do not participate in
Estimates of participation in the Food Stamp Program by eligible households
these entitlement programs, but who they are and why they don't participate.
have ranged from 30 to 60 percent, though there is evidence that some of the non-
Such information would be useful to both the government for evaluating the
participants are eligible for only short periods of time during any given year.
administration of programs and to the administrators themselves for determining
The Chilton Survey (commissioned by the Food and Nutrition Service of the Depart-
how to improve upon their present practices and procedures. One would like to
ment of Agriculture, at the request of the Subcommittee on Fiscal Policy, Joint
know how participation rates are related to:
Economic Committee) indicates that participation by eligible households headed
1. Knowledge of Programs: Knowledge of a particular program, by age, level
1
by a person over age 65 is even less than the national average.
of education, residence, etc. would reveal who is unaware of the program, and thus
With the exception of Medicare, where participation among eligibles is
to whom educational efforts should be directed, as well as the form that these
quite high, there is little information on the participation rates in the other
efforts should take (e.g., information dissemination to literate vs. illiterate
entitlement programs.
or rural VS. urban individuals would take a different form). This type of infor-
For entitlement programs, we hold the view that all families or individuals
mation is also necessary to evaluate the cost of educational programs relative
eligible for benefits from programs with open-ended funding should have the op-
to the increase in participation rates that might result, in order to assess the
portunity to receive those benefits. This does not mean that they actually receive
desired amount of investment in increasing knowledge.
them; rather it means that eligible families should be aware of the fact that they
2. Attitudes Towards Programs: Given participation rates less than 100
are--or might be--eligible for benefits, that they know how to apply for benefits
percent, it is important to know if attitudes inhibit participation--and, if so,
should they choose to receive them, and that applying should be relatively simple.
who holds these attitudes (the uneducated or the educated, blacks or whites, rural
Nonparticipation by eligibles can only be for three reasons: (1) ignorance about
or urban, etc.). A knowledge of what these inhibitive attitudes are and an iden-
the program, (2) the benefits are less than the "cost" of getting them (psychic
tification of who holds them is essential to determine (1) whether an informational
costs from the stigma of the program or demeaning treatment, nonmonetary costs
program should be undertaken to change them (e.g., whether they are based on er-
such as long waiting lines and the time and inconvenience of filling out forms, and
roneous information rather than moral positions), and (2) what information should
monetary costs such as traveling to the agency), or (3) outright denial of benefits
be disseminated (e.g., some may not participate in Medicaid because they believe
through discriminatory practices, lack of personnel to process all applications,
that, if the government pays the bill, it can also dictate what treatment
or for whatever reason.
they must have or how long they must stay in the hospital; or low participation in
1
A possible reason for higher participation among the non-aged is that local
the Food Stamp program may be due to a reluctance of some poor families to enter
welfare offices also certify Food Stamp eligibility, thus AFDC recipients are
made aware of their potential eligibility for Food Stamps.
banks and stand in the "welfare line" to buy the stamps).
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3. Availability of the Program: There is inadequate knowledge about the imped-
profiles of those receiving services, those on waiting lists, and those who for
iments to availability of specific programs to specific segments of the population
one reason or another do not apply at all. Lack of such information also limits
(e.g., those with no car living in a town with no welfare office, or the infirmed who
the ability to determine how many of these recipients participate in other pro-
cannot leave their home). We are not aware of any comprehensive study of par-
grams, and therefore does not allow an assessment of the magnitude of the problems,
ticipation rates in a spatial context, relating the geographic location of offices
if any, of deleterious program interactions.
to participation rates by residence, age, sex, level of income, and education.
RECOMMENDATION 6. We recommend that the Administration on Aging conduct a
The cost to the participant in terms of transportation and time has by and large
study to determine the magnitude and the distribution (by age, sex, education,
been ignored in studies of participation rates. A knowledge of impediments to
income, race, health status, size of community, urban versus rural, region)
availability is necessary to determine the optimum administrative approaches for
of (a) eligibles, (b) participants, and (c) eligible nonparticipants for all
each program--number of offices, their location, office hours, the need for home
of the Federal income-conditioned benefit and service programs for the elderly;
VS. office contacts, etc.
and to determine the reasons for nonparticipation of those who are eligible.
With some modification the above discussion of participation in the entitlement
This study should build upon the work which has already been done in this
programs is also applicable to those programs with closed-ended funding. These
area. However, it should pay particular attention to programs which have not
already been studied.
are programs which have limited funding and therefore have a limited number of
Outreach
"units of service" (as under Title VII of the Older Americans Act, Title XX of
As mentioned earlier, one of the outcomes of the above study would be in-
the Social Security Act, and under the various housing programs). Participation
formation on the extent to which ignorance about the programs inhibits participa-
in these cases is more of a privilege than a right, and there are usually more
tion and on who among the eligibles lack knowledge. This, in turn, would give
eligible individuals or families who want to participate than there are service
some indication of the extent of outreach necessary, and to whom that outreach
units available. In those cases the agency must ration the available service
should be directed. There is a third important element of outreach not addressed
units, usually allowing participation on a first-come, first-served basis and
by this study, however, and that is the effectiveness of various methods of out-
keeping a waiting list in chronological order of application and certification
reach. It is not enough to know who lacks information if we do not know how to
of eligibility, or utilizing procedures to rank the applicants by priority needs
reach them.
for service.
Of all the major income-conditioned programs, the SSI program has probably
All of these types of Federal programs are State or locally administered, and
had the most ambitious outreach effort. Several outreach projects have been
and in many cases there are insufficient data at the national level to know who
among the eligibles apply for the services and, among those that apply, who
receive benefits. In other words, we do not have sufficient data to construct
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launched, employing various methods and techniques. 1 However, these
As with the preceding recommendation this study should build on existing
have not been conducted in a setting to allow an evaluation of the
information wherever possible.
effectiveness of alternative methods. Moreover, some methods may be highly
It is essential that the study address the issue of the effectiveness
effective for some groups and relatively ineffective for others. For example,
of alternative methods of outreach for minority groups and for various age
some older people are illiterate, others are infirmed, others are mentally
cohorts of the elderly (e.g., different methods for persons who are 85 than
incompetent, others have no television, others may not perceive themselves
for persons who are 65).
as poor, others may find applying for a program to be degrading. In short,
Finally, the study should focus on attitudinal issues. No outreach
an effective outreach program may contain a mix of methods, but to date there
effort will work effectively unless the climate of the administering agency
have been insufficient evaluations of past and current outreach efforts to allow
is perceived by the elderly to be encouraging and sympathetic.
the Social Security Administration to maximize the effectiveness of outreach
expenditures by making choices among methods and modes of outreach.
While outreach efforts have been less for other programs such as Food Stamps,
the relative effectiveness of various outreach methods has not been carefully
evaluated for these programs either. Even in the Veterans programs, with their
large, informal outreach program carried out by the veterans service organizations,
there is no careful study of the most effective mix of outreach methods.
There is a need for a careful evaluation of a wide variety of outreach methods.
Relative effectiveness can best be measured in a controlled experiment, and such
an experiment could explore the effectiveness of utilizing existing institutions
as well as alternative methods of outreach (e.g. radio, TV, mail, personal
contact by peers, personal contact by agency personnel).
RECOMMENDATION 7. We recommend that the Administration on Aging conduct a
series of controlled experiments to test the relative effectiveness of various
methods of outreach, by socio-economic-demographic subgroups of the population.
1These include letters to Social Security recipients, the SSI Alert program
funded by the Administration on Aging, the Mass Saturation Projects in selected
areas of Alabama and Kansas, and MBR Leads, which used Social Security's Master
Beneficiary Records (MBR) of earnings and contributions to identify persons who
might be eligible for SSI benefits.
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41
bewildering, to even the most sophisticated potential beneficiary--and it
is inefficient, imposing an unnecessary expense on taxpayers. Separate
E. Administration and Program Assessment
administering agencies exist presumably because the programs are funded by
separate Federal agencies under different legislation. Furthermore, the
Central Determination of Eligibility and Benefits
income-conditioned programs have a means test while the social insurance
retirement benefit is dependent on one's covered employment record. But
Our study of programs for Older Americans has shown that an elderly
this need not necessarily lead to separate administration of determination
individual or family could conceivably receive benefits at the same time from
of eligibility.
a social insurance program (01d Age, Survivors, and Disability Insurance),
There are several ways in which administrative functions could be combined.
five separate income-conditioned Federal programs (Supplemental Security
One is to simply have one local office collect income, asset, and other personal
Income, Medicaid, Food Stamps, Pensions for Veterans with Non-Service-
data from elderly applicants, and then send that information to each of the separate
Connected Disabilities, and one of several housing programs) --not to mention
offices for eligibility certification and determination of benefits. This would
State-level income-conditioned programs and other State and Federal programs
at least relieve the elderly of having to report this same information to several
for which eligibility is not conditioned on income. If benefits were only
different offices, and would substantially reduce the time and cost on the part
received from the Federal social insurance and income-conditioned programs
of both applicants and government personnel. After the initial application, how-
mentioned above, an elderly person would have to deal with four or five
ever, the applicant would have to continue to deal with four or five separate
separate agencies, 1 be certified for initial eligibility six separate times,
offices to receive benefits and to periodically have the level of benefits ad-
and report back to these four or five offices at various (and different)
justed as their economic or family situation change.
times throughout the year to report income and assets for recalculation of
A greater degree of centralized administration could be achieved by also
benefit levels. Finally, in determining benefits each of the programs has
having that one office be the sole contact with elderly persons receiving income-
different definitions of income and assets, different income and asset
conditioned benefits from Federal programs. This could be achieved in one of
disregards, and, in some cases, different accounting periods (the length
two ways: (1) by having that one office send the relevant information about the
of time income is averaged for calculating benefits).
applicant to the other agencies, who would certify eligibility and level of bene-
The practice of having separate agencies to administer each program and
fits, and return the decision to the intake office; or (2) by having the intake
the diversity of practices and procedures across agencies is confusing, if not
office determine eligibility and level of benefits (including subsequent periodic
1Social Security and SSI are administered by the same office, and, in
adjustment of benefits) and simply provide information to the other agencies re-
most States, Medicaid and Food Stamps are administered by one agency.
garding who is eligible and what benefits they should receive.
43
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number of State-administered programs, partially or wholly Federally financed.
The highest degree of centralization would be to have eligibility
Within the time constraints of this study we could not give ample consideration
determination and the dispensing of benefits be delegated to one office by the
to the advantages and disadvantages of having the same office also administer
various Federal agencies, in the manner in which Public Assistance offices
State-operated programs.
now administer the Food Stamp program. Even maintaining the same diversity
Neither do we want to open up the issue here of whether the administration
of eligibility rules, a single administering office for all Federal programs
of income maintenance programs should be completely separated from public
for the elderly would allow the beneficiary to deal with only one office for
social services. The Federalization of income maintenance programs for the
initial certification and recertification, would require the recipient to
aged, blind, and disabled, which was brought about by enactment of SSI,
give income and assets information only once for use in determining the
is still too new for assessment of its impact on State- and local-operated
level of benefits from all six programs, and would greatly facilitate
social services based on Title XX of the Social Security Act.
outreach efforts. This would (1) save the taxpayer a great deal of money,
Finally, there is an alternative approach to the centralization
(2) save the potential beneficiary a large amount of time and expense, and
outlined above. Local offices for each of the various programs could be
(3) dramatically increase participation rates among eligibles.
retained, but each local office would at least process applicants, and
Moreover, the heterogeneity in definitions of income, assets, set
perhaps also calculate benefits, and dispense benefits for all of the
asides, exclusions, and accounting periods could be substantially reduced
programs. While this decentralized approach might cost more than the
(as recommended elsewhere in this paper), leading to further reductions
centralized approach described above, it would have the benefit of being a
in administrative costs. Such simplification makes sense even with separate
less intimidating operation than having all local program operations
administrative agencies; when this simplification of definitions is combined
concentrated in one very large local office. The study proposed below
with administration by a single agency it could substantially reduce
should bear in mind this important human element.
(perhaps by as much as 50 percent) the current administrative costs and reduce
Thus, while we endorse in principal the notion of some centralization of
by more than half the "cost" to the recipients. The administrative expenses
could be shared by the separate funding agencies (much like the Food Stamp
local administration of a number of Federal programs, we recognize that the
issue must be given further study to arrive at the most efficacious
Program and AFDC now share administrative costs). Such centralization would
organizational structure.
benefit both the "givers" (taxpayers) and the "receivers" (aging beneficiaries).
RECOMMENDATION 8. We recommend that the Executive Branch should study the
There are, we realize, some outstanding issues, such as the degree of
desirability, feasibility, cost effectiveness, and convenience to the
centralization discussed above, whether the one proposed office should be an
existing one (e.g., Social Security) or a new creation, and which programs
elderly of having a simplified system at the local level to determine eligibility
could feasibly be administered by one office. For example, there are a large
and benefit levels for all Federally funded income-conditioned programs
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45
(including services) for those age 65 and older. The relationship to the
housing), or to provide cash to buy these and other necessary goods and services.
administration of the social insurance programs should also be considered.
This latter set of programs--available only to those in economic need--are com-
monly called income-conditioned programs; the level of cash or in-kind benefits
Whatever body is chosen to look at this problem should include State
are highest for those with the most need (lowest incomes), and are less for the less
representatives since there are many Federal programs which are influenced
needy (i.e., decline as income rises, with benefits diminishing to zero at modest
by the State administration.
levels of income). All of these programs are intended to raise the economically
The study should look at a wide range of options for local organization
deprived to a standard of living which society deems as "minimally acceptable".
should develop a set of administrative proposals, and should bear in mind
Some argue that there should be only one program for the elderly who
that enabling legislation may be required for many of the changes which
are in economic need, that being an income-conditioned cash program which
are recommended. While all programs should be included in the study, the
raises the income level of all older Americans to a minimally acceptable
study may show that not all of the programs should be incorporated in the
standard. Others argue that such a simple approach is unsatisfactory because
new recommended local system.
(1) the elderly may not have sufficient knowledge to spend the money in a way
While the FCA strongly endorses information and referral services,
to maximize their own well-being (e.g. spend too little on food), or (2) they
they should not be considered a substitute for the simplified system
may not spend the money in a way which those who are providing the money
approach contained in recommendation 8.
(taxpayers) would like them to spend it (e.g. not enough on housing, resulting
in unsightly neighborhoods), or (3) that the needs of the elderly vary so
Reassessment of Programs for the Elderly
much due to health, initial housing facilities, etc., that one program cannot
A number of programs for older Americans are designed for, and available
adequately take account of their special needs, or (4) that it is inefficient
to, those at all income levels. Some of these are recreational in nature,
for the private market to provide their special needs on a pay-for-service bases.
others attempt to mitigate loneliness or insecurity, still others are designed
For whatever reason, or combination of reasons, there are at least eleven
to convert the free time of retired people into productive uses, beneficial to
Federal and Federally-subsidized State benefit programs, 1 plus a number of
both the elderly and the community. Another set of programs are available only
social service and health programs designed to assist the low-income and
to elderly individuals or families who are in economic need. Their purpose is
vulnerable elderly. There is some question as to whether the Federal monies
to provide in-kind benefits or services which the more financially secure can
for all of these programs are best spent in such a variety of programs; whether
afford to purchase and which society deems as necessities (food, medical care,
the same amount of Federal funds would be more effective if devoted to fewer
¹These include Medicaid, SSI, Food Stamps, four different housing
programs and four separate programs for veterans.
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47
ANNEX. DESCRIPTION OF PROGRAMS CONSIDERED
programs, since most of the programs have the same basic objective, namely to
help those older Americans who have insufficient resources to help themselves.
For many programs designed to aid the elderly, the receipt of benefits
As is pointed out in Appendix I and in the discussion and recommendations
is a privilege rather than a right. All of the housing programs and the
in this report, the money income-conditioned programs for the elderly are
various programs under the Older Americans Act fall in this "privileged"
not well coordinated. They are conceived and funded by different Congressional
category. The reason is that they have closed-ended funding. For example,
committees over time, and administered by different agencies with different
the Rent Supplement program will pay the difference between the rental value
purposes in mind; and a consolidation of administration of existing programs,
of the apartment and 25 percent of an individual's (family's) income if that
while a decided improvement over the present situation, would not eliminate
individual lives in an apartment building built with PL89-117 funds. But
the deleterious and redundant effects arising from the overlap and interactions
there are not nearly enough such buildings to house all low-income older
of the many existing programs. While it is beyond the scope and the time
people who apply for the program. So only a privileged few get any benefits
constraints imposed on the present study, our research into State and Federal
from this type of program.
programs reveal that there is a need for another study whose purpose would be
In a second category of programs the individual (or family) is lawfully
to explore the rationale for the present set of programs for the elderly.
entitled to benefits. There are two such types: (1) contributory retirement
Building on the findings and recommendations of the present study, such a
programs (including Social Security) and (2) categorical programs with open-ended
proposed study could (1) explicitly define the needs of the low-income elderly
funding. Of the latter, the six most relevant programs to Older Americans
population, (2) outline a set of policies to meet these needs, and (3) recommend
are-Supplemental Security Income (SSI), Food Stamps, Medicare, Medicaid,
a minimum set of programs which would fulfill the stated policy objectives.
Pensions for Widows and Children of Veterans and Pensions for Veterans with
Hopefully the proposed set of programs would (1) be internally consistent,
Non-Service-Connected Disabilities (under the latter program veterans are
(2) provide equitable treatment among the low-income elderly population, and
defined to be disabled when they reach age 65).
(3) reduce the number of programs, and thereby reduce administrative costs to the
In the analysis for this report we have paid particular attention to the
government and participation "costs" to the recipients. These changes would lead to
major programs with open-ended funding and with categorical eligibility re-
a reallocation of funds among programs but would not affect the total level
quirements (group (2) above)--and within this subset, to those for which bene-
of benefits going to the elderly. Consequently total costs should be lower.
fits are conditioned upon income and are thus targeted on the low-income elderly
FCA ACTION 2. Studies will be initiated by the Federal Council on Aging to
population. Among the retirement programs, we have considered only Social
develop recommendations for a minimum and internally consistent set of income-
Security, since it is the only one for which benefits are earnings-conditioned.
conditioned benefits and services for the elderly to replace the current set of
Except for two housing programs, we have given little attention to those with
overlapping, often-inconsistent set of State and Federal programs now in existence.
closed-ended funding because they interact minimally with other programs and
because, in some cases, data on the number of elderly participants is virtually
nonexistent.
- 48
- 49
labor force currently contributes to the OASDI program; contributions are
paid in at a 5.85 percentage rate for both the employer and the employee and at
The eight programs given particular attention in our analysis are listed
a 7.9 percentage rate for self-employed persons on the first $15,300 of the
and briefly described below. A more complete description of these and other
earner's income. The benefit is calculated as a percentage of the retired
programs are contained in another report entitled "Handbook of Federal Programs
worker's average monthly earnings that were subject to the Social Security
Benefiting Older Americans.
tax. The percentage is higher for low wage earners. Workers retiring at
age 62 to 64 and electing to start receiving benefits at that time receive
The Supplemental Security Income Program
permanently reduced benefits. The minimum benefit payable in June 1975 to
a 65 year old individual was $101.40 per month and for a couple was $152.10
The Supplemental Security Income (SSI) Program, Title XVI of the Social
per month. The maximum benefit payable to an individual was $341.70 per
Security Act, was designed to provide a nationally uniform minimum cash assistance
month. The benefit payment level is automatically adjusted for inflation
program to the aged (persons over age 65), blind and disabled. The SSI program
by a formula based upon changes in the Consumer Price Index.
Medicare
replaced the State administered programs of 01d Age Assistance, Aid to the Blind,
The Medicare program, Title XVIII of the Social Security Act, provides
and Aid to the Permanently and Totally Disabled. The program consists of three
medical insurance for those persons receiving or entitled to OASDI or railroad
basic components: the basic Federal SSI program; State mandatory supplementation;
retirement. Noneligible persons over 65 who met special requirements can purchase
and State voluntary supplementation. The basic Federal SSI program provides
coverage. Part A provides limited Hospital Insurance which covers inpatient
monthly benefits of $157.50 to a single eligible individual and $236.60 to an
hospital care and post-hospital care after payment of a deductible. Part B,
eligible couple with no other income. The State mandatory supplementation "holds
Supplementary Medical Insurance, is a voluntary program to cover certain
harmless" individuals who were transferred from those programs replaced by SSI,
physician's services and other outpatient medical services after the payment
by requiring the States to totally compensate them for any decrease in income
of a co-insurance. All recipients have to pay a premium for this coverage.
which they may have suffered as a result of the change to the Federal SSI program.
However, practically all who are eligible have enrolled. The Federal
In addition each State may choose at its own option to supplement these basic
government, out of general revenues, matches the total of the premiums paid.
payment levels by any amount they select through the Voluntary State supplemen-
Medicaid
tation component.
The Medicaid program was enacted in 1965 as Title XIX of the Social Security
The Old Age, Survivors, and Disability Insurance Program
Act to enable each State, at its option, to furnish medical assistance to needy
The 01d Age, Survivors, and Disability Insurance Program, commonly referred to
families and aged, blind or disabled individuals, and to provide such services
as Social Security, includes a retirement program, where retirement benefits
as may be required by these persons to attain independence. Thirty-five states
received are based on the contributions paid in. In addition, the program also
provide coverage to SSI recipients and the remaining 16 states have chosen to
provides benefits to survivors of eligibles or to persons becoming disabled
limit coverage to this group to those individuals who would have been eligible
after establishing eligibility. Approximately 90 percent of the employed
- 50
51
under the medical assistance standards in effect on January 1, 1972. These
private enterprise. Income limits are set by local housing authorities and
individuals may qualify for assistance by spending on medical care that portion
vary according to housing costs in the area. Tenants benefit from the low
of their income which is in excess of the 1972 medical standards. The benefits
of this program are medical care services for which full or partial payment
rental charges made possible through Federal assistance to local housing
authorities.
is made on behalf of eligible beneficiaries. The cash value of the basic
Medicaid benefit is determined by the reasonable cost of medical care, which
Rent Supplements
may be reduced by a deduction related to the recipient's income and resources.
The Rent Supplement Program was enacted in 1965 in order to make rental
The Food Stamp Program
housing available to lower-income families. Specified individuals or organiza-
tions are permitted to operate approved private housing projects. Eligible
The Food Stamp program was enacted by Public Law 88-525 in 1964 as a
tenants include: persons age 62 or over; handicapped or displaced persons;
means of providing low-income families with an opportunity to purchase nutritionally
occupants of substandard housing; or military personnel serving on active
adequate diets and as a means of expanding the market for domestically produced
duty or their spouses. The income limits are generally the same as those set
food. The program was not available in every county until July 1, 1974. The
by the local housing authorities for public housing projects. The benefits to
maximum allowable income standards, which vary by household size, were standardized
the tenants take the form of the difference between the fair market rental
at this time. The Food Stamp benefit is a payment "in-kind" in that the "benefit"
established for the rental unit and 25 percent of adjusted family income, with
is the dollar value difference between what the recipient must pay for the Food
the provision that the supplement must be between 10 and 70 percent of the
Stamps, and the actual value of the stamps. The dollar amount of the stamps
market rent.
which eligible households are permitted to buy are automatically adjusted semi-
Pensions For Veterans with Non-Service-Connected Disabilities
annually according to changes in food prices.
This program was established in 1933 (and was later revised in 1960) to
Low Rent Public Housing
assist wartime veterans who have insufficient income and resources and are age
The Low Rent Public Housing program was enacted in 1937 to provide
65 or over, or have non-service-connected disabilities. Both laws remain in
decent, safe and sanitary low-rent housing for low-income families. The pro-
effect with the first covering veterans who were on the pension rolls prior to
gram provides loans and grants to local housing authorities and covers the
July 1, 1960 and electing to remain covered under that law and the second cover-
difference between rents paid by tenants and rent payable to the owner (plus
ing veterans who became eligible on or after that date. In order to qualify for
the local housing authority's operating expenses). A tenant family must con-
eligibility, the veteran must: (1) have had 90 or more days of active wartime
sist of two or more related persons, or a single elderly (age 62 or over) dis-
duty or if the service period was shorter than 90 days, the early discharge
abled, handicapped or displaced person, or the remaining member of a tenant
must have been due to a service-related disability; (2) be either permanently
family. Families must be unable to afford acceptable housing as supplied by
and totally disabled or have attained the age of 65.
- 52 -
Pensions For Widows and Children of Veterans
This program was enacted in 1933 and revised in 1960. It was designed
to provide a partial means of support for low-income widows and children of
veterans who died as a result of non-service related causes. As with the
Pension for Non-Service-Connected Disabilities program, two laws are cur-
rently in existence. Only those needy, not-presently-married widows with
low incomes who were receiving benefits prior to July 1, 1960 may continue
receiving benefits under the first law. The current law permits payments to
not-presently-married widow or child of a deceased veteran who (1) had 90
days or more of active wartime duty, or was discharged prior to 90 days
due to a service-related death or (2) at the time of death was receiving
compensation or military retirement pay for a service-connected disability.
DEPARTMENT OF
HEALTH, EDUCATION, AND WELFARE
POSTAGE AND FEES PAID
WASHINGTON, D.C. 20201
U.S. department OF H.E.W.
OFFICIAL BUSINESS
HEW-391
U.S.MAIL
DHEW Publication No. (OHD) 76-20950
The
Interrelationships
of Benefit Programs
for the Elderly
FORD i LIBRARY GERALD
Handbook of
Appendix I
Federal Programs
Benefiting
Older Americans
Federal Council on the Aging
The
Interrelationships
of Benefit Programs
for the Elderly
Appendix I
Handbook of Federal Programs
Benefiting Older Americans
Prepared for
The Federal Council on the Aging
by
The Human Resources and Income Security Project
The Urban Institute
December 29, 1975
FEDERAL COUNCIL ON THE AGING
WASHINGTON, D.C. 20201
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402
i
CONTENTS
Page
Introduction
iii
RETIREMENT PROGRAMS
Old Age, Survivors and Disability Insurance
1
Old Age, Survivors and Disability Insurance--Special Provisions
for Persons Age 72 and Over
12
Railroad Retirement Benefit Program
16
Civil Service Retirement
22
Foreign Service Retirement and Disability System
25
Military Retirement
31
SUPPLEMENTAL SECURITY INCOME PROGRAMS
Supplemental Security Income
37
State Supplementation of the Supplemental Security Income Program
42
HEALTH CARE PROGRAMS
Medicare--Hospital Insurance
57
Medicare--Supplementary Medical Insurance
60
Medical Assistance Program (Medicaid)
63
HOUSING PROGRAMS
Lower Income Housing Assistance Program
69
Construction Loans for Housing for the Elderly and Handicapped
73
Rental and Cooperative Housing for Lower Income Families
77
Rent Supplement Program
81
ii
iii
Page
FOOD PROGRAMS
INTRODUCTION
Food Stamp Program
83
The Federal Council on Aging commissioned this handbook as part of
VETERANS PROGRAMS
a research effort designed to investigate the combined impact of various
Pensions for Veterans with Non-Service-Connected Disabilities
benefit programs on Older Americans. The first step in this research effort
93
Compensation to Veterans with a Service-Connected Disability
was the identification and description of Federal and Federally-supported
99
Death Survivors Compensation and Dependency and Indemnity Compensation to
benefit programs. While this handbook does not identify and describe all
of Veterans for Service-Connected Deaths
102
programs from which an elderly person or family might conceivably receive
Pensions for Widows and Children of Veterans
108
benefits, The Urban Institute and the Federal Council on Aging jointly
Veterans Hospitalization
113
determined that the thirty-four programs included herein comprise the set
Veterans Outpatient Care
115
of benefit programs that are most relevant to the elderly population. Some
Veterans Nursing Home Care
117
of these thirty-four programs are designed to address the specific needs of
Veterans Domiciliary Care
119
elderly Americans, while others are available to both elderly and non-
Veterans Prescription Service
121
elderly alike with the premise that certain needs (e.g., adequate diets,
SERVICE PROGRAMS
housing and medical care) are common to all persons.
Grants to States for Service
It was determined that the most logical subdivision of programs
123
State and Community Programs on Aging
within the handbook would be according to functional form. These major
126
Nutrition Program for the Elderly
subdivisions are identified in the Table of Contents. Each of the thirty-
128
Senior Community Service Employment Program
four programs are presented in a consistent framework based primarily upon
130
Foster Grandparent Program
common program elements, such as mode of financing, eligibility criteria,
133
Retired Senior Volunteer Program
benefit formulas, magnitude of program cost and number of beneficiaries.
135
Senior Companion Program
Keying program descriptions on these common elements facilitates not only
137
Senior Opportunities and Services Program
the description of each individual program but, more importantly, the
139
Comprehensive Employment and Training Program
identification of the interactions of these elements across programs.
142
These interactions, which are the central focus of the larger research
effort, are highlighted for each program. If there is any one finding
which the handbook illustrates, it is that interactions across programs
iv
RETIREMENT PROGRAMS
occur on a large scale.
1. OLD AGE, SURVIVORS AND DISABILITY INSURANCE*
The information contained within these program descriptions was taken
A. Legislative Objective: To partially replace income from work
from various Federal agency publications, Congressional documents, Public
that is lost through retirement in old age.
Laws and the United States Code. Each program incudes a citation of the
B. Governing Regulations: Title II of Social Security Act of 1935
with subsequent amendments in 1939, 1946, 1950, 1951, 1954, 1956,
source of information used in developing the program description. In
1960, 1965, 1967, 1969, 1971, 1972 and 1974.
addition to these published documents, numerous persons within Federal
C. Administering Agency: The Social Security Administration of the
Department of Health, Education and Welfare.
agencies provided valuable information and insight into the interpretation
D. Financing: Financed by a payroll tax paid half by the covered
of complex program rules, and each program description was reviewed by a
employee and half by his employer (for non self-employed persons)
and a tax paid by self-employed persons on their earnings. The
representative of the relevant program's administration office.
tax on employees and employers for OASDI is 4.95 percent of total
wages; self-emloyed persons pay a tax equal to 7 percent of
The reader should note that there are a few inconsistencies in the form
self-employment income. Effective as of January 1, 1975, social
security taxes were levied on $14,100 of each earner's income.
in which program data are presented, due largely to a lack of available
Effective on January 1, 1976 Social Security taxes will be levied
on up to $15,300 of each earner's income.
data. Thus, while every effort has been made to present 1974 annual cost
E. Population Coverage: About 90 percent of the employed labor force
and caseload information, 1973 data is the most recent available for some
are contributing to the OASDI program. Approximately 91 percent
of the Nation's elderly 65 and over at the beginning of 1975 are
programs. Similarly, most cost figures represent total program costs, but
receiving monthly benefits or will receive benefits when they or
their spouses cease working. The ten percent of the employed labor
in some cases only total benefits are available. Where such inconsistencies
force in non-covered employment is composed mainly of federal, state
and local government employees, railroad workers and foreign migrant
are unavoidable, a clear explanation of what the figures represent will be
workers.
given.
F. Types of Assistance: Direct cash payments.
The myriad benefits in existence today comprise a massive set of
G. Uses and Use Restrictions: Monthly cash benefits are paid to
eligible retired workers with no restrictions on the use of benefits
complex and confusing program regulations and policy objectives. The
by the beneficiary.
author has attempted to transform these complex intertwined regulations
H. Eligibility Requirements:
into a readable form without sacrificing accuracy or detail.
(1) Categorical Eligibility Requirements
A worker must have attained the age of 62 and have contributed
for the required number of quarters of coverage to be fully
*Information for this program description was taken from U. S. Department
of Health, Education and Welfare, Social Security Administration, Social
Security Handbook, February 1974, U.S. G.P.O., Washington, D.C., 1974,
and U.S. House of Representatives, Committee on Ways and Means, The Social
Security Act as Amended Through January 4, 1975 and Related Laws, U.S.
G.P.O., Washington, D.C., 1975.
- 2 -
- 3 -
insured. Fully insured status is computed according to the
(3) Asset Test: None.
following: One quarter of coverage for each year between 1950
(or the year of attainment of age 21, if later) and the year
(4) Other Eligibility Conditions
of attainment of age 62 (age 63-65 for men born before 1913)
is required for fully insured status. A quarter of coverage
(a) Work Requirements: After acquiring benefit status, there
is a calendar quarter in which the individual receives non-
are no requirements.
farm wages in covered employment of $50 or more. A farmworker
receives credit for cash pay if he is paid at least $150 per
(b) Citizenship: None, however retirement benefits may not
year from one employer or if he works 20 or more days for cash
be paid to an alien (non-citizen, non-national) for any
pay on a time basis for one employer per year. Self-employed
months over six months spent outside the United States.
persons are credited with four quarters of coverage in any
There are a number of exceptions to this nonpayment
year in which they have a net profit of $400.
provision so that many aliens outside the United States
for more than six months continue to receive benefits.
Persons eligible for retirement and disability insurance
include eligible workers and: a wife or dependent husband
(c) Institutional Status: Institutionalized persons are not
age 62 or over; an unmarried child under 18; an unmarried
precluded from receiving benefits.
child age 18 to 22 who is a full-time student; unmarried
disabled children if disabled before age 22; and a wife of
(d) Residence Requirement: Beneficiaries under age 72 lose
any age caring for a child under 18 or a disabled child if
all monthly benefits for any month in which they spend
the child is entitled to benefits based on the worker's
more than seven days working in noncovered jobs outside
record.
the United States.
Persons eligible for survivors insurance include a widow or
I. Benefits: Benefits include cash payments and automatic eligibility
dependent widower age 60 or over; an unmarried child under age
for hospital insurance (Medicare).
18, an unmarried child age 18 to 22 if a full-time student,
and an unmarried child age 18 or over if the child has been
(1) Determination of benefit amounts: The benefit is calculated as
continuously disabled prior to age 22; a widow or widower
a percentage of the retired worker's average monthly earnings
caring for either a disabled child or any child under age
that were subject to the social security tax. The five years
18 who is entitled to benefits; a widow or dependent widower
with the lowest earnings are excluded so that the computation
age 50 to 60 who becomes disabled not later than 7 years after
period which results in the highest benefit is the one used.
the worker's death, or whose entitlement based on having a
Persons who are entitled and elect to receive retirement bene-
child in her care ended; and a dependent parent age 62 or over.
fits from age 62 to 64 receive permanently reduced benefits.
Those benefits are actuarially reduced by 5/9 of one percent
(2) No limit on any income other than earnings from work.
for each month of entitlement before age 65 (with a maximum
reduction of 20 percent). Wife's and husband's insurance
(a) Treatment of Earned Income: An eligible person under age
benefits are reduced by 25/36 of 1 percent for each month of
72 may earn up to an annual exempt amount ($2,520 in 1975,
entitlement before age 65. Widow's and widower's benefits are
$2,760 in 1976) and still receive full benefit payment;
reduced by 19/40 of 1 percent for each month of entitlement
the exempt amount will be automatically adjusted from time
between age 60 and 65, plus 43/240 of 1 percent for each month
to time based on increases in the general earnings levels.
of entitlement before age 60. (Widow's and widower's benefits
The first automatic increase occurred in 1975 when the
are payable before age 60 only if based on disability.)
annual exempt amount was increased from $2,400 to $2,520.
If a beneficiary earns more than the exempt amount, $1 in
The primary insurance amount (PIA) is the figure from which
benefits is withheld for each $2 of earnings above that
cash benefits are derived, including monthly benefits for
amount. The test also includes a provision under which a
the worker himself, his dependents and his survivors. (See
beneficiary, regardless of his yearly earnings, receives
attached tables.) The only cash benefits not based on the PIA
full benefits for any month in which he neither earns
are the fixed rate benefits payable to certain workers under a
wages in excess of $210 in 1975 ($230 in 1976) nor
transitional insured status provision, and the special monthly
renders substantial services in self-employment.
payment made to uninsured persons age 72 or over. (These
special monthly payments are described in the following program
(b) Treatment of Unearned Income: No reduction of benefits
outline.) Under the usual formula, an individual's PIA is the
is made for unearned income.
amount in column IV of the table that appears on the same line
- 4 -
- 5
as his Average Monthly Earnings (AME) in column III. The
J. Cost and Caseload Information: Total monthly cash benefit payments
Primary Insurance Benefit (PIB) shown in column I of the table
in 1974 amounted to $58,194,100,000 to an average monthly 23,121,000
is a computed amount which according to computation formulas
beneficiaries. (These figures include payments made to persons under
in the law prior to 1950 had approximately the same definition
the special benefit program for persons age 72 and over, since pub-
as the PIA does now. This column is used only as a step in
lished cost and caseload amounts include these.) U.S. Department of
computing the PIA in those instances where earnings before
Health, Education and Welfare, Social Security Bulletin, April 1975,
1951 are taken into account.
Vol. 38, No. 4, Table M-3, page 47; and U.S. Department of Health,
Education and Welfare, Social Security Bulletin, August 1975,
(2) Relationship of benefits to family size: Eligible dependents
Vol. 38, No. 8, Table M-1, page 40.
are entitled to an amount equal to 50 percent of the retired
worker's basic monthly benefit; the amount actually paid to
K. Interactions with Other Programs
the dependent may be somewhat less due to the limitation on
the amount that can be paid to the family.
(1) Program Eligibility: Receipt of social security benefits
automatically confers upon recipients eligibility for Medicare
(3) Relationship of benefit amount to place of residence: None.
benefits and entitlement to purchase insurance under the
Supplementary Medical Insurance program.
(4) Relationship of benefit amount to cost of living changes:
Beginning in June 1975 benefits were automatically increased
(2) Program Income: Social Security taxes earnings in excess of
annually whenever the consumer price index increases by
the allowable disregard at a 50 percent rate. Therefore, any
three percent or more.
income derived from the Community Services Employment Program
in excess of the disregard ($2,760) is taxed by the Social
The cost of living adjustment is computed in the following
Security Program at a 50 percent rate. All unearned income
manner. The Secretary shall effective of the month of June,
is untaxed.
increase the annual benefit amount of each individual entitled
to a benefit, and the primary insurance amount of any other
individual by the same percentage as the percentage by which
the CPI exceeds the index for the most recent prior calendar
quarter (A) ending on March 31, or (B) that was a cost-of-
living computation quarter.
(5) Current Benefit Amounts: The minimum benefit payable upon
retirement in 1975 at age 65 is $93.80. Effective as of June
1975, this minimum was increased to $101.40. The maximum benefit
payable at retirement at age 65 in 1975 was $316.30 for men and
$333.70 for women. These maximums were increased effective as
of June 1975 to $341.70 for men and $360.40 for women. U.S.
Department of Health, Education and Welfare, Social Security
Administration, Social Security Bulletin, July 1975, Vol. 38,
No. 7, Table 2, page 35. U.S. Government Printing Office,
Washington, D.C.)
(6) Comparison to Poverty Level: Minimum benefits for a retired
worker with no other benefits amount to approximately 50
percent of the poverty level for a single adult.
(7) Other Benefits/Related Programs: Aged beneficiaries are
entitled to hospital insurance (see description of Medicare).
See also Special Benefits for Persons Aged 72 and Over.
- 6 -
- 7 -
TABLE FOR DETERMINING PRIMARY INSURANCE AMOUNT AND MAXIMUM FAMILY BENEFITS
BEGINNING JUNE 1975
This Revised Table Was Made Pursuant to Section 215 (i) (2) (D)
II
III
IV
V
of the Social Security Act, As Amended
I
I
II
III
IV-
(Primary insurance
V
(Primary insurance
(Average
(Primary
$29.26
$29.68
$143.00
$133
$136
$154.50
$231.80
(Maximum
144.90
137
141
156.50
234.80
benefit under 1939
amount effective
monthly
29.69
30.36
insurance
Act, as modified)
family
wage)
30.92
147.10
142
146
158.90
238.40
for June 1974)
amount)
benefits)
30.37
30.93
31.36
149.10
147
150
161.10
241.70
31.37
32.00
151.00
151
155
163.10
244.70
If an individual's
Or his primary
Or his average
The amount
And the
32.01
32.60
153.20
156
160
165.50
248.30
primary insurance
insurance amount
monthly wage
referred to
maximum amount
32.61
-33.20
155.10
161
164
167.60
251.40
benefit (as deter-
(as determined
(as determined
33.88
157.20
165
169
169.80
254.70
in the
of benefits
33.21
mined under
under subsec.
under subsec.
preceding
payable (as
33.89
34.50
159.20
170
174
172.00
258.10
subsec. (d)) is--
(c)) is--
(b)) is--
paragraphs
provided in
34.51
35.00
161.20
175
178
174.10
261.20
of this
163.40
179
183
176.50
264.80
At
But not
sec. 203(a))
35.01
35.80
At
But not
subsection
least--
on the basis
35.81
36.40
165.20
184
188
178.50
267.80
more
least--
more
shall be--
than--
of his wages
36.41
37.08
167.50
189
193
180.90
271.60
than--
183.10
274.80
and self-
37.09
37.60
169.50
194
197
employment
37.61
38.20
171.40
198
202
185.20
277.80
Income shall
38.21
39.12
173.70
203
207
187.60
281.50
be--
39.13
39.68
175.70
208
211
189.80
284.70
216
191.60
287.40
39.69
40.33
177.40
212
40.34
41.12
179.60
217
221
194.00
291.00
---
$16.20
$ 93.80
$ 76
41.13
41.76
181.60
222
225
196.20
294.30
---
$16.21
$101.40
16.84
$152.10
42.44
183.80
226
230
198.60
297.90
95.30
$ 77
78
103.00
16.85
17.60
154.50
41.77
97.50
79
80
42.45
43.20
185.80
231
235
200.70
301.10
105.30
17.61
18.40
158.10
99.30
81
81
43.21
43.76
188.10
236
239
203.20
304.80
107.30
18.41
19.24
161.00
101.10
82
83
109.20
163.90
43.77
44.44
189.90
240
244
205.10
309.10
19.25
20.00
103.20
84
85
111.50
167.30
44.45
44.88
191.70
245
249
207.10
315.50
20.01
20.64
105.10
86
87
209.70
20.65
113.60
170.40
44.89
45.60
194.10
250
253
320.60
21.28
106.80
88
89
115.40
173.10
196.10
254
258
211.80
326.90
21.29
21.88
108.90
90
90
117.70
197.70
259
263
213.60
333.10
21.89
22.28
176.60
110.80
91
92
22.29
119.70
179.60
200.10
264
267
216.20
338.20
22.68
112.60
93
94
22.69
121.70
23.08
182.60
202.10
268
272
218.30
344.60
114.40
95
96
277
220.60
350.80
23.09
123.60
23.44
185.40
204.20
273
116.50
97
97
125.90
188.90
206.20
278
281
222.70
355.90
23.45
23.76
118.50
98
99
23.77
128.00
192.10
208.20
282
286
224.90
362.30
24.20
120.80
100
101
130.50
24.21
24.60
195.80
210.40
287
291
227.30
368.70
122.50
102
102
24.61
132.30
25.00
198.60
124.50
212.20
292
295
229.20
373.60
103
104
25.01
134.50
25.48
201.80
214.40
296
300
231.60
379.90
126.80
105
106
25.49
137.00
25.92
205.50
216:40
301
305
233.80
386.30
128.80
107
107
25.93
139.20
26.40
208.80
130.90
218.30
306
309
235.80
391.40
103
109
26.41
141.40
26.94
212.20
310
314
238.20
397.70
132.90
110
113
220.50
26.95
143.60
27.46
215.40
134.80
114
222.40
315
319
240.20
404.10
118
27.47
145.60
28.00
218.40
136.90
119
224.30
320
323
242.30
409.20
122
28.01
147.90
28.68
221.90
138.90
123
127
226.50
324
328
244.70
415.50
28.69
150.10
29.25
225.20
141.10
128
132
152.40
228.70
228.50
329
333
246.80
421.80
230.80
334
337
249.30
426.90
*Federal Register, Vol. 40, No. 100, May 22, 1975, pages 22291-22296.
- 9 -
- 8 -
I
II
III
V
I
II
III
IV
V
IV
$232.50
$338
$342
$251.10
$433.10
$322.10
$554
$556
$347.90
$628.10
234.50
343
347
253.30
439.50
323.60
557
56Q
349.50
630.70
236.80
348
351
255.80
444.50
325.40
561
563
351.50
632.60
238.70
352
356
257.80
327.10
564
567
353.30
635.10
450.80
240.90
357
568
570
355.20
637.00
361
260.20
457.20
328.80
242.80
362
365
262.30
462.30
330.40
571
574
356.90
639.40
244.70
366
370
264.30
575
577
358.80
641.50
468.60
332.20
246.90
371
375
266.70
474.80
333.70
578
581
360.40
643.80
248.90
376
379
268.90
480.10
582
584
362.40
645.80
335.50
251.10
380
384
271.20
486.40
337.00
585
588
364.00
648.40
252.90
385
389
591
366.10
650.20
273.20
492.60
338.90
589
254.90
390
393
275.30
497.70
340.60
592
595
367.90
652.80
257.10
394
398
277.70
504.10
342.30
596
598
369.70
654.60
259.00
399
403
279.80
510.50
343.90
599
602
371.50
657.30
261.30
404
407
282.30
515.40
345.60
603
605
373.30
659.20
263.00
408
412
284.10
521.80
347.30
606
609
375.10
661.50
264.90
413
417
286.10
528.10
349.00
610
612
377.00
663.60
266.80
418
421
288.20
533.10
350.70
613
616
378.80
666.10
268.90
422
426
290.50
539.40
352.40
617
620
380.60
668.70
270.70
427
431
292.40
545.80
354.00
621.
623
382.40
670.50
272.40
432
436
294.20
552.10
355.70
624
627
384.20
673.10
274.70
437
440
296.70
554.60
357.40
628
630
386.00
675.40
276.30
441
445
298.50
557.90
359.00
631
634
387.80
678.70
278.20
446
450
300.50
561.00
360.80
635
637
389.70
681.90
280.30
451
454
302.80
563.50
362.60
638
641
391.70
685.20
282.10
455
459
304.70
566.60
364.10
642
644
393.30
688.20
284.00
460
464
306.80
569.70
365.90
645
648
395.20
691.60
285.80
465
468
308.70
649
652
396.90
694.60
572.40
367.50
288.00
469
473
311.10
575.50
368.60
653
656
398.10
696.60
289.60
474
478
312.80
578.70
369.60
657
660
399.20
698.50
291.50
479
482
314.90
581.30
370.90
661
665
400.60
701.10
293.60
483
487
317.10
584.50
372.20
666
670
402.00
703.60
295.40
488
492
319.10
587.70
373.60
671
675
403.50
706.00
297.30
493
496
321.10
590.20
374.90
676
680
404.90
708.60
299.40
497
501
323.40
593.30
376.20
681
685
406.30
711.10
301.10
502
506
325.20
596.40
377.60
686
690
407.90
713.60
303.00
507
510
327.30
599.00
378.90
691
695
409.30
716.20
304.90
511
515
329.30
602.10
380.20
696
700
410.70
718.70
306.90
516
520
331.50
605.40
381.60
701
705
412.20
721.20
308.70
521
524
333.40
413.60
723.60
607.80
382.90
706
710
310.60
525
529
335.50
611.00
384.20
711
715
415.00
726.20
312.70
530
534
337.80
614.10
385.60
716
720
416.50
728.70
314.40
535
538
339.60
616.70
386.90
721
725
417.90
731.20
316.30
539
543
341.70
619.90
388.20
726
730
419.30
733.80
318.40
544
548
343.90
623.00
320.20
549
553
345.90
626.20
10 -
11 -
I
II
III
IV
V
I
II
III
IV
V
$389.50
$731
$735
$420.70
$736.30
390.90
736
740
422.20
$439.10
$ 951
738.80
$ 955
$474.30
$829.90
392.20
741
745
423.60
440.20
956
960
741.40
475.50
832.00
393.50
746
750
425.00
743.80
441.30
961
965
476.70
834.10
394.70
751
755
426.30
442.40
746.00
966
970
477.80
836.20
395.80
756
760
427.50
748.10
443.50
971
975
479.00
838.30
396.90
761
765
428.70
750.20
444.60
976
980
480.20
840.30
398.00
766
770
429.90
752.30
445.70
981
985
481.40
842.40
399.10
771
775
431.10
754.40
446.80
986
990
482.60
844.50
400.20
776
780
432.30
756.40
447.90
991
995
483.80
846.70
401.30
781
785
433.50
758.50
449.00
996
1000
485.00
848.70
402.40
786
790
434.60
760.60
450.00
1001
1005
486.00
850.50
403.50
791
795
435.80
762.70
451.00
1006
1010
487.10
852.50
404.60
796
800
437.00
764.80
452.00
1011
1015
488.20
854.30
405.80
801
805
438.30
767.00
453.00
1016
1020
489.30
856.30
406.90
806
810
439.50
769.00
454.00
1021
1025
490.40
858.10
408.00
811
815
440.70
771.20
455.00
1026
1030
491.40
860.10
409.10
816
820
441.90
773.20
456.00
1031
1035
492.50
861.90
410.20
821
825
443.10
775.40
457.00
1036
1040
493.60
863.80
411.30
826
830
444.30
777.40
458.00
1041
1045
494.70
865.70
412.40
831
835
445.40
779.60
459.00
1046
1050
495.80
867.60
413.50
836
840
446.60
781.60
460.00
1051
1055
496.80
869.40
414.60
841
845
447.80
783.80
461.00
1056
1060
497.90
871.40
415.70
846
850
449.00
785.70
462.00
1061
1065
499.00
873.20
416.90
851
855
450.30
463.00
1066
787.90
1070
500.10
875.20
418.00
856
860
451.50
464.00
790.00
1071
1075
501.20
877.00
419.10
861
865
452.70
465.00
1076.
792.10
1080
502.20
879.00
420.20
866
870
453.90
466.00
794.20
1081
1085
503.30
880.80
421.30
871
875
455.10
796.30
467.00
1086
1090
504.40
882.70
422.40
876
456.20
468.00
880
798.40
1091
1095
505.50
884.60
423.50
881
885
457.40
800.50
469.00
1096
1100
506.60
886.50
424.60
886
458.60
470.00
802.60
1101
890
1105
507.60
888.30
425.70
891
459.80
471.00
895
804.80
1106
1110
508.70
890.30
426.80
896
900
461.00
472.00
1111
806.30
1115
509.80
892.10
428.00
901
473.00
905
462.30
1116
809.00
1120
510.90
894.10
429.10
906
463.50
811.00
474.00
1121
910
1125
512.00
895.90
430.20
911
915
464.70
813.20
475.00
1126
1130
513.00
897.90
431.30
916
920
465.90
815.10
476.00
1131
1135
514.10
899.70
432.40
921
925
467.00
817.30
477.00
1136
1140
515.20
901.60
433.50
926
468.20
478.00
930
819.30
1141
1145
516.30
903.50
479.00
434.60
93L
935
469.40
821.50
1146
1150
517.4C
905.40
435.70
936
480.00
940
470.60
823.50
1151
1155
518.40
907.20
481.00
436.80
941
471.80
825.70
1156
1160
945
519.50
909.20
482.00
437.90
946
950
473.00
827.80
1161
1165
520.60
911.00
483.00
1166
1170
521.70
913.00
484.00
1171
1175
522.80
914.80
- 12 -
- 13 -
2. OLD AGE, SURVIVORS AND DISABILITY INSURANCE--SPECIAL PROVISIONS FOR
would receive if he retired and filed for the pension.
PERSONS AGE 72 AND OVER*
A governmental pension includes monthly Retirement
Survivors Disability Insurance and Railroad benefits,
A. Legislative Objective: To provide an assured income to those
but does not include workmen's compensation or veterans
persons who had little or no opportunity to contribute to the social
compensation for a service-connected death. The special
security program.
age 72 payment is also offset by the amount of a govern-
mental pension received or that could be received by the
B. Governing Regulations: Tax Adjustment Act of 1966.
spouse if he (she) retired or applied for the pension.
C. Administering Agency: Social Security Administration. Department
(3) Asset Test: None.
of Health, Education and Welfare.
(4) Other Eligibility Conditions:
D. Financing: Financed from the general funds of the U.S. Treasury.
(a) Work requirements: No requirements.
E. Population Coverage: National coverage.
(b) Citizenship: Applicants must be residents of the United
F. Types of Assistance: Direct cash payments.
States (the 50 States and District of Columbia) and (A)
citizens of the United States or (B) if an alien must have
G. Uses and Use Restrictions: Nonthly benefits with no restriction
been lawfully admitted for permanent residence and must
on use.
have resided in the United States for five continuous years
immediately preceding application for eligibility.
H. Eligibility Requirements:
(c) Institutional Status: Institutionalized persons are not
(1) Categorical Requirements: Applicants must have reached age
precluded from receiving benefits.
72 before 1968 if they had less than three quarters of covered
employment. Those persons attaining age 72 after 1967 and
(d) Residence Requirements: The benefits to which an individual
before 1971 were required to have three additional quarters
is entitled shall not be paid for any month in which the
of coverage for each year between 1966 and the year age 72
individual resides outside the United States.
was reached.
I. Benefits: Benefits are cash payments*
(2) Income Tests
(1) Determination of benefit amounts: The maximum benefit amount
(a) Treatment of Earned Income: There is no restriction
to an individual is currently $69.60 per month; the maximum
on the amount of wages or self-employment income an
benefit amount to a couple with both husband and wife eligible,
individual age 72 or over may receive and still be
is currently $104.40 per month.
eligible for benefit payments.
In the case of a husband and wife only one of whom is entitled
(b) Treatment of Unearned Income: Special age 72 benefits
to benefits, the benefit amount (after any reductions due to
will be suspended for any month the beneficiary received
the eligible individual's receipt of government annuities or
supplemental security income benefits, State supplemental
pensions) will be reduced by the total amount above $34.80
SSI benefits, or if such individual's needs were taken
per month of any periodic payments from governmental pensions
into account in determining his (her) spouse's eligibility
received by the spouse who is not eligible for benefits under
for such aid. Payments will be offset by the amount of
this provision.
any governmental pension that an individual receives or
*U.S. House of Representatives, Committee on Ways and Means, The Social
*Joint Economic Committee, Congress of the United States, Subcommittee
Security Act as Amended Through January 4, 1975 and Related Laws. February
on Fiscal Policy, "Handbook of Public Income Transfer Programs: 1975,"
12, 1975, U.S. Government Printing Office, Washington, D.C., pages 192-196.
Studies in Public Welfare, December 31, 1974, U.S. Government Printing
Office, Washington, D.C., pages 14-15.
- 14
- 15 -
In the case of a husband and wife both of whom are entitled
to benefits:
(2) Program Income: This program taxes income received from Civil
Service Retirement, Foreign Service Retirement, Railroad Retire-
(a) The remaining benefit amount of the wife after any
reduction due to her receipt of government pensions or
ment and Military Retirement programs at 100% . Receipt of any
income from SSI or AFDC automatically reduces payment under
annuities, will be further reduced by the total amount
this program to zero.
of her husband's government pension benefits in excess
of $69.60 per month; and
(b) The remaining benefit amount of the husband after any
reduction for his receipt of government pension benefits
will be further reduced by the total amount of hs wife's
receipts from government pensions above $34.80.
In addition, benefits under this program are reduced to
zero for any month in which the beneficiary receives
payments under the AFDC or SSI programs.
(2) Relationship of benefits to family size: Benefits to an
eligible couple amount to 150% of the benefit to an individual.
(3) Relationship of benefit amount to place of residence: Benefit
reduced to zero for any month in which individual resides outside
the United States.
(4) Relationship of benefit amount to cost of living changes: The
July 1972 Amendments provided for automatic increases in the
special age 72 payments to keep pace with increases in the cost
of living reflected by an increase in the Consumer's Price
Index totalling three percent or more.
(5) Current benefit amounts: See 10A.
(6) Comparison to poverty level: Average monthly benefits in 1974
of $63.55 amounted to 32 1/4% of the poverty threshold for a
nonfarm unrelated individual over age 65.*
J. Cost and Caseload: In April 1975 monthly cash benefits of $16, 197,000
were received by 254,840 persons. (U.S. Department of Health, Educa-
tion and Welfare, Social Security Bulletin, August 1975, Vol. 38,
No. 8, Tables M-10 and M-11, pages 48-49, U.S. Government Printing
Office, Washington, D.C.)
K. Interactions with other programs:
(1) Program Eligibility: Receipt of program benefits does not
entitle recipient to automatic eligibility in any other program.
*See August 1975 Social Security Bulletin, Table M-13, page 51, for the
average monthly benefit and U.S. Department of Commerce Current Population
Report, p-60, No. 99, issued July 1975, "Money Income and Poverty Status
of Families and Persons in the United States: 1974," page 16 for 1974
poverty cutoffs.
- 17 -
- 16
(a) Disability benefit eligibility criteria: Workers permanently
3. RAILROAD RETIREMENT BENEFIT PROGRAM*
disabled after at least ten years of railroad service who
are unable to engage in any regular employment as a result
A. Legislative Objective: To provide a continuing source of income
to retired or disabled railroad workers or survivors of deceased
of their disability are eligible for disability benefits at
any age.
workers.
(b) Dependent's eligibility criteria: The wife of a retired
B. Governing Regulations: Railroad Retirement Act of 1937 as amended
beneficiary age 65 or over is eligible if she: (1) is 65
in 1946, 1951 and 1966; Railroad Retirement Act of 1974.
or over; or (2) has in her care a child of the beneficiary
C. Administering Agency: Federal Railroad Retirement Board.
under 18 or disabled. Reduced benefits are payable at age
62-64. In those cases where the employee's benefits accrue
D. Financing: Financed by a payroll tax, general revenue funds and
on or after July 1, 1974, a spouse of an employee with 30
transfers from social security funds. The upper limit of income
years of service is eligible for an unreduced annuity when
which is taxed is the same as that for Social Security ($15,300 in
both employee and spouse reach age 60. In cases where
January 1976) with the tax rate set at 5.85% for employees and
the employee's annuity accrues after January 1, 1975, a
'5.35% for employers. Supplemental annuities to retired workers
spouse of an employee with less than 30 years of service
6.7 years and older with more than 30 years of service are "pay-as-
is eligible to receive either an unreduced annuity when
you-go" financed by an employer tax on the number of hours the
the employee has attained 62 and the spouse has either
retiree worked. The tax rate for this provision was 7.5 cents per
attained age 65 or has a child or the employee in her
hour in fiscal year 1974. Beginning October 1975 the tax rate is
care, or a reduced annuity when the employee and the
spouse have each attained age 62.
set at 8.5 cents per hour.
(c) Survivor's eligibility criteria: The following persons
E. Population Coverage: National coverage.
are eligible for survivor's benefits: (1) widows or
dependent widowers aged 60 or above; (2) widows or
F. Types of Assistance: Direct cash payments.
dependent widowers aged 50-59 disabled within 7 years
of the worker's death; (3) widows caring for any child
G. Uses and Use Restrictions: No restrictions on use.
entitled to payments; (4) unmarried children less than
18 years of age or less than 22 years old if attending
H. Eligibility Requirements:
school full time; (5) unmarried disabled children if
(1) Categorical Requirements: Retired workers must have at least
disabled before age 22; and (6) if there is no eligible
ten years of railroad employment. In order to receive dis-
widow, above. widower or child, a dependent parent age 60 or
ability benefits an individual must have been employed by the
railroad industry for at least 12 of the 30 months preceding
(2) Income Test: There is a benefit reduction rate of 50% on all
retirement. Retired workers may collect full benefits at age
65 or at age 60 if they have had 30 or more years of service.
earned income (earned in nonrailroad employment) in excess of
$2,760 per year (in 1976).
Reduced benefits are paid to those workers retiring between
the ages of 62 and 64 with less than 30 years of service.
Disability benefits are not payable for any month in which
Supplemental retirement benefits are payable at age 65 for
the beneficiary is under age 65 and earns more than $200.
the following workers: (1) those awarded a regular retirement
Benefits are restored if annual earnings are below $2,500.
or disability annuity after June 1966 if he had 25 years of
If the beneficiary earns $2,500 or more in any year he loses
service and was employed by the railroad industry when the
1 month's annuity for each $200 he earns over $2,400 (counting
the last $100 or more as $200).
annuity began; and (2) age 60 with 30 years of service whose
annuity begins after July 1, 1974 provided that the worker
(3) Asset Test: None.
discontinues railroad employment by age 65.
(4) Other Eligibility Requirements:
*The information for this program description was taken from Joint Economic
Committee of the Congress of the United States, Subcommittee on Fiscal
(a) Work Requirements: Eligibility for a supplemental benefit
is permanently lost if the beneficiary works for the rail-
Policy, Studies in Public Welfare, "Handbook of Public Income Transfer
road after his retirement date.
Programs: 1975," U.S. G.P.O., Washington, D.C., pages 42-49.
- 18 -
- 19
Workers, spouses or survivors are not entitled to a benefit
TABLE 1*
for any month in which they are employed in the railroad
industry. If the last employment was not in the railroad
Components of an Annuity Computed under the Provisions
industry workers and spouses also lose their right to bene-
of the Railroad Retirement Act of 1974
fits for any month in which they worked in such employment.
(b) Citizenship Requirements: None.
Additional social security
From
benefit based on pre-1975
(c) Institutional Status: None.
appropriations
non-RR employment
(d) Residence Requirement: None.
Supplemental R.R.
Annuity
I. Benefits:
FOR POST-1974 R.R.
SERVICE:
(1) Determination of benefit amounts: Workers receive benefits
0.5% of average monthly
consisting of two components, the first a social security level
compensation for each year
component computed under the social security benefit formula
plus $4 for each year
on the basis of combined railroad and non-railroad earnings;
From R.R.
the second a staff level component based on railroad service
retirement
FOR PRE-1975 R.R.
TIER-II
only. In addition eligible employees may receive supplemental
fund
SERVICE:
$1.50 for each of 1st
benefits. The following table exhibits the components of the
10 years plus,
annuity and outlines the sources of financing for each component.
$1.00 for each year
in excess of 10
Spouse annuities components are generally equal to one-half of
the employee's components. Survivors are entitled to a social
R.R. annuity computed under
security level benefit on the basis of the deceased employee's
law in effect prior to 1975
minus social security bene-
combined railroad and non-railroad earnings. The staff component
fit based on pre-1975 R.R.
of the survivor annuity is approximately 30 percent of the social
service
security level annuity component prior to any reduction due to
receipt of a benefit based on the survivor's own earnings.
A "hold-harmless" clause in the 1974 Act insures that no
Social Security Benefit
individual who first receives benefits within the next eight
From social
based on all R.R. service
TIER-I
years will receive less than he would have under the previous
security fund
and all non R.R. employment
law.
The law provides that this portion of an individual's benefit shall not hereafter be subject to cost-of-
living increases, although tier I and tier II will be.
*Joint Economic Committee of the Congress of the United States, Subcommittee
on Fiscal Policy, Studies in Public Welfare, "Handbook of Public Income
Transfer Programs: 1975," U.S. G.P.O., Washington, D.C., page 46.
- 21 -
- 20
(2) Program Income: Income received from social security benefits
(2) Relationship of benefit to family size: None.
is subject to a 100% benefit reduction rate. Income received
from the Community Service Employment Program in excess of
(3) Relationship of benefit to place of residence: None.
$2,760 per year (in 1976) is subject to a 50% benefit reduction
rate.
(4) Relationship of benefit to cost of living changes: Cost of
living changes are reflected in benefit amounts.
The supplemental benefit imposes a 100% reduction rate on all
income received from any private railroad pension attributable
(5) Current benefit structure: The maximum for a spouse benefit
to the employer's contribution.
was $225.70 in June 1974. Other benefits may be based on
the worker's earnings, and therefore vary from individual
to individual.
Source: Joint Economic Committee of the Congress of the United
States, Subcommittee on Fiscal Policy, Studies in Public Welfare,
"Handbook of Public Income Transfer Programs: 1975," U.S. G.P.O.,
Washington, D.C., page 47.
(6) Comparison to Poverty Level: The maximum benefit for a spouse
in 1974 was 114% of the poverty level for a single unrelated
individual over age 65.
(7) Other benefits/related programs: See program interactions.
J. Cost and Caseload Information: Monthly benefits in April 1975
amounted to $272,800,000 to 674,000 retired or disabled persons,
and 336,000 survivors.
Source: U.S. Department of Health, Education and Welfare, Social
Security Bulletin, August 1975, Vol. 38, No. 8, Tables M-1 and M-3.
K. Interactions with Other Programs:
(1) Program Eligibility: Receipt of Railroad Retirement benefits
automatically entitles the recipient to benefits from Medicare
and permits the purchase of benefits from the Supplementary
Medical Insurance program.
All persons entitled to railroad retirement annuities after
1975 are automatically precluded from receiving social security
benefits. For those persons entitled prior to 1975 who are
receiving both social security and railroad retirement benefits,
the social security level component of the railroad retirement
benefit benefit. is reduced by the amount of any monthly social security
No person may receive survivor's benefits under both railroad
retirement and social security based on the earnings record of
the same person.
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4. CIVIL SERVICE RETIREMENT*
(c) Involuntary Separation: An employee involuntarily sep-
arated for reasons other than misconduct or delinquency
A. Legislative Objective: To protect Federal civilian employees and
is eligible for an immediate annuity provided he or she
their dependents against income loss resulting from the death of
has had 25 years of service or has attained age 50 and
the employee or from retirement because of age or disability.
has had 20 years of service. If the employee is under
age 55, the basic annuity is reduced 1/6 of 1 percent
B. Governing Regulations: Civil Service Retirement Act, Amended 1969,
for each full month under age 55.
P.L. 91-93. Title 5 of U.S.C., Secs. 8331-8348.
(d) Disability: Disability retirement is permitted after at
C. Administering Agency: Civil Service Commission.
least 5 years of service upon a finding of disability by
the Civil Service Commission.
D. Financing: Financed through employee contributions, agency or
departmental contributions, congressional appropriations, and
(e) Deferred Retirement: Employees separated after 5 or more
interest on investments. The employing agency shall deduct 7
years of service have two alternatives. The employee's
percent of the basic pay of an employee, 7 1/2 percent of the
accumulated contributions may be refunded at any time
basic pay of a Congressional, Law Enforcement or Firefighting
between separation and attainment of age 62; or at age 62
employee, and 8 percent of the basic pay of a member of Congress.
entitlement to a full annuity is established computed on
the basis of total service up to the date of separation.
E. Population Coverage: Includes employees as defined by section
Before attaining age 62 the separated employee has no
8331 of Title 5 U.S.C. Congressional employees and members of
survivor protection except the lump sum refund; after age
Congress may elect to be covered by this program.
62, death benefits for surviving children and spouse may
be payable, depending upon the date of the individual's
F. Types of Assistance: Cash payments upon retirement, death or
separation from the employ of the Federal government.
disability.
(2) Income Test: None.
G. Uses and Use Restrictions: None.
(3) Asset Test: None.
H. Eligibility Requirements: (Collection of Retirement Benefits)
(4) Other Eligibility Requirements: The employee must have been
(1) Categorical Requirements:
subject to the retirement system for at least one year of the
last two years before separation.
(a) Mandatory Retirement: An Employee must retire at age 70
or as soon thereafter as he/she has completed 15 years of
(a) Work Requirements: None.
service. However, by special exception by the President,
an employee can continue working for the Federal govern-
(b) Citizenship Requirements: None.
ment after the age of 70. The retirement benefit is
received but substracted from the employee's salary.
(c) Institutional Status: None.
(b) Voluntary Retirement: Employees may collect full annuity
(d) Residence Requirement: None.
at age 62 or over with at least five years of service or
at age 60 or over with at least 20 years of service or.
I. Benefits
at age 55 or over with at least 30 years of service.
Employees who have rendered at least 20 years of service
(1) Determination of Benefit Amounts: The basic annuity is deter-
as a law enforcement officer or firefighter or a combina-
mined by the highest average annual basic salary for any three
tion of both may retire at age 50.
consecutive years with total service including unused sick leave.
The annuity formula favors long-service employees with each
year of service above 10 worth one and one-third times as much
*The information for this program description was taken from U.S.C. Title 5
as each of the first 5 years (when average salary is at least
Subchapter 3, and U.S. Department of Health, Education and Welfare, Social
$5,000). For the majority of employees (i.e., those with at
Security Bulletin, February 1970, Vol. 33, No. 2, pages 15-25.
least 10 years service and average salaries of at least $5,000)
the formula can be expressed as the product of (1) the average
- 24 -
25 -
salary and (2) the years of service times 2 percent, minus
5. FOREIGN SERVICE RETIREMENT AND DISABILITY SYSTEM*
3 3/4 percent. The maximum annuity is equal to 80 percent of
average salary plus annuity attributable to sick leave. The
A. Legislative Objective: To protect foreign service employees and
minimum annuity (only for disability retirement and death before
their dependents against income loss resulting from the death of
retirement) is 40% of average salary or basic annuity computed
the employee or from his retirement because of age or disability.
using actual service plus assumed service to age 60, if the
actual earned annuity is less than 40% of average salary. The
B. Governing Regulations: Title 22 of U.S.C. Subchapter VIII.
law also provides that a retiree who is not receiving any other
benefits (and is not entitled to receive any) from the Federal
C. Administering Agency: State Department.
Government, will receive an annuity at least as great as the
smallest primary insurance amount payable by the Social Security
D. Financing: Financed through employee and department contributions,
Administration.
congressional appropriations, and interest on investments.
(2) Relationship of Benefit Amount to Family Size: The retiring
Seven percent of the basic salary of each participant is deducted
married employee will receive a reduced annuity during his or
from his/her salary for contribution to the fund, with an additional
her lifetime to provide an annuity for his or her surviving
seven percent contributed from the appropriations from which
spouse of 55 percent of his/her full annuity, unless this option
employee's salaries are paid. In addition, any participant may, at
is specifically waived or a smaller part of the basic annuity
his option, make additional contributions not to exceed 10 percent
is chosen as the base for the surviving spouse.
of his basic salary.
(3) Relationship of Benefit Amount to Place of Residence: None.
E. Population Coverage: Covered employees include all foreign service
officers, all other persons making contributions to the fund and
(4) Relationship of Benefit Amount to Cost of Living Changes: The
any chief of mission who has served in that position for twenty
percent change in the Consumer Price Index is determined each
years who has made contributions for each year of service.
month. Increases are based on the highest rise in the price
index for any 3 consecutive months in each of which such
F. Types of Assistance: Cash payments upon retirement, death or
increase was at least 3 percent above the index of the base
disability.
month last used to determine a cost of living increase. This
amount is then increased by an additional 1 percent.
G. Uses and Use Restrictions: None.
(5) Current Benefit Structure: Varies on an individual basis.
H. Eligibility Requirements:
(6) Comparison to Poverty Level: Varies on an individual basis.
(1) Categorical Requirements: The following persons are entitled
to the benefits of the Foreign Service Retirement system:
(7) Other Benefits/Related Programs: Retirees are entitled to carry
health and life insurance coverage into retirement.
(a) All Foreign Service Officers;
J. Cost and Caseload Information: Retirement benefits of over $8 billion
(b) All other persons making contributions to the Fund;
will be paid to approximately 1.3 million annuitants and survivors in
Fiscal Year 1976.
(c) Any chief of mission not otherwise entitled who has
served for an aggregate period of twenty years or more
K. Interactions with Other Programs:
and has paid into the Fund a special contribution for
each year of service;
(1) Program Eligibility: No automatic eligibility for any other
program.
(d) Any Foreign Service staff officer or employee appointed
by the Secretary of State who has had at least ten years
(2) Program Income: No benefit reduction rate is applied to other
of continuous service in the Department's Foreign Service.
income sources.
*Information for this program description was taken from U.S. Code Title 22
Sections 1061-1121, Subchapter 8.
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- 26 -
(e) All Foreign Service Information Officers;
Age 62 or older on
January 31, 1979
January 1, 1979
(f) Any Foreign Service Staff Officer or employee appointed
Attainment of age 62
End of month in which
by the Director of the United States Information Agency
between January 2, 1979
age 62 is attained
who has had at least ten years of continuous service in
the Agency's Foreign Service.
and December 31, 1979
(g) Any Foreign Service Reserve Officer with unlimited
Age 61 or older on
January 1, 1980
tenure appointed pursuant to Section 15 or 17 of Public
January 1, 1980
Law 90-494.
Attainment of age 61
End of month in which age
between January 2, 1980
61 is attained
(h) Any Foreign Service Reserve Officer, Foreign Service
Staff Officer or employee of the agency of International
and December 31, 1980
Development serving under unlimited appointments in
employment subject to Section 625 (d) (2) of the Foreign
Age 60 or older on
January 31, 1981
Assistance Act of 1961, as amended.
January 1, 1981
Mandatory Retirement: Mandatory retirement is set at age
Attainment of age 60 on
End of month in which age
and after January 1, 1981
60
is
attained
60 for participants below the rank of Career Minister,
age 65 for Career Minister and above. Participants
occupying a position of Chief of Mission or any other
Voluntary Retirement: Participants may retire at age 50
position to which appointed by the President, by and with
after 20 years of creditable service (or participants who
the consent of the Senate, is not subject to compulsory
are employees of the Agency for International Development
retirement while serving in that position.
age 57 or over on January 1, 1975, regardless of length
of service) and receive benefits as explained in I (1).
If an employee of the Department of State or the United
States Information Agency becomes a participant after the
Involuntary Separation: Foreign Service Officers, Foreign
age of 60 they will be mandatorily retired at the end of
Service Information Officers, and Foreign Service Reserve
the month in which they become a participant.
Officers with unlimited tenure appointed pursuant to
Section 15 or 17 of Public Law 90-494 of grade 1, 2 & 3
Participants who are employees of the Agency for Inter-
who are involuntarily separated will receive an immediate
national Development (as described in H. (1) h) will be
annuity as determined by I (1) regardless of the age of
mandatorily retired according to the following schedule:
the officer.
AGE
RETIREMENT DATE
Foreign Service Officers, Foreign Service Information
Officers, and Foreign Service Reserve Officers with un-
Attainment of age 70
limited tenure appointed pursuant to Section 15 or 17 of
01/01/74 12/31/76
End of month in which age
70 is attained
Public Law 90-494 of grade 4, 5, 6 & 7 who are involuntar-
ily separated may, if eligible for voluntary retirement,
Age 64 or older on
retire on an immediate annuity. If ineligible, they will
January 31, 1977
January 1, 1977
receive a gratuity payment of one-twelfth of a year's
salary at their then current salary rate for each year
Attainment of age 64
of creditable service, not to exceed one year's salary.
End of month in which age
between January 2, 1977
64 is attained
They would also be eligible for the benefits listed under
and December 31, 1977
Voluntary Separations.
Age 63 or older on
January 31, 1978
Voluntary Separation: Any employee voluntarily separating
January 1, 1978
from the Service after obtaining at least five years of
service credit may elect to receive a refund of his/her
Attainment of age 63
between January 2, 1978
End of month in which age
contribution, plus interest, or receive a deferred annuity
63 is attained
at age 62 (if separated prior to October 1969) or age 60
and December 31, 1978
(if separated after October 1969).
- 28 -
- 29 -
service by totally disabled or incapacitated credit
who Disability: becomes any person with five years of service
to vicious reason of disease, illness or for useful
At the time of retirement, the annuity of each married male
his habits, intemperance or willful injury misconduct not due on
participant shall be reduced by $300 to provide a minimum
part, is eligible for a retirement annuity.
annuity of $2,400 for his surviving wife; if his annuity is
more than $4,800 he may elect up to 50% of such annuity for
of Death: service (a) If an individual with at least 18
his wife with his annuity further reduced by 10 percent of
and is survived credit dies before separation or months
the difference between $4,800 and the base he specifies for
normal entitled to an annuity equal widow or
widower is by a widow or a widower, the retirement
the survivor benefit.
years of annuity. If the participant had to 50% of the
If an annuitant dies and is survived by a wife or husband and
except that average salary for the computed
the basis creditable of the service, the annuity less is than three on
by a child or children, an annuity shall be paid to each child,
that equals the lesser of: $900 or $2,700 divided by the number
than $2,400. the annuity of any widow shall entire period,
of children. This annuity is in addition to that paid to the
receive an annuity Surviving under children this provision. are also eligible not be less to
surviving wife or husband.*
(2) Income Test: None.
If an annuitant dies and is not survived by a husband or wife,
but by a child or children, each surviving child will be paid
(3) Asset Test: None.
an annuity equal to the smaller of: $1,080 or $3,240 divided
by the number of children.*
(4) Other Eligibility Requirements: None.
Unmarried participants may elect to receive a reduced annuity
in order to provide an annuity equal to 50% of the reduced
(a) Work Requirements: None.
annuity to a designated beneficiary upon the participant's
death. The annuity payable to a participant electing such
(b) Citizenship Requirements: None.
coverage shall be reduced by 10 percent of an annuity computed
according to the basic annuity formula, see 10 (A), and an
(c) Institutional Status: None.
additional 5 percent of an annuity so computed for each full
five years that the designated beneficiary is younger than
(d) Residence Requirement: None.
the retiring participant except that the total reduction
I. Benefits:
may not exceed 40 percent.
(3) Relationship of Benefit Amount to Place of Residence: None.
(1) highest Determination is equal three to 2 percent of Benefit of his Amounts: average The basic annuity of a participant
(4) Relationship of Benefit Amount to Cost of Living Changes: The
contributions have consecutive years of service for salary for the
percent change in the Consumer Price Index is determined each
number of been made to the Fund, which full
month. Annuity increases are based on the highest rise in the
years, plus years unused of sick service leave credit credit. not to exceed multiplied thirty-five by the
price index for any 3 consecutive months in each of which such
price index increase was at least 3 percent above the index
of the base month last used to determine a cost of living
(2) Relationship retirement of Benefit Amount to Family
increase. This amount is then increased by an additional one
a reduced annuity any married to female participant Size: may elect At the to receive time of
percent, and annuities are increased by this total amount.
her death. She may elect provide an annuity for her husband upon
(5) Current Benefit Structure: Varies on an individual basis.
such for her coverage husband. is The annuity up to of 50 the percent participant of such annuity
(6) Comparison to Poverty Level: Varies on an individual basis.
specifies. plus to $2,400 10 percent she specifies of reduced any amount as by the 2 in 1/2 base excess percent for of the of $2,400 survivor any amount electing she benefit, so up
(7) Other Benefits/Related Programs: Varies on an individual basis.
*The amounts payable to the child or children are increased by all cost-of-
living increases, as described in I (4), subsequent to November 1, 1969.
- 30 -
- 31
J. Cost $36 and Caseload Information: During Fiscal Year 1974, approximately
million was paid to 3,600 annuitants. This does not include
6. MILITARY RETIREMENT*
refunds of contributions or gratuities.
A. Legislative Objective: The military retirement program provides
Source: Information received from The United States Department of
protection against loss of income to members of the Armed Forces
State, Retirement Division.
and their families due to the retirement of the Armed Forces member.
K. Interactions with Other Programs:
B. Governing Regulations: Major legislation includes: The Officer
Personnel Act of 1947; Army and Air Force Vitalization and Retirement
Program Eligibility: No automatic eligibility for any other program.
Equalization Act (1948); Career Compensation Act of 1949; Uniform
Services Contingency Option Act of 1953; Servicemen's and Veteran's
Program Income: Does not apply any benefit reduction rate.
Survivors' Benefit Act of 1956; P.L. 85-422; P.L. 88-132; and
P.L. 92-245.
C. Administering Agency: The Department of Defense administers the
program for the Army, Navy, Air Force and Marine Corps. The
Department of Transportation administers the retirement system
for members of the Coast Guard. The Department of Commerce
administers the program for members of the National Oceanic and
Atmospheric Administration, and the Department of Health, Education
and Welfare administers the program for members of the Public Health
Service.
D. Financing: Financed through annual appropriations authorized by
Congress. Retirees contribute to survivors benefits through reduced
retirement benefits.
E. Population Coverage: Nationwide.
F. Types of Assistance: Cash benefits and services.
G. Uses and Use Restrictions: None.
H. Eligibility Requirements:
(1) Categorical Requirements: Eligibility for retirement benefits
is possible under three criterion: (1) age or length of service;
(2) disability incurred during active service; or (3) eligibility
for annuity payments (survivors of retired servicemen).
(a) Nondisability Retirement Eligibility Requirements: Any
Regular or Reserve commissioned officer or warrant officer
may be retired after 20 years of active service at least
10 of which are commissioned service for commissioned
officers. Enlisted members may retire after 20 years of
service either active or inactive. Retirement for age
varies according to rank, with 60 years of age generally
being the minimum age at which servicemen may retire.
*Information for this program description was taken from the Joint Economic
Committee, Subcommittee on Fiscal Policy, Studies in Public Welfare, Paper
No. 20, "Handbook of Public Income Transfer Programs: 1975," U.S. G.P.O.,
Washington, D.C., December 31, 1974, pages 313-322.
- 33
- 32 -
Regular officers are also manditorily retired if they are
(3) Asset Test: None.
passed over for promotion. This provision varies by amount
of service and rank.
(4) Other Eligibility Requirements:
(b) Disability Retirement Eligibility Conditions: A member who
(a) Work Requirements: None.
has a service-incurred disability of at least 30 percent
(b) Citizenship Requirements: None, non-citizens are entitled
(as determined by the Veterans Administration rating) may
to benefits except that any retiree who becomes a citizen
be retired for permanent disability if he is physically
of a country other than the U.S. after his retirement loses
incapable of performing the duties of his grade.
retirement benefits.
If disabilty is not permanent the member is placed on the
(c) Institutional Status: None.
temporary disability list. After five years, the member
must be either retired for permanent disability or removed
(d) Residence Requirement: None.
from the disability list. Any member found unfit for
further service but ineligible for disability retired pay
I. Benefits: Benefits based on years of service.
may receive disability severance pay.
(c) Annuities to Dependents Upon Death of Service Member in
(1) Determination of Benefit Amounts:
Retired Status: Members who retired before September 21,
(a) Nondisability Benefits: The retired pay is equal to
1972 could elect to participate in the Retired Serviceman's
2 1/2 percent of the basic pay multiplied by the number
Family Protection Plan (RSFPP) by Voluntarily accepting a
of years of service, with the maximum benefit equal to
reduced monthly retirement benefit in order to provide for
75 percent of basic pay.
a continuation of a portion of retired pay for his/her
survivors. Members already retired on September 21, 1972
Credited service for enlisted men is active service only.
who were participating in the RSFPP could elect to either:
Officers may be credited with active and inactive service
(1) Continue in the RSFPP and not join the new Survivor
depending upon branch of service and whether retirement
Benefit Plan (SBP); (2) Drop RSFPP and join SBP; (3) Con-
was voluntary or mandatory.
tinue in RSFPP and join SBP provided that combined coverage
does not exceed 100 percent of retired pay.
The retired grade is generally the grade whether temporary of
or permanent in which the member is serving on the date
Members who retired after September 20, 1972 may not partic-
retirement.
ipate in RSFPP. Those members with spouse or children will
automatically be covered under SBP unless they choose to
(b) Disability Benefits: Benefits are determined by multiplying
decline coverage prior to their retirement.
the basic pay of the members retired grade by the percentage active
of disability or 2 1/2 percent multiplied by years of
The cost to the service member of providing a survivor
service whichever provides the larger benefit. Maximum
benefit is 2 1/2 percent of the first $300 of the base
benefits amount to 75% of basic pay; the minimum benefit
amount, plus 10 percent of the remaining base amount.
is 30 percent of basic pay.
(The base amount chosen by the member may range from $300
to total retirement pay.) This cost continues for the
Members have the option of receiving disability compensation
lifetime of the member. Cost for an annuity for children
from the Veterans Administration rather than disability
only is based on an actuarial charge dependent upon the
retired pay.
age of the member and the youngest child.
Disability severance pay is equal to 2 months basic pay for
Members may elect to provide annuities for surviving
each year of service not to exceed two years of basic pay.
spouses, surviving children, surviving spouse and children,
or under the new plan only, other natural persons with an
(c) Survivor Benefits: Under RSFPP a member could elect to
insurable interest.
receive actuarilly reduced benefits for his/her lifetime
in order to provide benefits to the survivors upon the
(2) Income Test: None, except that under SBP, survivors benefits
member's death. Payments to surviving spouse terminate
are reduced by social security benefits attributable to military
upon the spouse's death or remmariage. Payments to an
service.
- 35 -
- 34 -
Income: No taxation of income from any other may program not except also
eligible child stop upon attainment of age 18, or age 23 if
the child is attending school. Election of this plan had
Program receiving benefits under the SBP program while in
to have been made prior to the member completing 19 years
that receive persons Social Security benefits based on credits earned
of service or if after 19 years of service, at least 2 years
military service.
before receiving retirement pay.
Under the SBP, the benefit paid to the survivor is 55 percent
of the base amount, where the base amount is that portion of
the full amount of retired pay specified by the retiree at
the time of retirement. This benefit is reduced by the
social security survivor benefit attributable to military
service after the spouse attains age 62. Payments to a
surviving spouse cease upon death or upon remarriage prior
to age 60. Payments to eligible children cease at age 18
or at age 22 if the child is attending school.
Under the new SBP, payment to a surviving spouse of a member
who dies on active duty after 20 years of service, is equal
to the difference between the Dependency and Indemnity
Compensation paid to the spouse and 55 percent of the
retired pay to which the member would have been entitled
had he retired on the date of death.
(2) Relationship of Benefit Amount to Family Size: None, except
survivor benefits. See above.
(3) Relationship of Benefit Amount to Place of Residence: None.
(4) Relationship of Benefit Amount to Cost of Living Changes:
Retirement and survivor annuities are automatically increased
whenever the CPI rises at least 3 percent over the last adjust-
ment period and remains above this for 3 consecutive months.
The increase is equal to the percentage rise in the CPI plus
an additional 1 percent.
(5) Current Benefit Structure: See I (1).
(6) Comparison to Poverty Level: Since benefits vary by length of
service, pay grade of member, etc., no comparison can be made.
(7) Other Benefits/Related Programs: Most benefits available to
active duty members, such as medical care, commissary and
exchange privileges and space available for air travel, are
available to retirees.
J. Cost and Caseload Information: Information not available.
K. Interactions with Other Programs:
Program Eligibility: Automatically entitled to Veterans Outpatient
Care, Veterans Hospitalization, Prescription Service and Domiciliary
Care.
- 37 -
SUPPLEMENTAL SECURITY INCOME PROGRAMS
7. SUPPLEMENTAL SECURITY INCOME*
A. Legislative Objective: To establish a national program to provide
a guaranteed annual income floor for persons who have attained the
age of 65, or are blind or disabled.
B. Governing Regulations: Social Security Act Amendments of 1972,
Public Law 92-603, October 1972. Effective as of January 1, 1974,
PL 92-603, Section 301 replaced the Old Age Assistance, Aid to the
Blind and Aid to the Permanently and Totally Disabled Programs
in the 50 States and District of Columbia.
C. Administering Agency: The Bureau of Supplemental Security Income
(BSSI), Office of Program Operations, Social Security Administration,
Department of Health, Education and Welfare.
D. Financing: All benefits and administration costs of the Federal SSI
program are funded through open-ended appropriations from the Federal
general revenues.
E. Population Coverage: National Coverage.
F. Types of Assistance: Direct monthly cash payments.
G. Uses and Use Restrictions: No restrictions.
H. Eligibility Requirements:
(1) Categorical Requirements: Individual applicants must have
either attained the age of 65 or be blind or disabled as
defined by the Social Security Act.
(2) Income Tests: For purposes of this program, income is defined
as all earned and unearned income except:
1. Earned income if such income does not exceed $30 per
quarter.
2. Irregular infrequent unearned income if such income
does not exceed $60 per quarter.
*Information for this program description was taken from U.S. House of
Representatives, Committee on Ways and Means, The Social Security Act as
Amended through January 4, 1975 and Related Laws, U.S. G.P.O., Washington,
D.C., February 12, 1975; and U.S. Department of Health, Education and
Welfare, Social Security Bulletin, July 1975, Vol. 38, No. 7, U.S. G.P.O.,
Washington, D.C., page 35.
- 38 -
- 39 -
3. The first $85 per month of earned income and one-half
Excluded assets are:
of the remainder, or $65 per month plus one-half the
remainder of earned income and $20 per month of un-
(a) The value of a home up to $25,000 ($35,000 in Alaska and
earned income.
Hawaii), where "value" is determined as the fair market
value regardless of encumbrances, based on the assessed
4. All income from a non-eligible child attending school.
value for tax purposes taking into consideration the ratio
between assessed value and the market value.
5. Assistance based on need which is paid by a state or
political subdivision to supplement SSI benefits.
(b) Non-liquid income producing property if relied upon by the
individual as a significant factor in producing income on
6. Any grant, scholarship or fellowship.
which he can live.
7. The value of medical and social services.
(c) Assets of a blind or disabled person needed to establish
a plan for his self-support.
8. Work related expenses of blind persons or income
required by a blind or disabled person in order for
(d) The value of household goods and personal effects up to
him to establish a means of self-support.
$1,500.
9. The first $1,200 of quarterly earnings of a child
(e) The retail value of an automobile up to $1,200. Auto-
beneficiary attending school, not to exceed $1,620
mobiles are totally excluded if used for employment or
per year.
if regularly used to obtain medical treatment.
10. One-third of any payment for the support of a child
(f) Property used in a trade or business if such property is
beneficiary received from an absent parent.
used for self-support.
(a) Treatment of Earned Income: There is a 50 percent benefit
(g) Cash surrender value of life insurance if the total face
reduction rate on earned income above the disregard. This
value does not exceed $1,500.
means that for every $1.00 earned over the allowable amount
per month, $.50 is deducted from the monthly SSI benefit
(h) Cash reimbursement from indemnity insurance due to damage
payment until the earnings cause benefits to cease.
or loss of property if the reimbursement is used to replace
or repair the property within three months of receipt if
(b) Treatment of Unearned Income: There is a 100 percent bene-
resource is personal property and six months if resource
fit reduction rate on unearned income above the disregard.
is real property.
An individual living in another person's household and
receiving support and maintenance in kind from such person
(4) Other Eligibility Conditions:
shall have their benefit payment reduced by 33 1/3 percent
rather than including such maintenance and support in the
(a) Work Requirements: None.
unearned income of the individual. Similarly any individual
or eligible spouse who resides in a non-profit institution
(b) Citizenship: An individual must be a citizen of the
or nursing home receives a benefit reduced by 33 1/3 percent.
United States or an alien lawfully admitted for permanent
residence in the United States.
(3) Asset Test: Individuals are eligible for SSI if the value of
non-excluded assets do not exceed $1,500. An individual with an
(c) Residence: Benefit payments are suspended for any month
eligible or ineligible spouse living in the same household is
in which the beneficiary is outside the U.S. for the
eligible if total non-excluded assets do not exceed $2,250. In
entire month. Payments may be reinstated after the
the case of a child under 21 living at home, the non-excluded
individual has returned and resided in the U.S. for a
assets of $1,500 (if one parent resides in the home) or $2,250
period of 30 consecutive days.
(if two parents, or a parent and a step-parent reside in the
home) are considered the child's assets for purposes of deter-
(d) Institutional Status: Persons are ineligible for benefits
mining eligibility.
in any month in which they are inmates of a public institu-
tion with the following exceptions: (1) persons residing
in an educational or vocational institution may receive
- 40 -
- 41 -
benefit payments; and (2) persons residing in a public or
private hospital, nursing home, extended care or interme-
J. Cost and Caseload Information: Federal SSI payments in April 1975
diate care facility where the Medicaid program pays more
amounted to $343,000,000 for 4,163,014 persons, 2,339,128 of whom
than 50% of the cost of institutionalization may receive
qualified due to age, 74,315 as a result of blindness and 1,747,571
payments not to exceed $300 per year (in the case of an
due to disability. (U.S. Department of Health, Education and Welfare,
eligible individual without an eligible spouse, or an
Social Security Bulletin, August 1975, Vol. 38, No. 8, U.S. Government
eligible individual with a spouse when only one of them
Printing Office, Washington, D.C., page 59.)
resides in an above-mentioned facility) or payments not to
exceed $600 per year (if both the eligible individual and
spouse reside in any of the above-mentioned institutions).
K. Interaction with Other Programs:
I. Benefits:
(1) Program Eligibility: Receipt of SSI benefits automatically
entitles the recipient to benefits from the Food Stamp program
(1) Determination of benefit amounts: Benefits July 1974-June 1975
(except in six States which cash out Food Stamp benefits to SSI
to an eligible individual with no other income amount to $146 per
recipients) and the Medicaid program (except in 16 States which
month; benefits to an eligible couple with no other income amount
limit coverage of SSI to those who would have been eligible
to $219 per month. Benefits as of October 1975 to an eligible
under the medical assistance standards in effect on January 1,
individual with no other income amount to $157.70; benefits to an
1972), and benefits from the Title XX program. Aged SSI recip-
eligible couple with no other income amount to $236.60 per month.
ients are automatically eligible for benefits from the Senior
Community Service Employment Program.
(2) Relationship of benefits to family size: The benefit level for
an eligible couple is 3/2 times the benefit level for an eligible
(2) Program Income: Taxes income received from the Community
individual. No payments are made for dependent children.
Services Employment Program at 50%. Taxes income from all
other programs (except in-kind programs such as medical pro-
(3) Relationship of benefit amount to place of residence: None,
grams, Food Stamps and service programs) at 100%.
for the Federal portion of the SSI program.
(4) Relationship of benefit amount to cost of living increases:
SSI benefit levels are automatically increased at the same time
and by the same percentage of the cost-of-living increases
described under the social security system.
(5) Current benefit amounts: See I(1).
(6) Comparison tp Poverty Level: The July 1974 benefit level is
74 percent of the July 1974 nonfarm poverty level for an
individual, and 88 percent of the poverty level for a couple.
(7) Other Benefits/Related Programs: In 33 States all SSI bene-
ficiaries are eligible for medical care services under the
Medicaid program. All SSI beneficiaries are also eligible for
food stamps, with the exception of California, Massachusetts,
Nevada, New York, and Wisconsin, since these States cash out
the food stamp benefit and include that amount in their supple-
mentary payments.
- 43 -
- 42 -
F. Types of Assistance: Direct cash assistance.
8. STATE SUPPLEMENTATION OF THE SUPPLEMENTAL SECURITY INCOME PROGRAM*
G. Uses and Use Restrictions: None.
A. Legislative Objective: To prevent reduction of income to persons
transferred from the old State adult assistance programs to SSI,
H. Eligibility Requirements - Mandatory Supplements.
and to maintain benefit levels for all recipients comparable to
those paid under the old assistance programs.
(1) Requirements: Persons who correctly the OAA, received AB or
Categorical payments in December 1973 under mandatory
B. Governing Regulations: PL 92-603 authorized optional state supple-
assistance are categorically eligible for the categorical
mentation. PL 93-66 required States to make mandatory payments to
APTD supplementation programs if they continue to meet
all persons who were adult assistance recipients in December 1973 if
eligibility requirements of the SSI program.
their income would be reduced by transfer to the SSI program.
(2) In order to receive a mandatory supplement, the
C. Administering Agency: Mandatory and optional benefit supplements
Income Tests: income including Federal SSI payments the at time
may be administered by the State or by the Federal agency.
the of application total for benefits must be less than individual's
total income in December 1973.
Mandatory Supplements: The Social Security Administration admin-
isters the mandatory State supplementation payments in 29 States
(a) Treatment of Earned Income: All earned income is included.
and the District of Columbia. Twenty States administer their own
payments. Texas, because of a State constitutional prohibition,
(b) Treatment of Unearned Income: All unearned income is in-
has no mandatory supplementation.
cluded.
Optional Supplements: The Social Security Administration admin-
(3) Asset Test: Persons transferred from the test. State assistance
isters optional State supplementation in 16 States and the District
programs are deemed to meet the resource
of Columbia; 21 States administer their own programs and 13 States
pay no optional supplements.
(4) Other Eligibility Conditions:
D. Financing: States are responsible for the cost of State supplementary
(a) Work Requirements: None.
payments except that States who elect Federal administration of the
optional supplement are "held harmless" against increased costs in
(b) Citizenship: None.
excess of the State's share of assistance expenditures in the previous
adult programs for calendar year 1972.
(c) Institutional Status: Varies according to circumstances.
States administering their own mandatory and/or optional supplements
(d) Residence Requirement: Must have continuously assistance resided in
are responsible for the total cost of administration. When the
the same State under whose plan he received
Federal government administers the mandatory supplement, the Federal
payments in December 1973.
agency pays all administrative costs, but the State pays all supple-
mentation costs.
Eligibility Requirements Optional Supplements.
E. Population Coverage: Mandatory supplements are available nationwide.
(1) Categorical Requirements:
Optional supplementation is available in 37 States. Coverage within
each State may vary by living arrangements, basis for categorical
Administration: If the Federal government requirements administers
eligibility (i.e., age, disability or blindness) or whether or not
Federal supplement, the basic eligibility benefit.
the recipient was transferred from the State rolls.
the are optional the same as for receipt of the Federal SSI
Administration: States administering their own optional require-
supplementation State are free to set their own eligibility
*Information for this program description was taken from U.s. House of
ments.
Representatives, Committee on Ways and Means, The Social Security Act às
Amended Through January 4, 1975 and Related Laws, U.S. G.P.O., Washington,
D.C., February 12, 1975.
- 44
- 45
(2) Income Tests:
(2) Relationship of benefit amount to family size: None.
Federal Administration: States are required to establish an
adjusted payment level based on the average amount paid to
(3) Relationship of benefit amount to place of residence: In order
an individual with no other income under the previous adult
to receive a non-zero benefit payment the individual must have
assistance programs. The selected benefit level determines
continuously resided in the same State under whose plan he/she
the income limit for eligibility. States are required to
received assistance payments in December 1973.
supplement the income of all persons in a classification but
are not required to give benefits to all possible classifica-
(4) Relationship of benefit amount to cost-of-living increases: As
tions of eligibles.
the Federal SSI benefits increase through the general benefit
increases and cost-of-living adjustments, the number of persons
State Administration: States administering their own program
receiving mandatory supplementation benefits will decline.
income are not required to establish uniform payment levels. Therefore,
limits may vary within each such State.
(5) Current benefit amount: Determined on an individual basis.
Treatment of Earned Income:
(6) Comparison to the poverty level: Benefit levels for individuals
vary from 80 to 120 percent of the July 1974 poverty level.
Federal Administration: Same as under the Federal portion of SSI.
Benefits for couples vary from approximately 90 to 130 percent
of the poverty level.
SSI exclusions to income.
State Administration: States are not required to apply Federal
(7) Other benefits/related programs: Same as under the Federal
portion of SSI.
Treatment of Unearned Income:
I. Benefits: Optional Supplementation
Federal Administration: Same as under the Federal portion of SSI.
(1) Determination of benefit amounts:
SSI exclusions to income.
State Administration: States are not required to apply Federal
Federal Administration: The supplement is the amount the
State adds to the basic Federal SSI benefit when countable
(3) Asset Test: Same as under Federal portion of SSI.
income equals or is less than the basic Federal SSI benefit.
If countable income exceeds the SSI Federal benefit level, the
(4) Other Eligibility Conditions:
supplemental benefit is reduced by the excess countable income.
While the supplemental benefit level is set uniformly for all
(a) Work Requirements: None.
persons classified by living arrangement, etc., the levels
across classification may vary.
(b) Citizenship: Beneficiaries must be citizens of the U.S. or
aliens admitted for permanent residence.
State Administration: The determination of benefit levels
varies from State to State. Some States set flat grant amounts
(c) Institutional Status: Eligibility status of institutionalized
and others determine the benefit on an individual case basis
State administrations.
persons may vary between States under both the Federal and
as determined by need.
(2) Relationship of benefit amount to family size:
(d) Residence Requirement: Individuals must be residents of the
State from which they receive their benefit.
Federal administration: Supplemental benefit levels for couples
generally range from 1.4 to 1.9 times the benefit level for an
I. Benefits: Mandatory Supplementation.
individual.
(1) Determination of benefit amounts: Benefit amounts are determined
State administration: Supplemental benefit levels for a couple
on an individual basis. The benefit amount is equal to the
generally range from 1.2 to 2.0 times the level for an individual.
difference between the total current income including Federal
SSI payments and the individual's total income in December 1973.
- 47
- 46 -
Table
1 Supplemental security income for the aged, blind, and disabled: Number of persons receiving federally ad-
ministered payments and total amount, 1974-751
Benefits (in thousands)
(3) Relationship of benefit amount to place of residence:
Number of persons'
Disabled
Total
Federal
Period
SSI
State mentation supple- ,
Total
Aged
Blind
Federal administration: Supplemental benefits vary by State of
residence, and in some cases by geographic areas within a State.
$439,244
$334,205
$105,040
1974
3,653,466
2,115,358
73,951
1,464,157
341,189
107,921
74,132
1,503,694
449,110
July
3,734,349
2,156,523
1,533,618
453,829
335,348
118,481
74,150
456,991
345,929
111,062
State administration: Supplemental benefits vary between States
August
3,782,298
2,174,530
2,236,242
74,832
1,588,410
3,899,484
454,476
344,225
110,251
September
1
74,918
1,617,980
October
3,963,292
2,270,394
450,856
340,853
110,003
2,285,909
74,616
1,635,539
and within individual States.
November
3,996,064
December
346,841
111,345
74,524
1,664,007
458,186
1975
4,046,599
2,308,068
457,015
345,731
111,283
74,456
1,691,505
350,797
118,618
(4) Relationship of benefit amounts to cost of living changes:
January
4,081,574
2,315,613
74,399
1,723,376
469,410
February
2,326,928
462,222
343,071
119,151
4,124,703
74,315
1,749,571
2,339,128
478,360
359,742
118,618
States are not required to adjust supplemental benefits to
March
4,163,014
2,341,463
74,324
1,784,844
342,896
114,158
April.
4,200,631
73,849
1,788,323
457,053
4,188,502
2,326,330
483,955
375,174
108,782
reflect cost-of-living increases.
May
2,312,031
74,042
1,818,757
June
4,204,830
July
Excludes data for State supplementation under State-administered
(5) Current Benefit Amounts: See attached tables.
Administration Excludes emergency district offices. advance Figures payments not adjusted made by for returned checks and
the
Social
Security
programs.
refunds of overpayments.
(6) Comparison to Poverty Level: Supplemental benefits for
Federally administered supplements for aged persons living
independently vary from approximately 80 percent to 140 percent
Table 2 : Supplemental security income for the aged, and
of the July 1974 nonfarm poverty level. State administered
and disabled: Combined Federal SSI payments for
blind, federally administered State"supplementation, by reason
supplements range from 80 to 120 percent of the July 1974
eligibility and State, July 1975
nonfarm poverty level for similar individuals.
[In thousands]
State
Aged
Blind
Disabled
(7) Other Benefits/Related Programs: Same as for basic Federal SSI.
$210,297
$10,788
$262,871
Total
8,179
248
4,851
J. Cost and Caseload Information: Federally administered State supple-
Alabama
146
12
210
Alaska.
1,243
58
1,716
2,850
ments amounted to $119,151,000 in April 1975. State administered
Arizona
4,702
199
Arkansas
42,275
2,680
59,118
California
38
1,740
supplementation amounted to 11,696,000 in February 1975 with an
1,569
Colorado
677
32
1,605
Connecticut
245
31
378
average supplement payment of $38.33.
1,447
District Delaware of Columbia
505
8,782
7,086
7,426
Florida
7,863
617
Georgia
590
Source: U.S. Department of Health, Education and Welfare, Social
467
Hawaii
280
Idaho
Security Bulletin, August 1975, Vol. 38, No. 8, U.S. Government
3,653
10,972
1,928
Illinois
1,496
1,108
Printing Office, Washington, D.C., pages 61-62.
Indiana
1,252
Iowa.
895
1,035
5,040
4,594
Kansas
6,059
Kentucky
8,550
1,309
K. Interaction with Other Programs: Federally administered supplementa-
Louisiana.
925
3,800
Maine
1,523
Maryland
8,703
10,162
tion is identical to the basic Federal SSI program in terms of its
Massachusetts.
9,089
4,661
Michigan
1,372
in
1,948
interaction with other programs. State administered supplementation
4,811
Minnesota
6,720
Mississippi
3,954
5,240
programs may contain numerous types of program integration.
Missouri
378 304 196 291 109 130 282 648 233 28 247 19 13 89 44 725 37 127 69 304 142 472 664 245 229 52 64 479 174 16 20 9 15 77
498
254
815
Montana
572
206
Nebraska
311
224
Nevada
185
New Hampshire
3,395
5,313
1,607
New Jersey
1,029
17,927
37,207
New Mexico
7,333
New York
5,885
328
North Carolina
359
North Dakota
4,139
9,134
3,487
Ohio
4,317
1,640
Oklahoma
753
10,673
Oregon.
6,256
Pennsylvania
1,123
527
Rhode Island
3,559
3,602
328
South Carolina
405
6,356
South Dakota
6,170
8,376
Tennessee
14,761
607
Texas.
287
621
Utah
440
3,408
Vermont
3,075
4,673
Virginia
1,920
1,694
86
2,723
Washington.
West Virginia
135
3,639
3,374
129
Wisconsin
97
3
43
Vyoming
19
Unknown
Includes federally administered State supplementary October 1974 payments for Illinois that and
represent before July underpayments 1975 for South for Carolina months and States. before Utah. State supplementation is
currently State administered in these
- 48
- 49
Table 5:
Supplemental security income for the aged,
blind, and disabled: Average monthly amount of combined
Federal and State payments in States with federally admin-
istered State supplementation, by State, July 1975
Table 3 :
Supplemental security income for the aged,
Table 4 :
blind, and disabled: Number of persons receiving federally
Supplemental security income for the aged,
Average monthly amount
administered payments, by State, July 1975
blind, and disabled Total payments, Federal SSI payments,
State
and federally administered State supplementary payments,
Total
Aged
Blind
Disabled
by State, July 1975
State
Total
Aged
Blind
Disabled
[In thousands]
Arkansas
$87.82
$78.31
$117.81
$107.43
California
162.91
129.20
207.08
197.91
Total
4,204,830
2,312,031
74,042
98.18
72.28
116.83
125.69
1,818,757
Delaware
State sup-
District of Columbia
124.31
91.94
140.50
141.36
Alabama 3
145,113
102,293
2,040
State
Alaska'
40,780
Total
Federal SSI
plemen-
106.53
94.43
127.21
125.61
Florida
3,032
1,490
74
1,468
tation
96.52
82.36
121.70
116.51
Arizona 2.
27,470
Georgia
14,178
439
12,853
134.98
111.51
163.64
167.94
Arkansas
Hawaii
88,265
60,043
81.45
63.93
111.85
101.07
California
1,688
26,534
Total
$483,955
Indiana
638,845
327,195
12,941
Colorado
298,709
$375,174
$108,782
Iowa
87.67
71.44
122.44
113.65
35,586
20,690
341
Connecticut
14,555
22,467
Alabama
83.41
69.43
116.96
99.49
9,304
285
12,878
13,278
Alaska
13,278
Kansas
Delaware.
6,661
3,383
270
3,008
368
368
Louisiana
100.20
88.83
131.77
120.63
District of Columbia
15,929
Arizona
5,491
202
10,236
3,016
3,016
96.01
69.95
128.41
129.06
Florida
151,804
93,001
Arkansas
2,392
7,751
7,581
Maine
56,411
162,324
California
170
95,478
104,072
44,216
Maryland
113.46
80.63
132.88
135.14
Georgia
3,107
63,739
9,081
Colorado
59,856
151.49
125.23
211.26
195.19
Hawaii
5,295
3,346
3,346
Massachusetts
115
140.79
147.36
Idaho
3,671
8,871
Connecticut
4,205
2,314
Michigan.
123.11
92.77
108
4,558
2,314
Delaware
85.67
68.34
118.11
102.72
654
South Carolina
589
Minnesota
65
94.50
80.65
125.87
122.28
Illinois
135,666
48,298
Indiana
1,623
85,745
1,980
1,906
74
Mississippi
Florida
92.76
64.87
102.66
118.30
43,631
23,397
16,172
Montana
1,162
19,072
135.64
117.04
28,161
Georgia
15,996
177
Iowa
890
Nevada
99.23
88.44
17,523
9,748
15,667
Hawaii
15,421
246
114.26
88.37
127.64
140.13
Kansas
23,672
12,885
Kentucky
2
380
10,407
1,226
Idaho
829
396
New Jersey
99,287
60,417
2,069
760
760
New York
144.77
105.33
169.95
176.02
Louisiana
36,801
148,613
96,243
Maine
2,142
50,228
127.25
Illinois
105.11
75.38
122.52
23,652
13,224
Maryland
288
14,821
14,821
Ohio
10,140
Pennsylvania
121.95
94.76
131.94
145.79
47,525
Indiana
18,884
519
28,122
3,554
Iowa
3,480
73
Massachusetts
81,150
3,065
44,585
2,469
Rhode Island
106.02
74.62
131.61
131.38
128,800
Kansas.
2,266
203
83.30
70.28
134.87
105.41
Michigan
113,580
50,243
1,658
61,679
1,974
Kentucky
1,914
61
South Dakota
Minnesota
751
18,968
Tennessee
92.96
76:15
128.20
116.84
39,790
20,071
9,925
Louisiana
9,925
Mississippi
118.87
92.27
151.73
148.34
124,631
83,324
Missouri
1,965
39,342
14,891
14,470
421
Vermont
Maine
126.72
89.50
152.69
152.82
101,547
66,614
2,213
32,720
2,271
1,738
Washington
150.74
140.24
Maryland
533
5,256
136
Wisconsin
112.27
91.62
5,392
Montana
8,271
3,909
Massachusetts
150
4,212
19,512
Michigan
7,073
Nebraska
12,439
Wyoming
89.67
69.92
125.82
112.51
16,324
8,909
232
7,183
13,983
Minnesota
10,329
Nevada
3,654
5,456
3,513
New Hampshire
179
1,764
3,409
Mississippi
3,155
254
5,328
3,094
11,778
New Jersey
166
2,068
11,696
38,418
Missouri
82
77,328
New Mexico
993
37,917
9,414
9,414
25,804
12,636
New York
415
12,753
385,851
170,208
Montana
North Carolina
4,265
211,378
767
Nebraska
738
29
147,003
North Dakota ,
81,262
3,847
61,894
Nevada
1,414
1,414
8,158
Ohio
5,097
64
2,997
541
New Hampshire
410
131
129,170
54,908
426
Oklahoma
2
2,483
71,779
52,914
New Jersey
426
84,534
1,105
30,515
New Mexico
8,835
7,105
Oregon
-1,730
25,597
11,099
Pennsylvania
595
13,903
2,688
144,257
New York
2,688
66,021
5,031
73,205
North Carolina
55,860
37,500
18,360
North Dakota
13,691
13,691
Table 6:
Rhode Island
15,812
7,064
South Carolina 3
203
8,545
79,003
Ohio
696
696
Supplemental security income for the aged,
13,577
South Dakota.
46,941
1,966
30,096
8,988
Oklahoma
13,338
238
blind, and disabled: Number of persons receiving State-ad-
Tennessee
5,759
121
3,108
137,219
Oregon
7,946
7,946
Texas
81,033
1,784
54,402
192,862
Pennsylvania
2,458
2,458
ministered supplementary payments and total amount,
273,285
Utah
3,991
76,432
17,593
14,398
3,195
1974-75
1
9,257
Vermont
3,691
176
5,390
9,054
Rhode Island
Virginia
4,765
102
4,187
South Carolina
1,676
1,165
511
73,699
Washington
43,080
1,373
29,246
52,632
21,454
South Dakota
7,406
7,406
Number of persons
State sup-
501
30,677
Tennessee
749
West Virginia
725
24
42,416
Wisconsin
20,797
20,980
Texas
12,755
12,672
Period
plementa-
639
84
tion (in
W yoming
63,669
36,827
894
25,948
Utah
23,616
23,616
Total
Aged
Blind
Disabled
thousands)
2,568
Unknown
1,387
33
1,148
144
Vermont
914
914
64
7
73
Virginia
1,076
701
376
Washington
6,658
6,658
West Virginia
6,669
5,279
1974
1 Includes persons with Federal SSI payments and/or federally adminis-
1,391
May
333,594
234,083
6,738
91,884
$12,223
Wisconsin
4,503
4,503
tered State supplementation, unless otherwise indicated.
3,815
June
329,050
231,670
6,552
89,976
12,089
Wyoming
7,148
3,333
Data for Federal SSI payments only. State has State-administered
281,724
194,097
5,986
80,908
10,209
Unknown
230
223
7
July
supplementation but data for such payments are not available.
65
15
50
August
277,930
191,739
5,742
80,449
9,858
Data for Federal SSI payments only; State supplementary payments
September
275,648
190,063
5,699
79,886
9,705
not made.
October
300,045
193,680
6,049
100,316
10,659
Excludes payments for State supplementation under State-administered
November
299,644
192,445
5,970
100,757
11,109
programs: data not available.
December
299,893
192,251
5,867
101,775
11,312
Includes federallyadministered State supplementary payments that
represent underpayments for months before October 1974 for Illinois and
1975
before July 1975 for South Carolina and Utah. State supplementation is
January
305,336
194,826
5,842
104,668
11,716
currently State-administered in these States.
February
305,169
194,112
5,762
105,295
11,696
March
305,064.
193,690
5,744
105,630
12,319
April
313,012
196,651
5,626
110,735
14,579
May
316,263
196,581
5,578
114,104
14,657
1 Data reported to the Social Security Administration by individual States.
All data subject to revision. Excludes optional supplementation data for
Maryland. May-July 1974 for North Dakota; November 1974 for Florida; data
included in total but not distributed by reason for eligibility.
Excludes payments for State supplementation under federally adminis-
tered programs.
- 50 -
- 51 -
Table 7 :
blind, and disabled: Number of persons receiving State-
Supplemental security income for the aged,
Table 8:
Table 9:
administered supplementation and total and average amount,
Supplemental security income for the aged,
Supplemental security income for the aged,
by State, May 1975 1
blind, and disabled: Number of persons receiving federally
blind, and disabled: Number of persons awarded federally
administered payments and total amount, by reason for
administered payments, by reason for eligibility, 1974-75
eligibility, July 1975
State
Total
Aged
Blind
Disabled
Period
Total
Aged
Blind
Disabled
Payments (in thousands)
Number of persons
Reason for
All
1974
Federal
State sup-
May
185,577
98,596
297
86,684
eligibility
persons
Total
Total
SSI
plementa-
June
164,737
95,755
1,436
67,546
316,263
196,581
July
85,981
48,780
668
36,533
5,578
114,104
tion
August
73,575
41,872
433
31,270
Alabama
28,811
25,448
September-October
230,375
130,053
1,426
98,896
Alaska
361
Arizona
3,501
3,002
1,859
84
1,558
Total
4,204,830
$483,955
$375,174
$108,782
November
86,153
51,686
497
33,970
1,886
1,629
December
47,902
34,498
150
13,254
Colorado
23
Connecticut
32,438
234
22,767
182
9,489
Aged
2,312,031
210,297
158,729
51,568
Florida
9,877
3,746
114
Blind
74,042
10,788
8,023
2,765
1975
2,106
6,017
Idaho
984
Disabled
1,818,757
262,871
208,422
54,449
May 3.
81,164
28,844
671
51,649
1,091
31
Illinois
2,930
June
52,203
16,972
429
34,802
1,290
24
46,922
1,616
Kentucky
10,305
591
9,973
36,026
Minnesota
6,982
125
1 Excludes payments for State supplementation under State-administered
3,034
2,866
1 Data not available separately for each month.
Missouri
1,328
48
1,658
programs.
1 Data not available for January-April 1975.
Nebraska
57,597
47,891
1,628
New Hampshire
6,354
8,078
2,532
150
3,307
3,672
New York
1,816
139
North Carolina
31
1,352
4
1
10,233
26
North Dakota
5,716
506
572
4,011
Oklahoma
316
5
Oregon
72,645
251
51,162
706
South Carolina
20,128
20,777
8,656
709
809
10,763
Virginia
497
32
3,065
280
West Virginia
1,515
118
44
1,432
31
1
12
Total amount (in thousands)
Total
$14,657
$7,933
$317
$6,406
Alabama
Alaska
1,136
940
15
Arizona
178
180
83
5
138
90
Colorado
133
(2)
Connecticut
1,338
5
862
11
Florida
754
466
279
8
99
467
Idaho
43
1
105
54
Illinois
39
1
3,660
65
Kentucky
884
39
Minnesota
770
2,736
535
6
Missouri
186
228
85
2
2,093
99
Nebraska
1,641
114
339
N ew Hampshire
248
81
7
148
160
New Mexico
58
7
83
North Carolina
North Dakota
1,158
646
42
14
471
Oklahoma
7
(2)
1,885
7
Oregon
1,304
19
South Carolina
569
562
209
35
64
324
Virginia
40
2
113
23
West Virginia
62
4
47
1
1
(1)
(2)
Average payment
Total
$46.34
$40.36
$56.87
$56.14
Alabama
Alaska
39.41
36.95
42.40
50.86
59.96
Arizona
59.17
73.19
57.81
Colorado
(3)
Education and Welfare, Social Security Administration, Social Security Bulletin,
* The preceding tables were taken from, U.S. Department of Health,
44.65
81.59
41.24
20.11
Connecticut
37.84
57.79
Florida
76.34
49.07
74.48
67.27
46.85
77.67
November 1975. Vol. 38 No. 11. U.S.G.P.O. Washington, D.C.
Idaho
39.80
37.68
35.92
54.96
Illinois
30.35
29.88
77.99
40.45
Kentucky
85.80
65.99
Minnesota
77.19
75.96
76.69
48.40
Missouri
61.30
79.65
64.00
49.44
36.34
59.48
Nebraska
34.25
69.87
New Hampshire
38.98
31.99
41.98
44.45
New Mexico
44.68
43.58
32.15
47.53
61.23
North Carolina
North Dakota
113.18
112.97
82.73
Oklahoma
24.65
117.31
23.39
(3)
Oregon
25.95
26.37
25.49
27.25
28.26
27.04
South Carolina
24.19
49.31
79.62
30.15
Virginia
79.75
66.72
36.91
80.87
West Virginia
41.08
30.91
27.48
32.99
27.00
3
(3)
for Maryland. data subject to revision. Excludes optional supplementation data
States. 1 Data All reported to the Social Security Administration by individual
2 Less than $500.
8 Not computed on base of less than $500.
- 52 -
- 53 -
SUMMARY OF STATE SSI SUPPLEMENTATION FOR THE AGED, EFFECTIVE JULY 1, 1974
pplemental payments to aged recipients with no countable income and no special needs are shown below
payment amounts.' State payment amounts may actually vary for individual recipients because of
Table 10 Cont.:
ayments made by the State under former or current State programs. The supplement is shown as "none"
payment equals or exceeds State minimum required or optional payment levels for recipients without
SUMMARY OF STATE SSI SUPPLEMENTATION FOR THE AGED, EFFECTIVE JULY 1, 1974-Continued
State payment amounts
State payment amounts 1
Recipients
Administration of
transferred
Newly eligible
Administration of
Recipients
State supplements
from State rolls
recipients
State supplements
transferred
Newly eligible
from State rolls
recipients
Manda-
Indi-
Indi-
Manda-
State
tory
Optional
State payment categories
viduals
Couples
viduals
Couples
Indi-
tory
Optional
State payment categories
Indi-
viduals
Couples
viduals
Couples
Michigan
Federal
Federal
Living independently
$14
$21
$14
$21
State
State
Living independently
In household of another
9
14
9
14
None
$11
None
In nursing or foster care home
$11
2 81
Domiciliary care
72
217
72
217
State
State
2 $4
Living independently and actual cost
2 $4
281
Personal care
132
337
132
337
of shelter is:
In home for aged
(3)
(3)
(3)
(3)
Less than $35
39
Minnesota
Federal
State
Living independently
32
39
39
66
39
$35 or more
66
104
131
104
131
Mississippi
Federal
None
Living independently
None
None
None
None
Room and board (individual)
104
(3)
Missouri
State
State
Living independently
None
None
None
None
State
State
104
Living independently
(3)
None
None
None
None
In licensed domiciliary nursing home.
2 150
$ 300
150
300
Federal
Living independently
None
Federal
None
In licensed practical or professional
2 200
2 400
200
2 400
Federal
10
None
Living independently.
None
89
221
Out-of-home care
89
nursing home.
221
137
347
137
Montana
Federal
Federal
Living independently
None
None
None
None
In household of another
347
94
229
Adult foster care home or home for
49
171
49
171
94
Living independently without cook-
229
114
271
114
disabled.
ing facilities.
271
Licensed rest home with boarding
4
81
4
81
State
State
Living independently
State
19
State
111
19
Living independently
111
care.
Federal
92
Federal
67
92
67
Nebraska
State
State
Living independently
67
70
67
70
Living independently
4
29
None
Individual and essential person
140
(3)
140
(3)
Adult foster care.
None
63
199
63
199
Room and board
254
179
254
179
Federal
Federal
Living independently
None
None
None
Adult foster home
269
*209
*69
209
Living in foster care home
None
Federal
24
None
121
24
121
Nevada
Federal
Federal
Living independently
39
79
39
79
Living independently
Federal
None
None
None
Living independently
None
None
In household of another
26
53
26
53
None
None
None
None
Domiciliary care
110
293
110
293
Federal
Federal
Living independently
27
41
27
24
41
New Hampshire
State
State
Living independently
27
9
16
In household of another.
2
3
2
3
Individual and essential person
89
(3)
89
(1)
In public housing
6
9
6
9
Individual in supervised living ar-
47
(2)
47
(a)
With ineligible spouse in household
43
of another.
(3)
43
(3)
rangement.
New Jersey
Federal
Federal
Living independently
36
31
36
31
With ineligible spouse in own house-
87
(8)
87
Licensed boarding home
44
161
44
161
hold.
(3)
With ineligible spouse
104
(3)
104
(3)
In domiciliary care
102
277
102
277
With others (1 of 2)
26
75
26
75
In domiciliary care II
152
377
152
377
With others (3 or more)
1
35
1
35
In domiciliary care III
State
214
State
501
214
501
New Mexico
State
None
Living independently
None
None
None
None
Living independently
54
30
54
30
New York
Federal
Federal
Living independently
61
76
61
76
Federal
State
Living independently
Federal
29
None
None
29
Living independently
None
Living with others
8
27
8
27
Federal
None
None
None
None
In household of another
14
35
14
35
Federal
Living independently
None
None
None
Living with dependent person
None
Congregate care:
73
(3)
73
(3)
Level
In licensed adult foster or boarding
44
181
44
181
Area A
134
341
134
341
home.
Area B
79
231
79
231
Custodial care (licensed private
104
301
facility).
104
301
Area C
79
231
79
231
Level II
229
531
229
531
In State). family life home (approved by
34
161
34
161
Level III:
Federal
Area A
493
1,059
493
1,059
None
Living independently
57
469
State
State
23
Living independently
None
None
Area B
469
1,011
1,011
None
None
None
None
Area C
154
381
154
381
In personal care facility (nontitle
North Carolina
State
State
Living independently
None
None
None
None
XIX):
With ineligible spouse or essential
4
(3)
4
(a)
Class
91
255
Class II
91
256
person.
76
225
76
225
Domiciliary group care (nontitle
113
299
2113
299
Class III
61
195
In licensed mini-home (serving 3 or
61
195
XIX).
23
119
23
119
Attendant care at home
279
:41
279
141
fawer).
North Dakota
State
State
Living independently
None
None
None
None
Caretaker required in home
23
53
23
And with ineligible spouse
53
Ohio
Federal
None
Living independently
None
None
None
None
Federal
88
None
Living independently
(3)
88
(3)
Oklahoma
State
State
Living independently
15
30
15
30
Federal
None
Federal
None
None
None
In household of another
15
30
15
30
Living independently
10
15
Living with others
10
15
In health facility recognizing medic-
40
80
40
80
8
12
In household of another
8
12
aid payments.
8
12
8
12
Meals at restaurant
30
60
30
60
Foster or licensed boarding home: I.
64
201
64
Oregon
State
17
Licensed boarding home: II
201
State
Living independently
17
17
17
Federal
79
None
231
Living independently
79
231
With ineligible spouse or essential
90
(3)
90
(3)
Federal
None
Federal
None
None
Living independently
None
person.
123
191
Shared living expenses
123
191
Pennsylvania
Federal
Federal
Living independently
20
30
20
30
59
191
59
191
In household of another
20
30
20
30
In household of another
95
185
95
Boarding
185
With 1 essential person
30
45
None
None
71
191
Domiciliary care
71
191
With 1 essential person in household
30
45
None
None
196
465
196
465
of another.
Rhode Island
Federal
Federal
Living independently
37
68
37
68
In household of another
43
76
43
76
South Carolina
Federal
State
Living independently
None
None
None
None
South Dakota
Federal
None
Living independently
44
11
None
None
Tennessee
Federal
None
Living independently
None
None
None
None
Texas
None
None
Living independently
None
None
None
None
Utah
Federal
None
None
ables are taken from, Congress of the United States,
Living independently
None
None
None
mmittee, Subcommittee on Fiscal Policy, Studies in
ngton, D.C. pages 135-139.
Handbook of Public Income Transfer Programs: 1975",
- 54 -
- 55 -
OF STATE SSI SUPPLEMENTATION FOR THE AGED, EFFECTIVE JULY 1, 1974-Continued
Table 11 :
SUMMARY OF STATE SSI SUPPLEMENTATION FOR THE BLIND AND DISABLED, EFFECTIVE JULY 1, 1974
State payment amounts
[Monthly State supplemental payments to blind and disabled recipients with no countable income and no special needs are shown below in columns, "State payment amounts to blind (disabled).' when State Federal pay-
base payment equals or exceeds State minimum required or optional payment levels for recipients without special needs. Payments to couples may also vary when the category (aged, blind, or disabled) of
ment amounts may actually vary for individual recipients because of special needs payments made by the State under former or current State programs. The supplement is shown as "none"
Recipients
eligibility of the spouses differ.]
Administration of
transferred
Newly eligible
State supplements
from State rolls
recipients
State payment amounts to blind
State payment amounts to disabled
Manda-
Indi-
Indi-
Administration of
Recipients transferred
Newly eligible
Recipients transferred
Newly eligible
Optional
State payment categories
viduals
Couples
viduals
Couples
State supplements
from State rolls
recipients
from State rolls
recipients
State
Mandatory
Optional
State payment categories
Individuals
Couples
Individuals
Couples
Individuals
Couples
Individuals
Couples
Federal
Federal
Living independently:
Area
$29
$41
$29
$41
Area
2
Alabama
State
State
Living independently
None
$31
None
$31
None
None
None
None
49
61
49
61
In Nursing or foster care home
$ $4
$81
$ $4
$ 81
$ $4
3 $81
$ $4
3 $81
Living independently with essential
California
Federal
Federal
Living independently
119
311
119
311
89
221
89
221
person:
And without cooking facilities
119
311
119
311
114
271
114
271
Area
114
126
114
126
Out-of-home care
137
347
137
347
137
347
137
347
Area 2
134
146
134
146
In household of another
124
319
124
319
94
229
94
229
In household of another
23
29
23
29
Disabled minor in house of parent/relative
(4)
(4)
(4)
(4)
(4)
(4)
67
(4)
In household of another with essen-
78
114
78
114
Colorado
State
State
Living independently
9
91
9
91
9
91
9
91
tial person.
Individual with essential person
$ 74
(4)
$ 74
(4)
374
(4)
374
(4)
307
$ 225
$ 307
In custodial care facility:
Home care
225
307
225
307
225
Licensed
84
241
84
241
Delaware
Federal
Federal
Living independently
8
8
8
8
None
4
None
None
59
Adult foster care.
(a)
63
199
63
199
Unlicensed
59
191
191
None
Indiana
Federal
None
Living independently
None
69
None
None
None
None
None
State
None
Living independently
6
None
None
None
lowa
Federal
Federal
Living independently
18
18
36
None
None
None
None
Federal
Federal
Living independently:
In household of another
18
36
18
36
None
None
None
None
Area
30
33
30
33
Area 2
16
6
16
6
Living with dependent person
91
(4)
91
(4)
73
In household of another: Areas 1
12
14
12
14
In licensed adult foster or boarding home
(4)
73
44
(4)
181
44
181
44
Custodial care (licensed private facility)
181
44
181
and 2.
104
301
104
301
104
301
In family life home (approved by State)
104
301
With ineligible spouse or essential
34
Massachusetts
Federal
161
34
Federal
161
34
Living independently
161
34
146
161
person:
365
146
365
Shared living expenses
113
175
113
175
Area
106
(3)
106
146
365
146
365
51
Living in household of another
175
51
175
Area 2
79
79
195
438
195
438
Boarding
83
170
83
170
146
365
146
With ineligible spouse or essential
14
365
59
(3)
175
(3)
(3)
Domiciliary care
59
175
person in household of another:
Missouri
146
State
365
State
146
365
202
Living independently
477
202
477
None
10
None
10
None
In licensed domiciliary nursing home
None
None
Areas 1 and 2.
150
None
$300
$ 150
$ 300
3 150
300
In licensed practical of professional nursing
$ 150
Board and room: Areas 1 and 2
3
71
3
71
$ 200
300
$ 400
$ 200
$ 400
Adult family home: Areas 1 and 2
home.
$ 200
$ 400
$ 200
$ 400
56
186
56
186
Nevada
Federal
Federal
State
None
Living independently
None
None
None
None
Living independently
69
211
69
211
In household of another
(6)
(6)
(6)
Federal
Federal
Living independently
70
110
70
110
118
284
284
Domiciliary care
In household of another
75
118
75
118
North Carolina
State
291
109
State
291
Living independently
(6)
(6)
GGG
(6)
118
109
(c)
None
Federal
None
None
None
None
Living independently
None
None
None
None
None
With ineligible spouse or essential person
None
None
None
10
(4)
10
Domiciliary group care (non-title x1x)
(4)
4
(4)
4
3
113
299
$113
(1)
299
Attendant care at home
$113
#299
3113
299
$ 94
$11
$ 94
$11
$79
$6
recipients, add Federal SSI payment of $146 for individuals and $219 for couples, except if living
Oregon
State
State
Living independently
$79
$6
37
29
37
29
17
With ineligible spouse or essential person
17
17
102
17
add reduced (because of income in kind-room and board) Federal SSI payment of $97 for
South Carolina
Federal
State
(4)
102
(4)
Living independently
90
(4)
90
None
1
€
couples. In the case of transferred recipients with essential persons, an additional Federal pay-
Utah
None
Federal
None
None
None
Living independently
None
None
None
if living "in household of another") will be made which may reduce the State supplement.
None
43
None
None
None
None
None
None
rounded off; e.g., 51 cents or more is raised to $1.) The amounts specified in this table are
further supplemented on a special needs basis in some States, or may be based on specific
1 For States not listed, the blind and disabled supplement is the same level as for the aged in table 9.
to special exceptions or to special provisions for "essential persons. In North Dakota and
$ Table 10 displays the supplementation levels for the blind and disabl ed in only those States where
3 Up to.
the State supplemental payment levels to these recipients differ from the supplements to the aged.
Not applicable.
of aged persons living independently is optional by counties. Texas has no mandatory
For source and footnotes, see table 9.
Same as for aged.
it was excepted from the mandatory provision because of State constitutional barrier. Rate
Nevada has had no APTD program.
hange over time. For further details see source or inquire with State agencies.
of Health, Education, and Welfare, Social Security Administration, Bureau of Supplemental
Blind and Disabled, "Summary of State Supplementation and Medicaid Decisions,' June 26,
- 57 -
HEALTH CARE PROGRAMS
9. MEDICARE--HOSPITAL INSURANCE*
A. Legislative Objective: To provide basic protection against costs
of inpatient hospital and certain post-hospital services for eligible
individuals.
B. Governing Regulations: Title XVIII of the Social Security Act.
C. Administering Agency: The Social Security Administration of the
Department of Health, Education and Welfare, with the assistance of
other Federal agencies, state health agencies and private insurance
companies.
D. Financing: The hospital insurance part of the Medicare program is
financed by payroll taxes paid half by employer and half by the
employee. The tax rate of 0.9% (1.8% combined rate for employee and
employer) is applied to all earnings up to $15,300 effective as of
January 1, 1976. Self-employed persons pay 0.9% on the same amount.
E. Population Coverage: National coverage.
F. Types of Assistance: Insurance.
G. Uses and Use Restrictions: Hospital insurance benefits are paid to
participating hospitals and other medical facilities to cover the
cost of medical services provided to eligible individuals.
H. Eligibility Requirements:
(1) Categorical Requirements: The following individuals are eligible
to receive benefits: (1) persons aged 65 or over and receiving
or entitled to receive social security or railroad retirement
benefits, either as an insured worker or eligible survivor or
dependent of an insured worker; and beginning July 1, 1973, (2)
persons who are not yet 65 years old but have been entitled to
social security or railroad disability benefits for at least 24
consecutive months; and (3) persons under age 65 suffering from
permanent kidney failure.
Information for this program description was taken from U.S. Department of
Health, Education and Welfare, Social Security Administration, Social Security
Handbook, February 1974, U.S. G.P.O., Washington, D.C., 1974, and U.S. House
of Representatives, Committee on Ways and Means, The Social Security Act as
Amended Through January 4, 1975 and Related Laws, U.S. G.P.O., Washington,
D.C., 1975.
- 58 -
- 59 -
In addition, persons reaching age 65 before 1968 who had insuf-
nursing facility services. The deductible amount is recomputed
ficient coverage for receipt of cash social security or railroad
each year based on the following formula: $40 multiplied by (the
retirement benefits, are eligible for medicare benefits. Persons
average per diem rate for inpatient hospital services for the
reaching age 65 after 1967 and having three quarters of covered
preceding calendar year divided by $37.92, the average per diem
employment 1975 (whenever acquired) for each year after 1967 (until
rate for such services in 1966).
for men and 1974 for women) are also eligible. Persons 65
and over not eligible under any other provisions may buy hospital
(2) Relationship of benefit amounts to family size: None. Benefits
insurance coverage by paying $45 per month (in 1976). Premium
are determined on an individual basis.
payments are redetermined annually according to the following
formula: $33 X (the inpatient hospital deductible for the next
(3) Relationship of benefit amount to place of residence: None.
year divided by $76).
(2) Income Tests: None.
(4) Relationship of benefit amount to cost of living changes: No
automatic increase. Benefit amounts are based on the cost of
medical services, thus as these costs increase benefits also
(a) Treatment of Earned Income: Not applicable.
increase.
(b) Treatment of Unearned Income: Not applicable.
(5) Current benefit amounts: Benefit amounts vary according to
(3) Asset Test: None.
medical service performed.
(4) Other Eligibility Conditions:
(6) Comparison to Poverty level: Not applicable.
(a) Work Requirements: None.
(7) Other Benefits/Related Programs: Hospital insurance deductibles,
coinsurances and monthly premiums for uninsured individuals may
be paid by States under the Title XIX (Medicaid) program.
(b) Citizenship: None for individuals with insured status. For
premium hospital insurance, the individual must be a resident of
J. Cost and Caseload Information: An estimated $10.3 billion in benefit
the United States and either a citizen or an alien admitted for
payments is expected to be made for approximately 24.2 million persons
permanent residence who has resided in the United States for at
in fiscal year 1975 (U.S. Department of Health, Education and Welfare,
least five years prior to application.
Social Security Bulletin, August 1975, Vol. 38, No. 8, U.S. G.P.O.,
(c) Residence Requirement: None.
Washington, D.C., page 4).
K. Interactions with Other Programs:
(d) Institutional Status: No limitation. Persons residing in
criteria. institutions may qualify if they meet all other eligibility
Program Eligibility: Medicare beneficiaries are automatically eligible
for enrollment in the Supplementary Medical Insurance program.
I. Benefits:
Program Income: Since there is no income test, income from other
(1) Determination of benefit amounts: Benefits are paid for most
programs is untaxed.
skilled the reasonable costs of inpatient hospital care and post-hospital of
for nursing facility care and post-hospital home health care
a benefit period. Inpatient hospital benefits are provided
lifetime reserve of hospital days may be utilized whenever
up to 90 days in each benefit period. In addition, a 60-day
A individual needs more than 90 hospital days in any benefit period. an
have or skilled nursing facility services and ends when such services
"benefit period" begins when an individual receives hospital
been terminated for 60 consecutive days. In 1976, the bene-
a ficiary $26 is responsible for a $104 inpatient hospital deductible,
per day coinsurance amount for the 61st-90th day of in-
patient and hospital care, $52 per day for lifetime reserve days,
a $13 per day coinsurance amount after 20 days of skilled
- 60 -
- 61 -
10. MEDICARE--SUPPLEMENTARY MEDICAL INSURANCE*
(b) Citizenship: None, if individual is entitled to hospital of
A. Legislative Objective: To establish a voluntary insurance program to
otherwise, individual must be a resident the
of cover physician's services and services provided by other suppliers
United insurance; States and either a citizen or an alien admitted for
medical services for those aged or disabled individuals or individ-
permanent residence.
uals suffering from permanent kidney failure who elect to enroll.
(c) Residence Requirement: See citizenship requirement.
B. Governing Regulations: Title XVIII of the Social Security Act.
(d) Institutional Status: Institutionalized persons are not
C. Administering Agency: The Social Security Administration of the
Department of Health, Education and Welfare, with the assistance of
precluded from enrollment.
other companies. Federal agencies, State health agencies and private insurance
I. Benefits:
D. Financing: SMI is financed from premium payments from enrollees and
(1) Determination of benefit amounts: Beneficiaries receive health are
services covered by the insurance. Excluded from coverage
from be Federal general revenues. The amount of the enrollee's
may Retirement deducted automatically from his/her Social Security or premium Railroad
services:
the benefits. The premium amount is redetermined annually by
(a) which are not reasonable and necessary for the treatment
July 1975 was $6.70 per month.
Secretary of HEW. The enrollee premium amount in effect as of
or diagnosis of illness or injury or to improve the
functioning of a malformed body member;
E. Population Coverage: Approximately 96 percent of the population
aged 65 and over were enrolled in the program in 1973. Ninety-three
(b) for which neither the individual nor any other person has
percent in of the eligible social security beneficiaries were enrolled
any legal obligation to pay;
the same year.
(c) which are paid directly or indirectly by a governmental
F. Types of Assistance: Insurance.
entity;
G. Uses and Use Restrictions: Benefits paid are for covered services
(d) which are not provided within the United States (except
for certain exceptions with respect to Canadian or Mexican
medical services.
provided to eligible persons by physicians and other suppliers of
hospitals);
H. Eligibility Requirements:
(e) which are required as a result of war;
(1) Every individual who: (1) is eligible for hospital insurance
(f) which constitute personal comfort items;
under enroll Medicare; or (2) has attained age 65, is eligible to
in the Supplemental Medical Insurance program.
(g) where such expenses are for routine physical check-ups,
eyeglasses or eye examinations for the purpose of fitting
(2) Income Tests: None.
or prescribing eyeglasses, immunizations, hearing aids or
examinations therefore;
(3) Assets Test: None.
(h) payments for orthopedic shoes;
(4) Other Eligibility Conditions:
(1) for the provision of custodial care;
(a) Work Requirements: None.
(j) for expenses of cosmetic surgery;
*Information Health, for this program description was taken from U.S.
(k) where such services constitute charges imposed by immediate
Handbook, Education and Welfare, Social Security Administration, Department Social of
relatives of such individual or members of his household;
Amended Representatives, Committee on Ways and Means, The Social U.S. as
of February 1974, U.S. G.P.O., Washington, D.C., 1974, and Security House
(1) for the care, treatment, filling, removal or replacement
D.C., 1975. Through January 4, 1975 and Related Laws, U.S. G.P.O., Security Washington, Act
of teeth;
(m) routine foot care;
- 62 -
- 63
(n) paid for workmen's compensation;
(o) paid for by Federal employee's health benefits program;
11. MEDICAL ASSISTANCE PROGRAM (MEDICAID)*
(p) statements performed for or or by an individual who has submitted
A. Legislative Objective: To permit States to provide medical assistance
to needy families with dependent children, aged, blind and disabled,
of customary charges; requests or for payment substantially in excess false
and to assist such families in achieving independence or self-care
through rehabilitation and other services.
(q) needs which of are the determined to be substantially in excess the
B. Governing Regulations: Title XIX of Social Security Act as amended;
a grossly inferior individual, quality. harmful to the individual or of of
Public Law 89-97; P.L. 90-248; P.L. 91-56; 42 U.S.C. 1396, P.L. 92-223;
P.L. 92-603; P.L. 93-233; P.L. 93-66, 45 CFR.
reimbursement Payment is made to directly the to the provider of the service
C. Administering Agencies: The Social and Rehabilitation Service of
in each services, after the first $60 percent of the
charges for individual for 80 reasonable or by
DHEW administers grants to States. In 42 States and the District of
Columbia, the administering State agency is the same agency which
calendar year for which the beneficiary of covered is responsible. expenses
supervises public assistance. In seven States the responsible agency
(2) determined Relationship of benefit amounts to family size: None. Benefits
is the Department of Health, and in one State a separate Medicaid
commission administers the program.
on an individual basis.
(3) Relationship of benefit amount to place of residence: None.
D. Financing: Federal matching funds are expended on an open-ended
basis from the general revenues with the Federal share ranging from
(4) Relationship fits can be expected of benefit to amount to cost of living
50 to 83 percent according to a formula relating state per capita
income to national per capita income.
services increase. increase as the "reasonable changes: charges" Bene- for
In addition the Federal government pays 75 percent of the costs of
(5) Current benefit amounts: Varies according to service performed.
compensating and training skilled professional medical personnel and
the staff supporting such personnel of public agencies; 100 percent
(6) Comparison to Poverty Level: Not applicable.
of the costs of compensating and training long-term care facility
inspectors; 90 percent of the costs of development and 75 percent of
(7) and Other coinsurance Benefits/Related amounts Programs: The monthly premium,
the costs of operation of management information systems; 90 percent
of the costs of family planning services; and 50 percent of other
program under the Supplementary deductible Insurance
administrative costs.
eligible may under be that paid program. under Title XIX (Medicaid) for Medical individuals
In 33 States and the District of Columbia the total non-Federal costs
J. disabled Cost and persons Caseload will Information: Approximately 23.4 million
of medical assistance payments are met from State funds, and in the
20 remaining States, State and local funds are used to defray payment
Social Security year 1975 (U.S. Department of Health, Education at $3.8 and billion for
fiscal receive benefits estimated aged or
and administration expenses.
Washington, D.C., Bulletin, page 4). August 1975, Vol. 38, No. 8, U.S. Welfare, G.P.O.,
E. Population Coverage: All States cover recipients of Aid to Families
with Dependent Children (AFDC); all but fourteen cover all aged,
K. Interactions with Other Programs:
blind and disabled recipients of Supplemental Security Income (SSI);
the other fourteen States limit coverage of SSI eligibles to persons
Program Eligibility: No automatic eligibility.
who can meet restrictive medical assistance standards. In addition,
Program Income: Does not tax away income from any source.
*Information for this program description was taken from U.S. Department of
Health, Education and Welfare, Social Security Administration, Social
Security Handbook, February 1974, U.S. G.P.O., Washington, D.C., 1974, and
U.S. House of Representatives, Committee on Ways and Means, The Social
Security Act as Amended Through January 4, 1975 and Related Laws, U.S.
G.P.O., Washington, D.C., 1975. Information on State financing and State
coverage were received on November 17, 1975 from the Medical Services
Administration of the Department of Health, Education and Welfare.
- 65 -
- 64 -
32 States cover the medically needy persons who are aged, blind,
(b) Persons eligible for but not receiving financial assistance
disabled or members of families with dependent children who are
under AFDC or SSI. (12 States)
ineligible for cash assistance but can not afford medical services.
(c) Essential spouses grandfathered in as being categorically
F. Types of Assistance: Formula grants to States.
needy in December 1973.
G. Uses and Use Restrictions: States must provide for the cash assistance
(d) Children under 21 residing in a foster home or institution
eligibles: in- and out-patient hospital services; laboratory and X-ray
and for whom a public agency is assuming some financial
services; skilled nursing home services; home health services for
responsibility. (32 States)
persons over 21; family planning services; physician's services; and
early screening, diagnosis and treatment for persons under 21. States
(e) All financially eligible children under 21. (18 States)
are required to provide any seven of the services for which Federal
financial participation is available to the medically needy.
(f) Those persons who are members of groups otherwise covered
for cash assistance whose income exceeds the cash assistance
H. Eligibility Requirements:
standards but are below a separate "medically needy" eligi-
bility level. (32 States)
(1) Categorical Eligibility:
(2) Income Tests:
Applicant Eligibility: All States choosing to provide Medicaid
programs must offer medical assistance to all AFDC recipients.
Categorically needy: Income limits are the same as those set by
States may choose to limit coverage of SSI recipients to those
the State or Federal government in the cash assistance program
persons who can meet more restrictive standards than those of
for which the applicant is categorically eligible (SSI or AFDC)
SSI, if these standards are no more restrictive than the medical
except in those States which use more restrictive medical assis-
assistance standards of the State which were in force on January
tance standards. In these States, persons with incomes above
1, 1972. Those 14 States limiting coverage in this manner must
the January 1972 medical assistance standard are eligible for
offer medical assistance to aged, blind and disabled persons who
Medicaid payments if they spend the excess income on medical
spend that amount of their income in excess of the standard on
expenses. Also, any SSI or State assistance they receive is
medical expenses. All aged, blind, disabled persons and essential
disregarded.
spouses who were eligible for Medicaid in December 1973 retain
this eligibility status as long as they continue to meet the
Medically needy: Federal payments are not available to any
December 1973 criteria.
family whose income exceeds 133 1/3 percent of the highest
amount normally paid in each State to an AFDC family of the
In addition, States are required to cover all persons who would
same size with no income or resources. Single individuals
be eligible for benefits except for an eligibility condition or
with incomes in excess of 133 1/3 percent of the highest amount
requirement specifically prohibited under title XIX.
paid (or which would be paid if the State covered such a family)
to an AFDC family of one, are ineligible for Federal matching
States are required to submit State plans which Social and
funds. Thus, the State-set "medically needy" income eligibility
Rehabilitation Services Regional Commissioners have the authority
levels must be within the Federal limit.
funds are awarded quarterly based on the State's estimate of
to approve or disapprove. Once a State plan has been approved,
The income level for the medically needy must be as high as the
funds needed to provide medical assistance,
most liberal payment standard since January 1966 or the level at
which Federal payments become available. A lower income level,
Beneficiary Eligibility: In addition to the persons described
related to costs of clothing and personal needs, is set for
above for whom the States are required to give medical assistance,
persons in institutions.
needy groups:
certain States have chosen to include the following categorically
(a) Treatment of Earned Income: See below.
(a) Persons in a medical facility who are not receiving financial
(b) Treatment of Unearned Income: See below.
assistance but who would be eligible if they did not reside
in such a facility. (30 States)
Categorically needy: Income is treated as it is under the SSI
or AFDC program, whichever is applicable. Income is reduced by
medical expenses in those States which utilize their January 1972
medical assistance standards.
- 66 -
- 67 -
Medically needy: Total gross earned and unearned income must
individual or family are deducted for purposes of determining
assistance programs, and medical expenses incurred by the
receive all the disregards aplied by the States under cash
(2) Relationship of benefit amount to family size: Not applicable.
eligibility for Medicaid benefits.
No recipients ever receive direct payments.
must The income be above the amount allowed as the "medically needy" level
(3) Relationship of benefit amount to place of residence: Benefit
this spent on medical expenses before benefits are received;
amounts vary by State because of differences in services provided,
feature of the program is known as the "spend-down."
costs of medical services, and types of persons covered.
(3) Asset Test:
(4) Relationship of benefit amount to cost of living changes: Some,
but not all, reimbursement payment levels tend to automatically
Categorically needy: Excludable resources and resource
reflect cost of living increases; this is also only partially true
under are the same as for determination of eligibility for limits
of eligibility levels. Generally, though, increases in either
of those the applicability assistance category, with the assistance exception
reimbursement rates or eligibility levels require positive action
States returning to their January 1, 1972 medical
by the State.
assistance standards.
(5) Current Benefit Amounts: Average monthly payments (in 1973) for
Medically as the needy: Retainable resources must be at least as
all persons age 65 or over was $154, with money payment recipients
The highest level used in SSI or AFDC, whichever is high
receiving $71 and non-recipients receiving $278.
size allowable level of liquid resources must increase as greater. family
increases. The 32 States which offer assistance
Source: Joint Economic Committee of the United States Congress,
medically liberal needy have adopted resource tests which are generally to the
Subcommittee on Fiscal Policy, "Handbook of Public Income Transfer
more programs. than those applicable under the cash assistance
Programs: 1975," Studies in Public Welfare, Paper No. 20, December
31, 1974, U.S. G.P.O., Washington, D.C., page 275.
(4) Other Eligibility Conditions:
(6) Comparison to Poverty Level: Not applicable.
(a) Work Requirements: None.
(7) Other Benefits/Related Programs: Medicare.
(b) Citizenship: None. However, recipients may be permanent
J. Cost and Caseload Information: Medicaid expenditures in 1974 were
residents of, or legally admitted aliens to, the United
$11.7 billion (Department of Health, Education and Welfare, Social and
States, and most States also require recipients to be
Rehabilitation Service, Medical Services Administration, November 17,
period" is imposed.
permanent residents of the State, even though no "waiting
1975).
K. Interaction with Other Programs:
(c) Residence Requirement: None.
Program Eligibility: No automatic eligibility for any other program.
(d) Institutional Status: Inmates of public nonmedical institu-
tions tions and individuals under 65 who are patients of institu-
Program Income: For the "categorically needy" segment of the popula-
that for tuberculosis or mental diseases (with the exception
tion, income is taxed under the same procedures as SSI or AFDC,
whichever is applicable.
mental persons under 21 years of age may receive in-patient
hospital care) are not eligible for medical benefits.
I. Benefits: to reimbursement Payments are made to providers of medical services according
regulations. schedules established by the States within Federal
(1) Determination of benefit amounts: Benefits are medical
services which are enumerated in the State's plan for which care
payment is made on behalf of eligible beneficiaries.
- 69 -
HOUSING PROGRAMS
12. LOWER INCOME HOUSING ASSISTANCE PROGRAM*
A. Legislative Objective: To aid low-income families in obtaining decent,
safe and sanitary housing in private accommodations and to promote
economically mixed housing through participating owners, developers
and Public Housing Agencies.
B. Governing Regulations: Housing Act of 1937, Section 8, as amended by
the Housing and Community Development Act of 1974, Public Law 93-383;
88 Stat. 662, 42 U.S.C. 1437f.
C. Administering Agency: Housing Production and Mortgage Credit/Federal
Housing Administration, U.S. Department of Housing and Urban Develop-
ment.
D. Financing: Annual Federal appropriation.
E. Population Coverage: Nationwide.
F. Types of Assistance: Project Grants.
G. Uses and Use Restrictions: At least 30% of the families assisted at
initial rent-up must be "very low-income families" defined as those
with less than 50% of the median income for the area. Project grants
are made through contracts with owners of existing housing or prospec-
tive owners who agree to construct or substantially rehabilitate
housing in which some or all of the units will be occupied by low-
income families.
H. Eligibility Requirements:
(1) Categorical Eligibility Requirements: Initial occupancy is
restricted to "lower income" and "very low income" families.
The term "families" includes single persons in such cases
where: (1) the individual is at least 62 years of age or a
disabled person (as defined by the Social Security Act) or a
handicapped person; (2) where the individual is a displaced
person; or (3) the individual is the remaining member of a
tenant family. The term "handicapped person" is defined as
a person with an impairment that: (1) is expected to be of
long-continued and indefinite duration; (2) substantially
impedes his ability to live independently; and (3) is of such
*Information for this program description was taken from Housing Assistance
Council Inc., "The Housing and Community Development Act of 1974: Implica-
tions for Rural America," October 25, 1974, Washington, D.C., and U.S.
Department of Housing and Urban Development, Housing Production and Mortgage
Credit, Federal Housing Administration, Notice HPMC-FHA 74-44, "Income
Limits, Sections 8-235-236," December 24, 1974, internal memo to all
Regional Administrators, Area Office Directors, Insuring Office Directors.
- 70
- 71 -
a nature that such ability could be improved by more suitable
For "very low income families" (those whose incomes do not
housing conditions. The term "displaced person" means a person
exceed 50 percent of the median income for the area) the
displaced by governmental action or natural disaster.
following income ceilings have been calculated as a percentage
of the 1974 estimated median family income:
The Department of Housing and Urban Development will provide
subsidy funds under one of several possible contracts arrange-
ments. The Secretary may contract directly with an owner or
prospective owner, or the Secretary may contract with a Local
Persons
Housing Authority which may in turn make a contract with the
per Family
12345678
owner or prospective owner. Owners of new or substantially
rehabilitated units are defined as any private person or
Percentage of
entity, or public housing agency having the legal right to
Median Family Income
30
40
45
50
54
58
62
66
lease or sublease the unit.
For new construction or substantial rehabilitation HUD can
contract directly with the owner or prospective owner or with
Recalculations of the median incomes for each area are to be
the Local Housing Authority (LHA). The contract for assistance
prepared annually as soon as appropriate data are available.
payments to the owner must be for at least one month, but no
more than 20 years (except for projects financed, guaranteed
(a) Treatment of Earned Income: Income is defined as income from
or owned by a State agency, in which case the contract can be
all sources of each family member residing in the household
for up to 40 years). The contract with the owner shall indicate
without deductions or adjustments.
that ownership, management and maintenance responsibilities shall
be assumed by the owner, except that it may be subcontracted to
(b) Treatment of Unearned Income: See (2a) above.
a public housing agency or other entity acceptable to HUD.
(3) Assets Test: None.
For existing units the contract for assistance payments is
restricted to 15 years. The sole right to give notice to vacate
(4) Other Eligibility Condtions:
is assumed by the public housing agency with the owner having
the right to make recommendations to the Local Housing Authority.
(a) Work Requirement: None.
Up to 100% of the units in a structure may be assisted under
(b) Citizenship: None.
Section 8. Housing assistance payments can be made only on
occupied units. However, payments may be made for unoccupied
(c) Institutional Status: Not applicable.
units for a period up to 60 days when a tenant vacates a unit
before expiration of the lease or where a good faith effort is
(d) Residence Requirement: Must reside in a housing unit covered
being made to fill the unit.
by the Section 8 housing program.
(2) Income Tests: For lower income families under Section 8 (those
I. Benefits: Benefits take the form of subsidies to cover the difference
whose income does not exceed 80% of the median income for the
between the family contribution for rent and the unit rental.
area), the income ceilings for various size families in each
area have been calculated as the following percentages of the
(1) Determination of benefit amounts: The rent to the owner cannot
1974 estimated median family income:
exceed the fair market rent by more than 10% (20% in certain
special circumstances). Fair market rent levels are determined
annually. The family must pay at least 15%-25% of gross income
as their contribution to the total rent. Large very low-income
Persons
families and those with exceptional medical expenses will pay 15%;
per Family
1
2
3
4
5
6
7
8+
other families pay 15% to 25% as determined by HUD. The Secretary
must take into consideration the number of children, level of
Percentage of
income, and extent of medical and other unusual expenses.
Median Family Income
50
64
72
80
85
90
95
100
(2) Relationship of benefits to family size: In determining the
percentage of gross income which the family must contribute to
rent, the size of the family is taken into consideration.
- 72 -
73
(3) Relationship of benefit amount to place of residence: Must reside
in an approved public housing unit in order to receive a benefit.
13. CONSTRUCTION LOANS FOR HOUSING FOR THE ELDERLY AND HANDICAPPED*
(4) Relationship of benefit amount to cost of living changes: Adjust-
A. Legislative Objective: To provide direct Federal construction loans
ments to the rent to the owner are authorized on an annual basis
for housing projects to serve elderly and handicapped families and
or more frequently to reflect changes in the fair market rents.
individuals.
Additionally special adjustments can be made to take into account
increases in operating expenses due to increased property taxes,
B. Governing Regulations: Section 202 of the Housing Act of 1959,
utility rates, and similar costs.
12 U.S.C. 1701q as amended by the Housing and Community Development
Act of 1974. At the time that Section 202 funds are approved, Section
(5) Current benefit amounts: Vary from family to family.
8 funds will be set aside. The Section 8 Housing Assistance Payment
Program was authorized by the U.S. Housing Act of 1937 as amended by
(6) Comparison to poverty level: Not applicable.
Section 201 of the Housing and Community Development Act of 1974.
Participation in the Section 8 program is required and approval of
(7) Other Benefits/Related Programs: Section 202 funds may be used
the Section 202 loan is subject to feasibility of a proposal under
to finance the construction phase of such housing projects that
the Section 8 program.
are sponsored by non-profit organizations and assisted under the
Section 8 Housing Assistance Payments Program. Section 8 allows
C. Administering Agency: Department of Housing and Urban Development,
financing by any of the programs authorized under the National
Housing Production and Mortgage Credit.
Housing Act, which includes Section 236.
D. Financing: Annual appropriations.
J. Cost and Caseload Information: Grants in fiscal year 1975 amounted
to $900 million. Estimated fiscal year 1976 obligations total
E. Population Coverage: Nationwide.
$662,300,000.
F. Types of Assistance: Provision of direct Federal construction loans
Source: Department of Housing and Urban Development, November 13,
to a non-profit corporation or non-profit consumer cooperative.
1975. It is estimated that a maximum of 400,000 housing units could
be made available to eligible families.
G. Uses and Use Restrictions: Loans can be used only to finance the
construction or substantial rehabilitation of projects for the elderly
K. Interactions with Other Programs:
and handicapped. The housing projects must be designed to provide a
range of the following services: health; continuing education; welfare;
(1) Program Eligibility: No automatic eligibility for other programs.
informational; recreational; homemaker; counselling and referral
services; as well as transportation where necessary to facilitate
(2) Program Income: Income from all other programs (with the excep-
access to services and facilities made available.
tion of the Food Stamp program) in excess of the allowable income
limits results in loss of initial benefits under the Lower Income
H. Eligibility Requirements:
Housing Assistance Program.
(1) Categorical Eligibility Requirements: Applicants must be
non-profit corporations or non-profit consumer cooperatives
approved by the Assistant Secretary for Housing Production and
Mortgage Credit as to administrative and financial capacity and
responsibility.
Tenants include elderly or handicapped families or individuals,
defined as: (a) families of two or more persons the head of which
(or his spouse) is 62 years of age or over, or is handicapped,
or (b) a single person who is 62 years of age or over or who is
*Information for this program description was taken from the Federal Register,
Wednesday, August 20, 1975, Vol. 40, No. 162, pages 36536-36543. In addition,
numerous unpublished HUD internal memorandums and reports were utilized.
- 74
- 75
handicapped. A "handicapped person" is any person having
(a) Treatment of Earned Income: All earnings except the earnings
an impairment which is expected to be of long-continued and
of eligible minors are included in countable income. In
indefinite duration, is a substantial impediment to his (or
addition to the exclusion of minor's earnings, a deduction
her) ability to live independently, and is of a nature that
of $300 for each eligible minor is allowed. Eligible minors
such ability could be improved by more suitable housing
are persons under 21 years of age related to the head of
conditions. A person shall also be considered handicapped if
the family by blood, marriage or operation of law excluding
he (or she) has a disability attributable to mental retardation,
spouse of head.
cerebral palsy, epilepsy, or another neurological condition
closely related to mental retardation, or to require treatment
(b) Treatment of Unearned Income: Unearned income includes all
similar to that required for mentally retarded individuals.
income, including that received by minors, (other than
earnings) from social security, disability, unemployment,
(2) Income Tests: Applicants must submit financial balance sheets
welfare or other sources. Unusual expenses for child care
and statements of income and expenses for each of the past five
or care of physically or mentally impaired dependents not
years. A minimum capital investment by the borrower of one-half
compensated for by insurance may be deducted.
of one percent of the total HUD Section 202 loan up to a maximum
of $10,000 is required, in cash or in-kind.
(3) Asset Test: Assets include combined assets of all members of
the household, related or unrelated, who will live in the unit.
Tenant families' incomes at the time of initial occupancy may not
Personal property such as furniture, clothing and an automobile
exceed 80 percent of median income for the locality as determined
are excluded. Estimated value of real estate based on original
by the Secretary with adjustments for smaller and larger families.
acquisition price minus any indebtedness is included. Outstanding
debts for food or medical expenses may be deducted. Cash on hand,
Income ceilings for various size families in each area have been
deposits in checking and savings accounts and stocks and bonds are
calculated as the following percentages of the estimated median
included. Assets may not exceed $2,000 in the case of non-elderly
family income:
applicants and $5,000 in the case of elderly applicants.
(4) Other Eligibility Conditions:
Persons
(a) Work Requirements: None.
per Family
1 2345678+
(b) Citizenship: None.
Percentage of
Median Family Income
50 64 72 80 85 90 95 100
(c) Institutional Status: Not applicable.
(d) Residence Requirement: Must reside in a Section 202 and
Section 8 approved dwelling.
"Very low income families" are defined as those whose incomes do
I. Benefits: Benefits to the builder include direct loans for construction
not exceed 50 percent of the local median income. These ceilings
or rehabilitation of housing units at an interest rate equal to the
are adjusted for family size according to the following:
average Treasury borrowing rate on debts with comparable maturities
plus an allowance to cover administrative costs and anticipated losses.
Tenants benefit from the housing assistance payments provided under
Persons
Section 8. These payments make up the difference between the approved
per Family
12345678+
rent for the unit and the amount the family will be required to pay,
which is not less than 15 percent or more than 25 percent of the
Percentage of
family's adjusted income.
Median Family Income
30 40 45 50 54 58 62 66
(1) Determination of benefit amounts: Benefits determined on an
individual basis.
(2) Relationship of benefits to family size: In determining the
percentage of gross income which the family must contribute to
rent, the size of the family is taken into consideration.
- 77
- 76 -
14. RENTAL AND COOPERATIVE HOUSING FOR LOWER INCOME FAMILIES*
(3) Relationship of benefit amount to place of residence: Must reside
A. Legislative Objective: To provide private enterprise with an additional
in a Section 202 and Section 8 approved dwelling.
means of developing good quality rental and cooperative housing for low
and moderate income persons by lowering their housing costs through
(4) Relationship of benefit amount to cost of living changes: Contract
interest reduction payments.
rents to the owner will be adjusted annually by the HUD established
Automatic Annual Adjustment Factor.
B. Governing Regulations: National Housing Act, as amended in 1968,
Section 236, Public Law 90-448; 12 U.S.C. 1715.
(5) Current benefit amounts: Not available. Program did not become
effective until September 1975.
C. Administering Agency: Housing Production and Mortgage Credit/Federal
Housing Administration, Department of Housing and Urban Development.
(6) Comparison to Poverty Level: Not applicable.
D. Financing: Loan insurance is provided through the special risk
(7) Other Benefits/Related Programs: Lower Income Housing Assistance
insurance fund. Interest reduction payments are met through
Program (Section 8).
appropriations from general revenues. Rents collected in excess
of basic rental costs are deposited in a fund for additional rent
J. Cost and Caseload Information: Congress authorized HUD to provide
supplement assistance.
$375,000,000 in loans during fiscal year 1976.
E. Population Coverage: National coverage.
K. Interactions with Other Programs:
F. Types of Assistance: The program consists of a combination of
(1) Program Eligibility: Eligibility for Section 202 benefits is
mortgage insurance and mortgage interest subsidy for housing lower
dependent upon eligibility for Section 8 benefits.
income families. The interest subsidy is paid directly to private
lenders to reduce interest to 1% to permit lower rents,
(2) Program Income: Includes income from all other sources excluding
food stamps and housing assistance payments.
G. Uses and Use Restrictions: Mortgages must be used to finance
construction or rehabilitation of rental or cooperative structures.
Projects must consist of five or more units of detached or semi-
detached row, walk-up or elevator-type structures which are primarily
residential. Housing site must be approved by the Department of
Housing and Urban Development. At least 20 percent of the units must
be allocated to projects for the elderly or handicapped and at least
10 percent of all funds must be used for rehabilitation projects.
H. Eligibility Requirements:
(1) Categorical Eligibility Requirements: To be eligible to apply
for and receive commitments for HUD-FHA-insured loans under
Section 236, a lender must be a HUD-FHA-approved mortgagee and
must be willing to receive monthly interest reduction payments
on behalf of the project mortgagors. HUD-FHA mortgage approval
*Information for this program description was taken from U.S. Department of
Housing and Urban Development, Housing Management, "Management of HUD-Insured
Multifamily Projects Under Section 221 (d) (3) and Section 236," October 15,
1974; U.S. Department of Housing and Urban Development, "Income Limits,
Sections 8-235-236," Notice to All Regional Administrators, Area Office
Directors and Insuring Office Directors, December 24, 1974; and several
unpublished, untitled internal HUD memos.
- 78
- 79 -
is not required in the case of State or local assisted projects
(d) Residence Requirement: Tenant must reside in a Section 236
not involving HUD-FHA mortgage insurance.
approved dwelling.
Sponsors may include non-profit, limited dividend and cooperative
I. Benefits: The benefit to the owner-mortgagor is a reduced interest
groups.
payment on an insured loan.
Eligible tenants include families or households defined as:
The tenant receives benefits in the form of increased availability of
(1) two or more persons related by blood, marriage or operation
housing at a reduced rent.
of law; or (2) a handicapped or elderly (age 62 or over) single
person.
(1) Determination of benefit amounts: The total amount of assistance
to the owner-mortgagor is based upon the difference between the
(2) Income Test: On admission, adjusted family income generally
monthly payments for principal, interest and mortgage insurance
cannot exceed 80% of the area median income adjusted according
premium and the monthly payments for principal, interest and
to the following table:
mortgage insurance premium which the project owner would be
obligated to pay if the mortgage were to bear interest at a rate
of 1% per annum.
Persons
The maximum mortgage is set at $12,500,000 with limited dividend
per Family
12345678
mortgagors eligible for 90% mortgages, non-profit organizations
and cooperatives eligible for 100% mortgage assistance.
Percentage of
Median Family Income
50
64
72
80
85
90
95
100
A "basic monthly rental charge" is established for each unit based
upon the payment of principal and interest due under a mortgage
bearing interest at the rate of one percent per annum. The
eligible tenant pays this "basic monthly rental charge" or 25%
of adjusted income, whichever is greater. The rent paid may never
Tenants with incomes above the allowable amount are permitted
exceed the market rent for the unit (where the market rent equals
occupancy if they pay the full market rent.
the cost of operating project plus payment of principal, interest
and mortgage insurance premium). In addition to the interest
Adjusted family income is gross annual income, less 5% (to account
subsidy, rent supplements may be used for low income families
for social security and other payroll deductions) minus earnings
with up to 40% of all units eligible for rent supplements. This
of eligible minors (where a "minor" is a member of the family
number has been administratively limited to 10% of all eligible
other than the spouse of the head, living in the household) minus
units. The rent supplement payment amounts to the difference
a $300 deduction for each minor.
between the basic rent and either 25% of tenant's income or 30%
of basic rent, whichever is greater.
(a) Treatment of Earned Income: All earnings except those of
minors are included in countable income.
(2) Relationship of benefits to family size: None.
(b) Treatment of Unearned Income: Unearned income includes
(3) Relationship of benefit to place of residence: Must live in
Social Security, disability, unemployment compensation,
a Section 236 approved dwelling in order to receive interest
welfare, and other unearned income (except Food Stamp
subsidy assistance.
bonus coupons), including that paid to minors.
(4) Relationship of benefit amount to cost of living changes: None.
(3) Assets Test: None,
(5) Current benefit amounts: Vary on an individual basis.
(4) Other Eligibility Conditions:
(6) Comparison to Poverty Level: Not applicable.
(a) Work Requirements: None.
(7) Other Benefits/Related Programs: Rent Supplement Programs, as
(b) Citizenship: None.
described above.
(c) Institutional Status: Not applicable.
- 80 -
- 81
J. Cost and Caseload Information: Through June 1974, 3,860 insured loans
for 416,954 units totalling mortgage commitments of $6,905,296,006
15. RENT SUPPLEMENT PROGRAM*
have been made. It should be noted that this program has been under
moratorium since January 5, 1973 and as such, no new applications are
A. Legislative Objective: To make good quality rental housing available
being considered.
to low-income families at a cost they can afford.
K. Interactions with Other Programs:
B. Governing Regulations: Housing and Urban Development Act of 1965 under
Section 101 of Title I--Special Provisions for Disadvantaged Persons.
(1) Program Eligibility: Tenants are automatically eligible for rent
supplement payments.
C. Administering Agency: Housing Production and Mortgage Credit/Federal
Housing Administration, Department of Housing and Urban Development.
(2) Program Income: Includes income from all sources (with the
exception of Food Stamp bonus amounts) in determining eligibility
D. Financing: Annual appropriations from the Federal budget.
for benefits.
E. Population Coverage: Nationwide.
F. Types of Assistance: Monthly Federal payment to owner of housing in
behalf of low-income tenants.
G. Uses and Use Restrictions: Housing units must be located in new or
substantially rehabilitated low-income housing owned by non-profit,
cooperative or limited-dividend organizations.
H. Eligibility Requirements:
(1) Categorical Eligibility Requirements: Eligible tenants include
low-income families and individuals who are eligible for public
housing and who are either displaced by governmental action,
62 years of age or older, physically handicapped, living in
substandard housing, or whose unit was damaged or destroyed
by natural disaster.
(2) Income Tests: Income may not exceed the maximum public housing
limit for the area. Authorized deductions include a $300
deduction per minor.
(a) Treatment of Earned Income: Includes all earned income
except that of minors (persons under age 21 related to the
head by blood, marriage or operation of law, excluding the
head of the household and his spouse).
(b) Treatment of Unearned Income: Includes unearned income of
all family members from all sources (with the exception of
Food Stamp bonus coupon amounts).
(3) Assets Test: Effective as of May 20, 1975, asset limits for
tenant eligibility for the non-elderly are set equal to the
dollar amount of the applicable income limit for the particular
*Information for this program description was taken from unpublished memos
from the Department of Housing and Urban Development and from The Federal
Register, Vol. 40, No. 93, Tuesday, May 20, 1975, Washington, D.C.
- 83 -
- 82
FOOD PROGRAMS
locality; asset limits for the elderly are set at three times
the dollar amount of the applicable income limit for the
16. FOOD STAMP PROGRAM*
particular area.
A. Legislative Objective: To permit low-income households to purchase
(4) Other Eligibility Conditions:
a nutritionally adequate diet and expand the market for domestically
produced food.
(a) Work Requirements: None.
B. Governing Regulations: Public Law 88-525; Public Law 93-86; Public
(b) Citizenship: None.
Law 93-335; Public Law 93-347.
(c) Institutional Status: Not applicable.
C. Administering Agency: Food and Nutrition Service of the United States
Department of Agriculture.
(d) Residence Requirement: Must reside in HUD approved housing
unit.
D. Financing: Benefits financed through open-ended Federal appropria-
tions; States and the Federal Government each pay 50 percent of total
I. Benefits:
administrative costs.
(1) Determination of benefit amounts: Eligible tenants must pay at
E. Population Coverage: Universal coverage, except for a few Indian Res-
least 25 percent of their adjusted income for rent. The rent
ervations that have chosen to retain the commodity distribution program.
supplement payment is the difference between the economic rent
of the unit and the tenant's contribution. In no instance can
F. Types of Assistance: Participants buy food coupons worth more than
the supplement be greater than 70 percent of the economic rent
the purchase price.
of the unit. As the tenant's income rises, the supplement is
decreased to the point where the tenant's income is sufficient
G. Uses and Use Restrictions: The food coupons can be used only for
to pay the economic rent.
purchase of food except alcoholic beverages and tobacco. Food coupons
may also be used to purchase plants and seeds for use in home gardens
(2) Relationship of benefits to family size: None.
to produce food for personal consumption. Persons over 60 who are
members of an eligible household or who live alone or only with their
(3) Relationship of benefits to place of residence: Must reside in
spouses and are disabled to the extent that they cannot prepare their
HUD approved housing unit.
own meals may use the stamps to purchase prepared meals as part of the
"meals on wheels" program. They may also use their food coupons when
(4) Relationship of benefit amount to cost of living changes: None.
participating in the Title VII, Older Americans Act, Nutrition Program.
(5) Current benefit amounts: Varies on an individual basis.
H. Eligibility Requirements:
(6) Comparison to Poverty Level: Not applicable.
(1) Categorical Requirements: Nonpublic assistance households must
meet the uniform national income and resource eligibility require-
(7) Other Benefits/Related Programs: Section 236, Rental and Coopera-
ments (see pages 86 to 90 for income standards). Households are
tive Housing for Lower Income Families.
eligible for benefits without regard to income and resource re-
quirements, provided that all household members are included in
J. Cost and Caseload Information: Estimated cumulative expenditures
the Federally-aided public assistance grant, general assistance
through fiscal year 1974 amount to $400 million for a total of 200,629
grant or Supplemental Security Income benefit. "Households" are
defined as all persons living as one economic unit, sharing common
units. It should be noted that this project has been under a morator-
cooking facilities and purchasing food in common. Students aged
ium since January 5, 1973 and as such no new applications are accepted.
18 or over who are claimed as tax dependents by an ineligible
household are not eligible for Food Stamps. Residents of a board-
K. Interactions with Other Programs:
ing house are generally ineligible except that elderly persons in
(1) Program Eligibility: No automatic eligibility for any other
congregate housing and drug addicts and alcoholics in private
nonprofit residential treatment centers are not precluded from
program.
participation.
(2) Program Income: Includes income from all other sources (except
the Food Stamp program) in determining eligibility.
*Information for this program description was taken from numerous publications
of the U.S. Department of Agriculture, Food and Nutrition Service.
- 84 -
- 85 -
(2) Income Tests: Separate maximum allowable monthly income standards
by household size are established for: (1) 48 States and the
an offer of suitable employment. Any narcotics addict or
District of Columbia; (2) Alaska; (3) Hawaii; (4) Puerto Rico;
alcoholic who regularly participates as a resident or non-
(5) Virgin Islands; and (6) Guam, to reflect differences in food
resident in a drug or alcoholic treatment and rehabilitation
prices. Income limits for nonpublic assistance participants are
program does not have to register for employment.
the higher of: (1) maximum allowable monthly income standards in
effect in the State prior to July 29, 1971; or (2) the uniform
(b) Citizenship: Must be a U.S. citizen or an alien admitted for
maximum allowable monthly income standards.
permanent residence.
Treatment of Earned and Unearned Income: Income is defined as any
(c) Institutional Status: Except for those exceptions noted
money received by any of the household members except students
above, institutionalized persons are precluded from participa-
under 18 years old. The following items are not considered income:
tion.
(1) irregular income not in excess of $30 in a three month period;
(2) in-kind income (except for an exclusion for $25 per month in
(d) Residence Requirements: Beneficiaries must be certified in
payments for housing); (3) loans, except deferred payment student
the Food Stamp project area in which they live.
loans; (4) certain relocation payments; (5) nonrecurring lump sum
benefits; (6) medical vendor payments; and (7) payments received
I. Benefits:
by volunteers for services performed in programs stipulated in
the Domestic Volunteer Service Act of 1973 (these include Foster
(1) Determination of benefit amounts: The benefit amount (bonus value)
Grandparents, Older Americans Community Service Programs, Retired
is equal to the difference between the cash value of the Food Stamp
Senior Volunteer Program, and Service Corps of Retired Executives,
and the purchase price of the stamp. (See pages 86 to 90.)
among others).
(2) Relationship of benefits to family size: Within a set net income
Deductions from income include: (1) ten percent of wage and
range the bonus value varies by household size with an increase in
salary income not to exceed $30 per month; (2) mandatory deductions
value as family size increases (see pages 86 to 90).
from income such as income and social security taxes and union
dues; (3) shelter costs in excess of 30 percent of household
(3) Relationship of benefit amount to place of residence: Benefit
income after all other deductions; (4) medical expenses in excess
amounts vary between (1) the 48 States and District of Columbia;
of $10 per month; (5) child care payments when necessary for the
(2) Alaska; (3) Hawaii; (4) Puerto Rico; (5) the Virgin Islands;
employment of a household member; (6) tuition and mandatory educa-
and (6) Guam, to reflect differences in the cost of living in
tional fees; (7) payor's court-ordered alimony and child-support
these areas.
payments; and (8) unusual and unanticipated expenses due to
disaster or casualty loss.
(4) Relationship of benefit amounts to changes in the cost-of-living:
Benefits are updated every January and July to reflect changes in
(3) Assets Test: Nonexcluded resources may not exceed $1,500 for a
the price of food as determined by the Bureau of Labor Statistics.
household, or $3,000 for households consisting of two or more
persons, one of whom is aged 60 or over. Resources include:
(5) Current Benefit Structure: See attached tables (pages 86 to 90).
cash, savings, checking accounts, U.S. savings bonds, stocks and
bonds, more than one licensed automobile, inheritances, prizes,
(6) Comparison to Poverty Level: Not applicable.
gifts, retroactive social security benefits, non-recurring lump
sum payments from insurance settlements, and any other resources
(7) Other Benefits/Related Programs: None.
not specifically excluded. Excludable resources include: the
home and lot, one licensed automobile, any unlicensed automobile,
J. Cost and Caseload Information: In Fiscal Year 1975 the estimated par-
cash value of life insurance policies, income producing property,
ticipation was 205,200,000 persons and the value of coupons issued was
personal effects and household goods.
$4,381,939,872. Estimates provided by the U.S. Department of Agricul-
ture, Food and Nutrition Service, Food Stamp Division, October 14, 1975.
(4) Other Eligibility Requirements:
K. Interactions with Other Programs:
(a) Work Requirements: Each abled bodied person between the ages
of 18-65 must register for work (except mothers or other
Program Eligibility: No automatic eligibility for any other program.
household members caring for dependent children under 18 or
incapacitated adults; students enrolled at least half time;
Program Income: Taxes all cash income (except that received from the
and persons working at least 30 hours per week) and accept
Senior Community Service Employment Program) above the allowable income
limit, at 100 percent.
- 86
- 87
Maximum Monthly Allowable Income Standards and Basis of
Maximum Monthly Allowable Income Standards
Coupon Issuance: 48 States and District of Columbia
and Basis of Coupon Issuance: Alaska
Maximum
Maximum allowable monthly
allowable
income standards-48 States
monthly
Household size:
and District of Columbia
income
One
$215
standards—
Two
300
Alaska
Three
427
Household size:
Four
540
One
1$ 254
Five
640
Two
393
Six
740
Three
567
Seven
833
Four
720
Eight
926
Five
853
Each additional member
+73
Six
980
1 Poverty guideline.
Seven
1,107
Eight
1,233
Each additional member.
+107
= Poverty Guideline.
MONTHLY COUPON ALLOTMENTS AND PURCHASE REQUIREMENTS- STATES AND DISTRICT OF COLUMBIA
Monthly coupon allotmenis and purchase requirements-Alaska
For household of-
For a household of-
1
2
3
4
5
6
7
8
1
2
3
4
5
6
7
S
Person
Persons
Persons
Persons
Persons
Monthly
Persons
Persons
Persons
person
persons
persons
persons
persons
persons
persons
persons
net Income
The monthly coupon allotment is-
Monthly net income
The monthly coupon allotment Is--
$48
$90
$128
$162
$192
$222
$250
$278
$64
$118
$170
$216
3256
$294
$382
$370
And the monthly purchase requirement is-
And the monthly purchase requirement is-
$0 to $19.99
0
0
0
0
0
0
$20 to $29.99
0
0
0
0
0
0
0
0
0
0
$0 to $19.99
0
0
$30 to $39.99
0
0
$20 to $29.99
1
0
0
0
0
4
4
5
5
$40 to $49.99
5
6
$30 to $39.99
4
4
4
4
5
5
8
$50 to $59.99
8
10
10
$40 to $49.99
7
8
10
11
11
$60 to $69.99
12
12
11
10
12
$50 to $59.99
8
10
10
10
12
12
13
13
14
14
$70 to $79.99
15
16
12
$60 to $69.99
10
18
14
14
15
16
15
16
16
17
17
$80 to $89.99
18
19
14
18
19
19
20
$70 to $79.99
12
16
17
19
21
$90 to $99.99
16
22
21
21
23
$80 to $89.99.
14
19
20
22
22
24
$100 to $109.99
18
26
24
26
27
$90 to $99.99
16
24
26
23
25
28
$110 to $119.99
29
21
26
27
$100 to $109.99
18
24
26
29
28
29
32
$120 to $129.99
33
24
29
30
26
34
$110 to $119.99
21
29
31
33
$130 to $139.99
36
27
32
33
34
36
37
38
$120 to $129.99
24
29
30
36
$140 to $149.99
39
30
35
36
37
39
40
41
$130 to $139.99
27
$150 to $169.99
33
42,
38
40
$140 to $149.99.
30
36
42
41
42
43
$170 to $189.99
36
45
44
46
$150 to $169.99
33
40
41
45
47
48
49
$190 to $209.99.
50
36
51
50
52
53
56
$170 to $189.99.
39
44
46
51
54
55
$210 to $229.99
57
38
56
58
$190 to $209.99
45
50
52
53
56
57
59
60
61
62
$230 to $249.99
63
62
64
65
69
$210 to $229.99.
50
56
58
59
63
66
67
68
$250 to $269.99
68
70
71
72
73
74
$230 to $249.99.
50
62
64
65
66
67
69
$270 to $289.99
75
70
76
77
$250 to $269.99
50
68
70
71
72
75
78
79
80
$290 to $309.99
81
70
82
87
$270 to $289.99
74
76
83
78
80
81
84
85
$310 to $329.99.
86
88
89
90
91
92
$290 to $309.99
80
82
83
84
85
86
87
$330 to $359.99
93
94
95
$310 to $329.99
86
88
93
96
97
98
$360 to $389.99
99
100
104
105
106
108
$330 to $850.99
92
94
95
96
97
98
99
107
$390 to $419.99
109
113
114
115
116
117
$360 to $339.99
92
103
104
105
108
107
108
$420 to $449.99.
110
122
$390 to $419.99
92
112
118
114
115
116
117
123
124
$450 to $479.99
125
126
131
132
135
$420 to $449.99
121
122
123
124
125
126
133
134
$480 to $509.99.
138
141
142
143
$450 to $479.99
130
131
132
133
134
135
$510 to $539.99
144
138
150
$480 to $509.99
139
140
141
142
148
144
151
$540 to $569.99
-152
153
138
159
160
161
162
$510 to $539.99
148
149
150
151
152
153
$570 to $599.99
164
169
$540.to $569.99
148
158
169
160
161
162
170
$600 to $629.99
171
164
178
$570 to $599.99
167
168
169
170
171
$630 to $659.99
179
180
164
187
188
189
$600 to $629.99
176
177
178
179
180
$660 to $689.99
190
197
$630 to $659.99
185
186
187
188
189
$690 to $719.99.
198
190
206
207
$660 to $689.99
188
195
196
N/Y
198
$720 to $749.99
190
214
$690 to $719.99
188
204
205
206
207
$750 to $779.99
216
$720 to $749.99.
188
213
214
216
216
$780 to $809.99
214
225
214
234
$750 to $779.99.
222
222
224
225
$810 to $839.99
214
238
$780 to $809.99
224
232
238
284
$840 to $869.99
238
$$10 to $839.99
234
241
242
243
$870 to $899.99
238
$840 to $869.99
224
250
264
262
$900 to 3929.99
238
$870 to $809.99
256
200
201
$900 to $929.99
258
209
270
$930 to $959.99
258
228
B79
$060 to $989.99
258
287
288
$990 to $1,019.99.
292
297
$1,020 to $1,049.99
282
806
$1,050 to $1,079.99.
292
815
$1,080 to $1,109.99.
202
324
$1,110 to $1,139.99
326
$1,140 to $1,169.99.
326
$1,170 to $1,199.99.
326
$1,200 to $1,229.99.
326
$1,230 to $1,259.99
826
Source: Federal Register, Vol. 40, No. 89, Wednesday, May 7, 1975.
Source: Federal Register, Vol. 40, No. 93, Tuesday, May 13, 1975.
89 -
- 88
Maximum Allowble Monthly Income Standards
Maximum Allowable Monthly Income Standards
and Basis of Coupon Issuance: Puerto Rico
and Basis of Coupon Inssuance: Hawaii
Maximum allowable
monthly income
standards—
Maximum allowable monthly
Household size:
Puerto Rico
income standards—
One
$215
Hawaii
Two
267
Household size:
Three
413
One
Four
527
¹ $240
Two
Five
627
386
Three
560
Six
720
Four
707
Seven
813
Five
Eight
907
840
Six
Each additional member
+73
967
Seven
1,087
1 Poverty Guideline.
Eight
1,207
Each additional member
"Income" as the term is used in the notice
+100
is as defined in paragraph (c) of $ 271.3 of
1 Poverty Guideline.
the Food Stamp Program Regulations.
Pursuant to section 7 (a) and (b) of the
Food Stamp Act, as amended (7 U.S.C. 2016,
Pub. L. 91-671). the face value of the monthly
coupon allotment which the State agency is
authorized to issue to any household certi-
fied as eligible to participate in the Program
Monthly coupon allotments and purchase requirements-Hawali
and the amount charged for the monthly
coupon allotment in Puerto Rico are as
follows:
For a household of-
1
2
3
4
5
6
7
person
8
persons
persons
persons
persons
persons
persons
persons
Monthly net income
Monthly coupon allotments and purchase requirements-Pusrio Rice
The monthly coupon allotment is-
$64
$116
$168
$212
$252
$290
$826
$362
For & household of-
And the monthly purchase requirement is-
1
2
3
4
5
6
T
8
person
persons
persons
persons
persons
persons
persons
persons
So $19.99.
0
0
0
0
$20 to $29.99
0
0
1
1
0
0
0
Monthly net income
The monthly coupon allotment is-
0
$30 to $39.99
0
0
4
0
4
4
$40 to $49.99.
5
5
$48
$86
$124
$158
$188
$216
$244
$272
6
7
$50 to $59.99.
8
8
10
10
10
$60 to $69:99.
10
12
13
12
And the monthly purchase requirement Is-
13
$70 to $79.99.
14
12
14
15
15
16
16
16
$80 to $89.99
14
17
18
18
$90 to $99.99.
20
$0 to $19.99
0
0
0
0
0
0
0
0
16
23
1
0
0
0
0
0
0
$100 to $109.99.
18
$20 to $29.99
1
24
$110 to $119.99
26
21
28
$30 to $39.99
4
4
4
4
5
5
5
5
$120 to $129.99.
$40 to $49.99
6
7
7
8
8
8
24
29
30
$130 to $139.99
$50 to $59.99
8
10
10
10
11
11
13
12
27
$140 to $149.99.
$60 to $69.99
10
12
13
13
14
14
15
16
30
35
36
$150 to $169.99.
40
$70 to $79.99
12
15
16
16
17
18
19
33
38
$170 to $189.99
$80 to $89.99
14
18
19
19
20
21
39
44
46
25
26
$190 to $209.99
$90 $99.99
16
21
22
45
50
52
53
$210 to $229.99
50
56
56
56
$100 to $109.99
18
24
58
59
$230 to $249.99.
60
50
$110 to $119.99
21
26
27
62
64
$250 to $269.99.
68
68
$120 to $129.99
24
29
31
70
71
33
39
$270 to $289.99
72
73
74
76
74
$130 to $139.99.
27
34
77
$290 to $309.99
78
79
80
$140 to $149.99.
30
35
36
37
42
80
82
83
$310 to $329.99
84
86
88
87
$150 to $169.99
33
40
41
45
86
89
$330 to $359.99.
90
46
47
88
94
92
95
$170 to $189.99.
36
44
51
$360 to $389.99
96
98
99
$190 to $209.99.
36
50
54
57
88
103
104
$390 to $419.99.
105
106
107
108
$210 to $229.99
38
56
68
112
113
114
115
116
117
$230 to $249.99.
64
65
69
$420 to $449.99.
121
122
$450 to $479.99
123
124
180
125
131
126
$250 to $269.99.
68
70
71
72
74
75
$480 to $509.99
182
139
134
140
135
$270 to $289.99
68
76
78
81
$510 to $539.99
141
142
143
144
$290 to $309.99.
82
84
86
87
146
149
$540 to $560.99
150
151
146
152
153
$310 to $329.99.
88
92
158
$570 to $599.99
159
160
161
162
$330 to $359.99.
94
96
98
167
$600 to $629.99
168
170
$360 to $389.99.
100
104
105
106
107
108
176
171
177
113
114
115
116
117
$630 to $659.99.
178
179
184
180
186
$390 to $419.99
109
$660 to 3689.99
187
188
189
122
123
124
125
126
184
195
$420 to $449.99.
$690 to $719.99
196
197
184
198
131
132
134
135
$450 to $479.99.
204
205
206
207
138
141
142
148
144
$720 to $749.99.
213
$480 to $509.99.
$750 to $779.99.
214
215
216
138
150
151
152
153
$510 to $539.99
220
223
224
159
160
161
162
$780 to $809.99.
225
$540 to $569.99
$810 to $839.99
220
232
233
234
164
169
170
171
220
$570 to $599.99
241
164
178
179
180
$840 to $869.90
242
243
$600 to $629.99.
$870 to $809.99
220
250
251
252
187
188
189
$630 to $659.99
$900 to $929.99.
254
260
190
197
198
261
$660 to $689.99
254
269
190
206
207
$980 to $959.99.
270
$690 to $719.99
254
278
190
214
216
$960 to $989.99
279
$720 to $749.99
214
225
$990 to $1,019.99
254
286
288
$750 to $779.99
286
214
234
$1,020 to $1,049.99
297
$780 to $809.99
$1,050 to $1,079.99
286
214
238
306
$810 to $839.99
286
238
$1,080 to $1,109.99
315
$840 to $869.99
$1,110 to $1,139.99.
286
288
318
$870 to $899.99
238
$1,140 to $1,109.99.
318
$900 to $929.99
$1,170 to $1,199.99.
318
$1,200 to $1,229.99
318
318
Source: Federal Register, Vol. 40, page 20840, May 13, 1975.
Source: Federal Register, Vol. 40, No. 93, Tuesday, May 13, 1975.
- 90 -
- 91
Maximum Allowable Monthly Income Standards
Maximum Allowable Monthly Income Standards and
and Basis of Coupon Issuance: Guam
Basis of Coupon Issuance: Virgin Islands
Maximum allowable
monthly income
standards-
Marimum allowable
Virgin Islands
monthly income
Household size:
Household size:
standards-Guam
One
$215
One
$240
873
Two
Two
393
Three
533
Three
567
Four
680
Four
720
Five
807
Five
853
Six
927
Six
980
Seven
1,047
Seven
1,107
Eight
1,167
Eight
1,238
Each additional member
+100
Each additional member
+107
1 Poverty Guideline.
3 Poverty Guideline.
Monthly coupon allorments and purchase requirements-Virgin Islands
Monthly coupon allotments and purchase requirements-Guam
For household of
For a household of-
1
2
3
4
5
6
7
8
1
person
persons
persons
persons
persons
persons
persons
persons
2
3
4
5
0
7
6
person
persons
persons
persons
persons
persons
persons
persons
Monthly net income
The monthly coupon allotment is-
-
Monthly net income
The monthly coupon allotment is-
$62
$112
$160
$204
$242
$278
$314
$350
$64
$118
$170
$216
$256
$294
$332
$370
And the monthly purchase requirement is-
And the monthly purchase requirement to-
$0 to $19.99
0
0
0
0
0
0
$0 80 $19.99
0
0
0
0
0
$20 to $29.99
0
0
B
$20 to $20.99
5
1
0
$30 to $39.99
0
0
0
30 to $39.99
4
4
5
40 to $49.90
$40 to $49.99
10
10
10
11
12
6
7
50 $0 $59.99.
$50 to $59.99
8
10
10
14
16
10
10
$60 to $69.99
12
160 to $09.99
10
12
12
16
19
15
70 to $79.99
$70 to $79.99
22
12
15
$80 to $89.99
$80 to $89.99
14
21
24
26
$90 to $99.99
$90 to $99.99
16
26
27
29
100
$109.99
$100 to $109.99
18
$119.99
21
26
27
28
31
33
$110 to $119.99
21
24
34
36
$129.99
$120 to $129.99
24
34
27
39
30
$130 to $139.99
3130 $139.99
27
$149.99
30
37
40
$140 to $149.99
30
35
41
43
15
$150 to $169.99.
$150 to $169.99
33
407
$170 to $189.99.
$170 to $189.99
39
$190 to $209.99
45
52
53
44
55
47
$190 to $209.99
45
50
$210 to $229.99
48
56
59
61
62
$210 to $229.99
50
56
62
64
65
37
68
$230 to $249.99
8260 to $249.99
68
71
72
78
74
50
62
64
$250 10 $269.99
$250 to $269.99
68
73
74
77
78
79
90
72
$270 to $289.99
$270 to $289.99
74
80
84
86
79
$290 to $309.99
$290 $309.99
80
83
86
89
90
91
92
85
$310 to $329.99
$310
$329.99
86
90
$359.99
86
94
95
96
97
98
$330 to $359.99
$330
92
96
$360 $389.99
86
108
104
105
106
107
DOB
94
97
$360 to $389.99
92
104
105
106
107
108
300 to $419.99.
112
113
114
115
116
117
103
$390 to $419.99
92
112
124
125
113
114
121
122
123
126
115
$420 to $449.99
116
117
$420 to $449.99
121
122
123
124
130
131
132
133
134
135
125
$450 to $479.99
128
$450 to $479.99
130
131
132
138
140
141
142
143
144
133
134
$490 to $509.99 99
135
$480 to $509.99
139
140
141
143
144
$539.99
188
149
150
151
152
158
142
$510 to $539.99
to
148
149
150
158
159
160
161
162
151
$540 to $569.99
152
158
1540 to $569.99
167
168
169
170
171
148
158
159
160
$570 10 $599.99
161
162
$570 te $599.99
167
168
169
176
177
178
179
180
$600 to $629.99
170
171
$600
$629.99
176
176
186
187
188
189
177
178
$630 to $659.99
179
180
$659.99
176
195
196
197
185
198
186
187
$660 10 $689.99
188
189
$660
$689.99
188
195
204
205
206
207
196
$690 to $719.99
197
198
$690
to
$719.99
188
204
210
205
214
215
216
$720 to $749.99
206
207
8720
$749.90
210
223
224
225
188
213
214
$750 to $779.99
215
216
1750
$779.99.
222
210
232
233
234
$780 10 $809.99
224
225
224
780
to
$809.99
241
242
243
232
$810 to $839.99
234
8810
$839.99
242
251
262
224
241
$840 to $869.99
242
343
$840 to $869.99
242
260
261
224
250
251
$870 10 $899.99
258
$870
$899.99
242
269
270
258
$900 to $929.99
260
261
$900 to $920.99.
274
279
258
$930 10 $959.99
269
270
$30 to $959.99.
274
288
258
$960 to $989.99 99
278
270
$060 to $989.99.
274
297
258
$990 to $1,019.99
287
288
990 50 $1,019.99
274
306
$1,020 to $1,049.99
292
297
$1,020 to $1,049.90
306
$1,050 to $1,079.99.
292
306
$1,050 to $1.079.99.
306
$1,080 to $1,109.99
292
315
$1,080 to $1,109.99
306
$1,110 to $1,139.99
292
324
$1,110 to $1,139.99
306
$1,140 to $1,169.99.
326
to $1,169.99
$1,170 to $1,199.99.
826
$1,200 to $1,229.99.
1,230 to $1,259.99
Source: Federal Register, Vol. 40, page 20841, May 13, 1975.
Source: Federal Register, Vol. 40, page 20838, May 13, 1975.
92
- 93
VETERANS PROGRAMS
effect under the new law covering those receiving income benefits
17. PENSIONS FOR VETERANS WITH NON-SERVICE-CONNECTED DISABILITIES*
that in after July 1, 1960. The old law imposes a $2,600 limit
on or unmarried veterans with no children and a $3,900 $3,000 on
limit on veterans with dependents. The new law imposes a
A. Legislative Objective: To assist wartime veterans who suffer from
married limit on veterans without dependents and a $4,200 limit on veterans
insufficient income and resources and permanent and total non-service-
connected disabilities.
with dependents.
(a) Treatment of Earned Income: See table below.
B. Governing Regulations: 38 U.S. Code Secs. 501-507, 521-523.
(b) Treatment of Unearned Income: See table below.
C. Administering Agency: The Veterans Administration, Department of
Veterans Benefits.
The definition of countable income under both the old and new laws.
following table shows the income included in the program
D. Financing: Open-ended Federal appropriations.
Congress of the United States, Joint Economic Transfer Committee,
E. Population Coverage: Nationwide.
Programs: Studies 1975," U.S. G.P.O., Washington, D.C., December 1974,
Source: in Public Welfare, "Handbook of Public Income 31,
F. Types of Assistance: Cash benefits.
pages 172-173.
Old law
New law
G. Uses and Use Restrictions: None.
Excluded
Excludes all income up to
(1) Income of spouse
$1,200, or the spouse's total
earnings, whichever is greater.
H. Eligibility Requirements:
Earned income included
Earned income excluded.
(2) Income of children
(3) Income of veteran:
Included
Included.
(a) Earnings
Included, except for insurance
Included, except for insurance
(b) Investments
dividends.
(1) Categorical Eligibility Requirements: Recipient must be a wartime
dividends.
(c) Gifts and inheritances
Included
Included, except for gift or
inheritance of property.
veteran discharged under other than dishonorable conditions after
at least 90 days of service (or separated from the service earlier
(d) Welfare:
(i)
Public assistance
Included
Excluded.
Excluded
Do:
because of a service-related disability) and permanently and
(ii) (iii) Private contributions for main-
VA pensions
Excluded, except for service-
Excluded, except for service
tenance.
man's family allowance.
man's family allowance.
Included
Excluded.
totally disabled from causes not traceable to the service.
v) Other public or private relief
(e) Retirement, disability, and survivors
Veterans age 65 years or older are considered to be permanently
benefits:
(i) Railroad retirement
Excluded
(See ii.)
(ii) Social security, public and
Benefits completely excluded
Same as old law for persons
and totally disabled. Active wartime duty includes the Mexican
private employee retire-
until employee's prior con-
entitled to such income on
tributions exceeded, 10 per-
December 31, 1964: 10 percent
border period, World Wars I and II, Korean conflict and the
ment systems.
cent of benefits excluded
exclusion applies to all such
thereafter; military retire-
income for other pensioners,
Vietnam era. The persons included in the filing unit are:
ment pay and other limited
including waived retirement
types waived are also ex-
pay except for waived military
eligible veterans and their spouses, dependents including children
cluded; excludes RSFPP
retirement.
annuities but not refunds.
(iii) VA compensation
Excluded
Excluded,4 except for W.W.I.
under 18, children over age 18 who became disabled before age 18,
adjusted compensation.
and children under age 23 attending school. A spouse is defined
(iv) Life insurance proceeds
Federal life insurance excluded;
Federal life insurance excluded;
10 percent of proceeds from
10 percent of proceeds from
as a wife or a dependent husband of a female veteran. A dependent
commercial policies excluded.
all other life insurance ex-
(v) Burial allowances, death gra-
Excluded, except for social se-
Excluded, cluded. except for death
husband is one who is incapable of self-maintenance and self-
curity lump sum death pay-
gratuity under Public Law
tuities.
support due to physical or mental disability. Wives of eligible
ment which is subject to only
89-214.
10 percent exclusion.
veterans need not be incapable of self-support.
(3) Income of veteran-Continued
included
Included.
(f) Unemployment benefits
Educational assistance allow-
Educational assistance allow-
(g) Stipends and allowances
ance in excess of amounts ex-
ance in excess of amounts ex-
(2) Income Tests: Two sets of income criteria currently exist--that
pended for training included;
pended for training included;
subsistence allowance
in-
subsistence allowance in-
cluded.
cluded.
in effect under the old law which covers those receiving pensions
Included.
Included
(h) Income in kind
Excludes mustering out pay,
Excludes State veterans bonuses,
prior to July 1, 1960 and electing to remain under that law, and
(i) Other income
State veterans bonuses, gov-
fire insurance proceeds, pay
ernment overtime pay, fire in-
for obligatory CIVIC duties,
surance proceeds, relocation
relocation payments.
payments.
(j) Income spent for:
(i) Unusual medical expenses.
Included
Excluded.
*The information for this program description was taken from: Congress of the
(ii) Final expenses.
Included.
Excludes expenses of last ill-
ness and burial of deceased
United States, Joint Economic Committee, Studies in Public Welfare, "Handbook
spouse of child.
of Public Income Transfer Programs: 1975," U.S. G.P.O., Washington, D.C.,
different program's income. Under the law, the program disregards all of wife earnings no matter how large year). This means that
The treatment of the income of a veteran's spouse permits the same pension payment (and to families if her of earnings vastly
December 31, 1974, pages 171-178; United States Code, Title 38, Secs. 510-512,
veteran with if no have no child-as one who together with his wife has no outside income 'Pensions at all. This for Widows and Children
are small, it income of his own whose wife earns $10,000 or $15,000 or more is eligible for the same preferential treatment
also disregards her unearned income SO long her total income is below $1,200 per pension- $2,064
521; Office of the Federal Register, Code of Federal Regulations, Title 38,
per of the year working they wife contrasts with the pension program's treatment of the widow (See
Revised as of July 1, 1974, U.S. G.P.O., Washington, D.C., 1974; Federal Reg-
of
ister, Thursday, September 26, 1974, Vol. 39, No. 188, U.S. G.P.O., Washington,
3 2 Veterans Veteran Retired Servicemen's may not receive Family both Protection military retirement Plan (U.S.C. and ch. pension 73). unless he has waived an amount of military pay equal
D.C., page 34529; and Veterans Administration, Federal Benefits for Veterans
to the amount of the pension. compensation and pension concurrently based on his own service record. Exclusion could another only
apply A veteran in an instance cannot receive when the beneficiary or another member of the family is also entitled to compensation on
and Dependents, U.S. G.P.O., Washington, D.C., January 1, 1975, page 5.
veteran's Rarely record. applied and does not include food stamps, medicaid or housing subsidies that are excluded under item (d).
- 95 -
- 94 -
Under the new law benefits depend on physical condition, number
(3) Assets Test: The old law did not impose any asset test. The new
law requires that the veteran's asset holdings be small enough
of dependents and countable income. Benefits are reduced by a
formula that imposes increasing marginal benefit-loss rates as
that the veteran could reasonably be expected to deplete his/her
countable income rises. If a veteran is in need of regular aid
holdings during the remainder of his/her lifetime. This conversion
and attendance he/she may receive an additional $123 in benefits,
is determined by the Veteran's Administration on the basis of:
if the veteran: (1) has a disability (in addition to the dis-
(1) income; (2) liquidity of assets; (3) constraints imposed by
ability which causes him/her to be permanently and totally dis-
community property laws; (4) veteran's life expectancy; (5) number
abled) which is independently rated at 60 percent or more; or (2)
of dependents; and (6) potential rate of depletion of the assets.
is housebound, he/she may receive extra cash benefits of $49 per
The veteran's home, lot and personal effects are the only excluded
items.
month.
(4) Other Eligibility Conditions:
(2) Relationship of Benefits to Family Size: Under the old law,
benefits do not increase with family size. Under the new law,
benefits are increased by $5 per month each for the second and
(a) Work Requirements: None.
third dependents but zero beyond that.
(b) Citizenship: None.
(3) Relationship of Benefits to Place of Residence: None.
(c) Institutional Status: Where the veteran is undergoing treat-
ment in an institution for an illness other than Hansen's
(4) Relationship of Benefit Amounts to Cost of Living Changes: No
automatic adjustments are made. Congress periodically increases
disease, his/her benefits will be reduced to $50 per month
on: (1) the day immediately following the first two full
benefits.
calendar months of care or treatment after the month of
admission or October 1, 1960, whichever is later; (2) the
(5) Current Benefit Amounts: Current benefit amounts for the new law
day of admission or readmission within six months following
are summarized in the following table.
two full calendar months of care or treatment after July 1,
Source: Veterans Administration, Federal Benefits for Veterans
1960; or (3) the day of readmission after return from trial
and Dependents, U.S. G.P.O., Washington, D.C., January 1, 1975,
visit where a previous reduction has been made. In addition,
payments for aid and attendance will be discontinued. Appor-
page 5.
tionments may be made to the veteran's wife and children
effective as of the date that the veteran's payment was
reduced. This apportionment generally amounts to the
difference between $50 and the rate payable during the first
two calendar months of care. The rate payable to a veteran
will be reduced to $30 per month or 50% of the amount other-
wise payable whichever is greater on the first day of the
seventh calendar month following admission.
Payments to veterans confined in penal institutions are dis-
continued on the 61st day of their incarceration but payment
may be made instead to the veteran's wife and children.
(d) Residence Requirement: None.
I. Benefits: Benefits take the form of cash payments.
(1) Determination of Benefit Amounts:
Benefits under the old law depend upon age, physical condition,
tenure as a veteran and presence or absence of dependents, and
whether or not the veteran is housebound or in need of regular
aid and attendance.
- 96 -
- 97 -
MONTHLY PENSION RATES FOR VETERANS
(6) Comparison to Poverty Level: The maximum new law benefit payment
Yearly
for a veteran with no dependents ($160 per month) amounts to about
Income not
Veteran
Veteran
Veteran
78 percent of the July 1975 poverty level for a single individual
more than
Veteran
Alone
3 Dep.
1 Dep.
2 Dep.
age 65 or over. The $182 maximum benefit for a veteran with three
or more
dependents amounts to approximately 41 percent of the July 1975
$300
$160
$172
400
$177
$182
poverty level for a non-farm male-headed family of four.
157
172
500
177
154
182
172
600
177
150
182
170
The basic monthly payment under the old law ($66.15) amounts to
700
175
146
180
168
800
173
approximately 29.5 percent of the July 1975 poverty level of a
142
178
165
900
170
175
single nonfarm individual under age 65. The increased benefit
138
162
1,000
167
level of $78.75 per month amounts to approximately 38.0 percent
133
172
159
1,100
164
128
169
of the July 1975 poverty level for an aged nonfarm individual.
156
1,200
161
123
166
153
1,300
158
118
163
150
1,400
155
(7) Other Benefits/Related Programs: Veterans may receive V.A. admin-
113
160
147
1,500
152
157
istered health services.
108
144
1,600
149
102
154
141
1,700
146
96
151
J. Cost and Caseload Information: In fiscal year 1974, payments amounted
138
1,800
143
90
148
135
to $1,475,547,381.
1,900
140
84
145
131
2,000
136
77
141
127
K. Interactions with Other Programs:
2,100
132
70
137
123
2,200
128
63
133
119
2,300
124
56
129
(1) Program Eligibility: Receipt of benefits under this program
115
2,400
120
48
125
111
confers upon recipients automatic eligibility for Veterans Hospi-
2,500
116
40
121
107
112
talization, Outpatient Care, Domiciliary Care, and Prescription
2,600
32
117
103
2,700
108
24
113
Service. Recipients are not eligible for military retirement
99
2,800
104
16
109
benefits or compensation payments.
95
2,900
100
8
105
91
3,000
96
5
101
87
(2) Program Income: The new law taxes benefits received from military
3,100
92
97
82
retirement at 100% in that the veteran may not receive both
3,200
87
92
77
3,300
82
87
military retirement and pension unless he has waived an amount of
72
3,400
77
82
military pay equal to the amount of the pension.
67
3,500
72
77
62
3,600
67
72
56
3,700
61
66
50
3,800
55
60
44
3,900
49
54
37
4,000
42
47
30
4,100
35
40
22
4,200
27
32
14
19
24
above that shown in the $100 increment levels.
An applicable formula will reduce pension for every dollar of income
Under the old law, basic benefits are set at $66.15 per month,
but are increased to $78.75 per month after continuous receipt
of the pension for 10 years or attainment of age 65. Veterans
who are blind or in need of regular aid and attendance may receive
a total payment of $135.45. Housebound veterans may receive a
total of $100 per month.
- 98 -
- 99 -
18. COMPENSATION TO VETERANS WITH A SERVICE-CONNECTED DISABILITY*
A. Legislative incurred because Objective: of military To compensate service. veterans for disabilities
(c) Institutional Status: After six
the benefits to a veteran are red
B. Governing Regulations: Title 38, U.S. Code, Chapter II.
50 percent of the benefit amount
ever is greater. If the veteran
C. Veterans Administering Benefits. Agency: The Veterans Administration, Department of
if he is hospitalized for Hansen
a penal institution, his benefits
I. Benefits:
D. Financing: Open-ended Federal appropriations.
(1) Determination of Benefit Amounts: The
E. Population Coverage: Nationwide.
mined by: (1) percentage of disability
impairment that such disability would
F. Types of Assistance: Cash benefits and services.
occupation; (2) marital status; (3) ni
(4) presence or absence of dependent
1
G. Uses and Use Restrictions: None.
special care or attendance; (6) loss (
H. Eligibility Requirements:
(2) Relationship of Benefit Amount to Fam:
extended to dependents only if the vet
(1) has Categorical Requirements: The individual who
compensation for a disability rated 5
dependent is lost due to death, marria
aggravated contracted an a disease, suffered a nonmisconduct must be a veteran
reduction does not occur until the end
charge existing injury in the line of injury or
as a wife, and dependents where dependents included are are:
eligible must veterans be other than dishonorable. Persons active duty. Dis-
(3) Relationship of Benefit Amount to Place
incapable children under age 18, children defined were
(4) Relationship of Benefit Amount to Cost
to 23 pursuing of self-support an before age 18, children over age from 18 who 18
governing legislation does not provide
dependent parents. education at an accredited institution, age and
ing adjustments; such adjustments must
(2) children. Income Tests: The None for a veteran, his wife/her
(5) Current Benefit Structure: Benefits
1
cent disability to $655 for a total d:
their eligibility income as dependents. of parents is considered in husband, determining and
limb, vision, hearing or creative organi
per month, per loss not to exceed $81
(a) Treatment of Earned Income: Not applicable.
with basic compensation unless the vet
ically legislated combinations of loss
(b) Treatment of Unearned Income: Not applicable.
benefit is $1,628 per month.
(3) Assets Test: None.
For dependents of veterans with a 100
veterans' benefits are increased thus
(4) Other Eligibility Requirements:
(2) wife and one child, $67; wife and
and three children, $105; with each ao
(a) Work Requirements: None.
an additonal $19; (3) children but no
$45 for two children, $67 for three, -
(b) Citizenship Requirements: None.
receiving an additional $19; (4) $32 1
(5) $61 for each child age 18-23 atter
*Information Congress of the for United this program States, description Joint was taken from: Title 38, U.S. Code;
For dependents of veterans with a part
50%, the dependents allowances are deo
Washington, Welfare, "Handbook D.C., of Public Income Transfer Economic Programs: Committee, Studies in Public
of disability.
January Benefits 1, for 1975. Veterans December and Dependents, 31, 1974; and U.S. Veterans G.P.O., Administration, Washington, 1975," U.S. D.C., Federal G.P.O.,
(6) Comparison to Poverty Level: Varies
As
ability and presence or absence of dej
(7) Other Benefits/Related Programs: See
- 100 -
- 101 -
J. 2,210,756 Cost and Caseload disabled Information: In June 1974,
Total benefits in 1974 veterans were estimated and 731,407 at dependents $3,172,909,000. benefits of disabled were paid veterans to
19. DEATH COMPENSATION AND DEPENDENCY AND INDEMNITY COMPENSATION TO SURVIVORS
OF VETERANS FOR SERVICE-CONNECTED DEATHS*
K. Interactions with Other Programs:
A. Legislative Objective: To compensate surviving spouses, children and
dependent parents for the death of a veteran from service-connected
Veteran's tion Program Care, Eligibility: Outpatient Veteran's Care, Domiciliary Automatically and Veteran's Care, eligible Veteran's Prescription for Nursing Veteran's Service. Home Hospitaliza- Care,
causes.
B. Governing Regulations: Title 38, U.S. Code, Chapters 11 and 13. Two
programs of compensation currently exist: Death Compensation, enacted
Program Income: Income received from other programs is not taxed.
in 1917; and Dependency and Indemnity Compensation (DIC) enacted in
1956. Dependents eligible for death compensation for deaths prior
to 1957 may elect to receive benefits under DIC program. The death
compensation program is only available to the eligible surviving
dependents of veterans whose service-connected deaths were prior to
January 1, 1957 and pays a flat rate compensation without regard for
the pay grade of the deceased veteran. Eligible survivors of veterans
whose service-connected deaths were after December 31, 1956, are en-
titled only under the DIC program which pays compensation based on the
pay grade of the deceased.
C. Administering Agency: The Veterans Administration, Department of
Veterans Benefits.
D. Financing: Financed through open-ended Federal appropriations.
E. Population Coverage: Nationwide.
F. Types of Assistance: Cash benefits and services.
G. Uses and Use Restrictions: None.
H. Eligibility Requirements:
(1) Categorical Eligibility: Beneficiaries must be a widow or a
widower, a child or dependent parent of a veteran whose death
was service-connected. Children are defined as all children
under 18 years of age, children 18-23 years of age attending
school, and children over 18 who were incapable of self-support
before attaining age 18. The dependency of parents is determined
by an income test.
(2) Income Tests: None for widows or children. Applies only to
parents. For death compensation countable income may not exceed
$205 per month for a mother and father living separately; $345
per month for a mother and father or remarried parent and spouse
*Information for this program description was taken from Title 38 U.S. Code;
Congress of the United States, Joint Economic Committee, Studies in Public
Welfare, "Handbook of Public Income Transfer Programs: 1975," U.S. G.P.O.,
Washington, D.C., December 31, 1974, pages 98-106; Veterans Administration,
Department of Veterans Benefits.
- 103 -
- 102 -
The maximum benefits for dependent parents are reduced by the
living together; and $95 per month for each additional dependent
following percentages of countable income effective as of
of the parent. Parents with income in excess of these limits,
January 1, 1975:
may be judged eligible for payments only if they are determined
to have inadequate income for "reasonable maintenance."
Annual
Annual
benefit-loss
benefits lost
rate within
when income
income
exceeds
Treatment of Earned Income: See following tables.
bracket
eligibility
(percent)
limits
Status of dependent parent and annual countable income
Treatment of Unearned Income: See following tables.
Single parent:
0 to $800
$801 to $1,000
$1,001 to $1,300
$1,301 to $1,500
Death compensation
Death and indemnity compensation
$1,601 to $1,800
$1,801 to $2,000
$2,001 to $3,000
Income of dependent parents:
$3,001 plus
(a) Earnings
Included
Included.
Two parents, living separately (each parent):
(b) Investments
Included except for insurance divi-
(1) 72 60 48 (1) (3) 0 0
$48
Included except for insurance dividends
to $800
dends.
Included
and capital gains on property sale.
$801 to $1,100
(c) Gifts and inheritances
Included.
(d) Welfare:
$1,101 to $2,100
$2,101 to $2,500.
(i) Public assistance
Excluded
Excluded.
$2,501 to $3,000
$48
(ii) VA pensions
do.
Do.
(iii) Private contributions
$3,001 plus
Excluded, except for serviceman's
Excluded,
except
for
serviceman's
Two parents living together (joint):
and maintenance.
family allowance.
family allowance.
(iv) Other public or pri-
$1,000
Excluded
Excluded.
vate relief.
$1,001 to $1,100
(e) Retirement, disability and
$1,101 to $2,500
survivors' benefits:
$2,501 to $3,500
(i) Railroad retirement,
Benefits completely excluded until em-
$3,501 to $4,200
$48
social security, pub-
Same as death compensation for per-
ployee's prior contributions ex-
$4,201 plus
lic and private em-
sons entitled to such income prior to
ceeded, 10 percent of benefits ex-
ployee retirement
Dec. 3, 1964; 10 percent exclusion
cluded thereafter; retirement pay
applies to all such income for other
waived also excluded: excludes
1 These annual rates $1 may more above the eligibility limits shown the annual residual benefits be lost well. bene-
be divided by 12 to yield benefit-loss rates applied each month to annual shown Income. are lost. If
systems.
pensioners; all waived retirement
RSFPP1 annuities.
(ii) VA compensation
pay excluded.
Excluded
ficiaries When also income qualified rises for the or $64 monthly aid and attendance allowance, $768 annually would as
Excluded, except for World War I
adjusted compensation.
Ineligible.
(iii) Life insurance pro-
Federal life insurance excluded; 10
ceeds.
Federal life insurance excluded; 10
percent of proceeds from commercial
percent of proceeds from all other
policies excluded.
(iv) Burial allowances
life insurance excluded.
Not applicable
and death gra-
Excluded, except for death gratuity
Source: Joint Economic Committee, "Handbook of Public Income
tuities.
under Public Law 89-214.
(f) Unemployment benefits
Included
Transfer Programs: 1975," page 101.
Included.
(g) Other income
Excludes mustering out pay, State
Excludes State Veterans' bonuses, fire
veterans' bonuses, fire insurance
insurance proceeds, pay for obliga-
(h) Income spent for:
proceeds, relocation payments.
tory civic duties, relocation payments.
DIC counts parents' income in the calendar year in which it is
(i) Unusual medical ex- Included
Excluded.
received. Accounting of income is based on an annual income
penses.
(ii) Final expenses-par-
do
Excludes costs of final illness, burial,
ents, spouse.
questionnaire. When conditions of entitlement change due to
and just debts of parents deceased
spouse.
changes in marital status, living arrangements or parents' income,
1 Retired Servicemen's Family Protection Plan (10 U.S.C. ch. 73).
benefits are continued at the same rate until the end of calendar
year, unless an upward adjustment in benefits is required.
(3) Asset Test: None.
(4) Other Eligibility Requirements:
Source: Joint Economic Committee of the United States Congress,
(a) Work Requirements: None.
Subcommittee on Fiscal Policy, "Handbook of Public Income Transfer
Programs: 1975," Studies in Public Welfare, Paper No. 20, December
(b) Citizenship Requirements: None.
31, 1974, U.S. G.P.O., Washington, D.C., page 100.
(c) Institutional Status: None.
Since January 1972, benefits for DIC parents have been adjusted
according to a sliding scale formula which imposes increasing
(d) Residence Requirement: None.
marginal benefit-loss rates as income rises but provides a minimum
payment when the maximum limit is reached. Consequently, the
I. Benefits:
first dollar gained above the maximum countable income limit
causes a net loss of $3 in monthly income.
(1) Determination of Benefit Amounts: Benefit payments are determined
according to: (1) number of eligible children; (2) sex and health
status of the surviving spouse; (3) number, marital status, health,
- 105 -
- 104 -
living arrangements and income of dependent parents; and (4) under
(6) Poverty Level: Varies according to family income, size,
the DIC program, the pay grade of the deceased veteran.
marital Comparison status, to and in the case of dependent parents,
marital status and living arrangements.
(2) Relationship of Benefit Amount to Family Size: Benefits vary
according to family size. See following tables, (page 106).
(7) Benefits/Related Programs: Widows and children assistance. entitled
Other to cash benefits are also entitled to educational
(3) Relationship of Benefit Amount to Place of Residence: None.
(4) Relationship of Benefit Amount to Cost of Living Changes: The
Dependency and Indemnity Compensation
legislation does not provide for automatic cost of living adjust-
Monthly Benefits, Effective August 1, 1975
ments; increases must be authorized by Congress.
(5) Current Benefit Structure: Monthly maximum benefits as of January
A. Widow, but no child -- based on pay
grade of deceased veteran as set forth below:
1975, for persons with no countable income, were as follows:
Monthly Rate Pay Grade
Monthly Rate
Pay Grade
W-4
$344
E-1
$241
0-1
304
(a) Death Compensation Program:
E-2
248
255
0-2
315
E-3
270
0-3
337
E-4
278
0-4
356
1. Widow with no child, $87;
E-5
0-5
392
E-6
284
0-6
441
E-7
298
0-7
478
2. Widow with one child, $121, with $29 per month
E-8
315
0-8
523
E-9
a329
additional for each additional child;
304
0-9
562
W-1
316
0-10
b615
W-2
W-3
326
3. Children without entitled widow, $67 for one child,
Marine Corps, senior enlisted advisor of the Navy, chief
Where veteran served as sergeant major of the Army or
$94 for two children, $122 for three children with
$23 per month for each additional child;
master sergeant of the Air Force, the widow's monthly
rate is $316.
Where veteran served as chairman of the Joint Chiefs
4. Dependent parents, $75 for a dependent mother or father,
of Staff or Chief of Army, Air Force, or Marine Corps,
$40 each for a dependent mother and father; and if
the widow's monthly rate is $660.
the widow or dependent parent is in a nursing home or
requires regular aid and attendance, an additional $64.
Additions: Widow with one or more children under 18 years of
age: $29 for each child.
Widow in nursing home or helpless or blind (or so
(b) Dependency and Indemnity Compensation:
nearly so as to require regular aid and attendance): $72
B. Where there is no widow, but there are entitled children:
1. Widow, from $241 to $615 per month depending upon the
Monthly Rate
deceased's pay grade, with an additional $29 for each
One child
$121
Two children
175
child;
Three children
More than three children
225 225 (plus $45 per month for
each child in excess of three)
2. Children without entitled widow, $121 for one child,
$175 for two children, $225 for three children, plus
Supplements rendered incapable of self-support before age $121 18 : $72
to Children:
$45 for each additional child. For an adult child
Child and child rendered incapable before age 18:
incapable of self-support before age 18, an additional
Widow Widow and child between ages of 18 and 23 attending school: $62
$72 per month is payable if there is no widow[er] entitled
to benefits. If a widow[er] is entitled, an adult child
who is incapable of self-support before age 18 is entitled
to $121 per month.
3. Dependent parents' benefits vary according to their income
with maximums of $123 for one parent, $86 for each of two
parents living separately, $83 for each of two parents
living together, and if the dependent parent is in a
nursing home or requires regular aid and attendance, $64
per month additional. See following tables, (page 106).
Source: Veterans Administration, Department of Veterans Benefits,
November 5, 1975.
- 106
- 107
Korean Unmarried surviving spouses of veterans of World War
Era) who Conflict or post-Korean period (including the II, the
20. PENSIONS FOR WIDOWS AND CHILDREN OF VETERANS*
are died as a result of service-connected disabilities Vietnam
eligible for GI home loans.
A. Legislative Objective: To provide a partial means of support for
widows, widowers and children of deceased veterans whose deaths
J. Cost 1975 an and Caseload Information: It is projected that in fiscal
were not caused as a result of active service.
benefits average totalling 374,672 $760,400,000. veterans' survivors will be aided monthly year with
B. Governing Regulations: U.S. Code Title 38.
page Source: 99. JEC Handbook of Public Income Transfer Programs, Paper No. 20,
C. Administering Agency: Veterans Administration, Department of Veterans
Benefits.
K. Interactions with Other Programs:
D. Financing: Financed through open-ended Federal appropriations.
tion, Program Veterans Eligibility: Automatic eligibility for Veterans
E. Population Coverage: Nationwide.
Prescription Outpatient Care, Veterans Domiciliary Care, Hospitaliza- Veterans
Service, and Veterans Nursing Home Care.
F. Types of Assistance: Direct cash payments.
Program Income: Does not tax income received from other programs.
G. Uses and Use Restrictions: None.
H. Eligibility Requirements:
(1) Categorical Eligibility Requirements: To be eligible under the
old law, a beneficiary must be a needy not presently married widow
or child on the pension rolls prior to July 1, 1960, who elected
to remain under the old law.
Under the new law, beneficiaries must be either a needy not
presently married widow or child of a deceased veteran who:
(1) had 90 or more days of active wartime duty or was discharged
prior to 90 days because of a service-related injury; or (2) at
the time of death was receiving compensation or military retire-
ment pay (or was entitled to receive such) for a service-connected
disability. "Widows" include widowers of deceased veterans.
Children are defined as persons under 18 years of age or persons
over 18 years of age who became permanently incapable of self-
support prior to age 18 or persons under age 23 attending an
accredited educational institution.
(2) Income Tests: The old law imposes annual eligibility limits of
$2,600 for a childless widow, and $3,900 for a widow with one or
more child. The new law imposes annual income limits of $3,000
for a widow without children and $4,200 for a widow with one or
more child. If there is no widow, or if the widow is presently
married, a child is eligible for benefits if the child's own
unearned income does not exceed $2,400 annually.
*Information for this program description was taken from: Congress of the
United States, Joint Economic Committee, Studies in Public Welfare, "Handbook
of Public Income Transfer Programs: 1975," U.S. G.P.O., Washington, D.C.,
December 31, 1975, pages 179-186; and Veterans Administration, Federal Bene-
fits for Veterans and Dependents, U.S. G.P.O., Washington, D.C., January 1,
1975, pages 35-37.
- 108
- 109
(a) Treatment of Earned Income: See table below.
(c) Institutional Status: Program benefits are discontinued
to widows or children imprisoned in penal institutions on
(b) Treatment of Unearned Income: See table below.
the 61st day of imprisonment. Payments continue to a widow
if the child is incarcerated or to a child if a widow is
Old law
New law
incarcerated.
-(1) Income of children
Earned income excluded
Earned income excluded.
(2) Income of widow:
(a) Earnings
Included
Included.
(d) Residence Requirement: None.
(b) Investments
Included, except for insurance dividends
Included, except for insurance dividends.
(c) Gifts and inheritances
Included
Included, except for gift or inheritance of
property.
I. Benefits:
(d) Welfare:
(i)
Public assistance
do
Excluded.
(ii) Private contributions for
Excluded, except for serviceman's family
Excluded, except for serviceman's family
(1) Determination of Benefit Amounts: Benefits are primarily related
maintenance.
allowance.
allowance.
(iii) Other public or private
Included
Excluded.
to family size and income.
relief.
(e) Retirement, disability, and survi-
vors' benefits:
(2) Relationship of Benefit Amount to Family Size: The old law pro-
(i) Railroad retirement, social
Benefits completely excluded until em-
Same as old law for persons entitled to
vides more for the first than for subsequent children. Under the
security, public and pri-
ployee's prior contributions exceeded,
such income on Dec. 31, 1964; 10 percent
vate employee retirement
10 percent of benefits excluded there-
exclusion applies to all such income for
new law, the allowance for the first child ranges from $20 to $72
systems.
after; retirement pay waived also ex-
other pensioners; waived retirement
cluded; excludes RSFFP' annuities.
per month, but subsequent children receive $20 each.
pay included except for military re-
tirement.
(ii) VA compensation
Excluded
Excluded, except for World War I ad-
justed compensation.
(3) Relationship of Benefit to Place of Residence: None.
(iii) Life insurance proceeds
Federal life insurance excluded; 10 per-
Federal life insurance excluded; 10 per-
cent of proceeds from commercial poli-
cent of proceeds from all other life
cies excluded.
insurance excluded.
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
(iv) Burial allowances, death
Not applicable
Excluded, except for death gratuity under
gratuities.
Public Law 89-214.
(f) Unemployment benefits
Included
Included.
(5) Current Benefit Amounts: Under the old law benefits are $50.40
(g) Other income
Excludes mustering out pay, State veter-
Excludes State veterans' bonuses, fire
ans' bonuses, fire insurance proceeds,
insurance proceeds, pay for obligatory
per month for an unremarried widow with no child; $63 for a widow
relocation payments.
civic duties, relocation payments.
with one child; and $7.56 more for each additional child. Widows
(h) Income spent for:
(i)
Unusual medical expenses
Included
Excluded,
in medically determined need of regular aid and attendance may
(ii) Final expenses
do
Excludes expenses of last illness, burial,
receive $50 more per month. In families where no widow is
and just debts of deceased veterans in
excess of other VA reimbursements.
entitled to a pension, one eligible child receives $27.30 per
I Retired Servicemen's Family Protection Plan (10 U.S.C. ch. 73).
month; two eligible children $40.95 (divided equally), and three
eligible children $54.60 (divided equally). For each additional
eligible child, another $7.56 is paid.
(3) Asset Test: Under the new law, a pension is not payable to those
If the widow is disqualified because of excess income, or if
persons whose estates are so large that it is reasonable they look
there is no widow, eligible children receive $49 monthly for the
to the estate for maintenance. The "estate" is defined as all
first child, plus $20 for each additional child, with the total
real and personal property except for the dwelling, a reasonable
lot and personal effects. A pension is generally allowed if the
divided equally among the children.
person can be expected to deplete his/her assets in his/her
remaining lifetime. This conversion is determined by the Veterans
Benefits under the new law are displayed in the following table.
Administration according to: (1) income; (2) cost of selling
assets; (3) liquidity of assets; (4) life expectancy of the widow
or child; and (5) potential rate of depletion of the estate.
There is no assets test under the old law.
(4) Other Eligibility Conditions:
(a) Work Requirements: None.
(b) Citizenship: No requirement.
- 110 -
- 111 -
REGULAR PENSION (NEW LAW)
Income not
Widow
Widow and
J. Cost and Caseload Information: In fiscal year 1975, 955,797 widows
more than
Alone
1 Child
or widowers and 879,380 children will receive payments totalling
approximately $1,131,732,000.
$300
$108
$128
400
107
128
K. Interactions with Other Programs:
500
106
128
600
105
128
700
102
128
(1) Program Eligibility: No automatic eligibility for any other
800
99
127
program.
900
96
126
1,000
92
125
(2) Program Income: Taxes benefits received from social security,
1,100
88
124
1,200
84
railroad retirement, public and private employee retirement
122
1,300
80
120
systems at 90 percent when beneficiaries' contributions are
1,400
76
118
exceeded.
1,500
72
116
1,600
68
114
1,700
64
112
1,800
60
110
1,900
56
108
2,000
52
106
2,100
48
104
2,200
43
101
2,300
38
98
2,400
33
95
2,500
28
92
2,600
23
89
2,700
18
86
2,800
13
83
2,900
8
80
3,000
5
77
3,100
73
3,200
69
3,300
65
3,400
61
3,500
57
3,600
53
3,700
49
3,800
49
3,900
49
4,000
49
4,100
49
4,200
49
An applicable formula will reduce pension for every dollar of income
above that shown in the $100 increment levels.
Source: Veterans Administration, Federal Benefits for Veterans
and Dependents, Washington, D.C., U.S. G.P.O., January 1, 1975,
page 36.
(6) Comparison to Poverty Level: Benefits range from 29 percent to
45 percent of the relevant poverty level dependent upon family
size and income.
(7) Other Benefits/Related Programs: None.
- 112 -
- 113 -
21. VETERANS HOSPITALIZATION*
(4) Other Eligibility Conditions:
A. Legislative Objective: To provide inpatient, medical, surgical and
(a) Work Requirements: None.
neuropsychiatric care and related medical and dental services to
veterans.
(b) Citizenship Requirements: None.
B. Governing Regulations: 38 U.S.C., Chapter 17.
(c) Institutional Status: None.
C. Administering Agency: Veterans Administration, Department of Medicine
(d) Residence Requirement: None.
and Surgery.
I. Benefits: Benefits include the provision of medical, surgical,
D. Financing: Annual appropriations.
neuropsychiatric and dental services, transportation and incidental
expenses for a veteran unable to defray the expense of transportation,
E. Population Coverage: Nationwide.
mental health services, counseling and training of immediate family
members when necessary for the effective rehabilitation of the veteran.
F. Types of Assistance: Provision of services.
(1) Determination of Benefit Amounts: Not applicable.
G. Uses and Use Restrictions: Limited to provision of medical services,
transportation and incidental expenses, mental health services, coun-
(2) Relationship of Benefit Amounts to Family Size: None.
seling and training of the veteran's family as necessary to the treat-
ment or rehabilitation of the veteran.
(3) Relationship of Benefit Amount to Place of Residence: None.
H. Eligibility Requirements:
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
(1) Categorical Eligibility: Any veteran who was released or dis-
(5) Current Benefit Amounts: Not applicable.
charged from military service under conditions other than dis-
honorable may be provided hospitalization if he or she states
(6) Comparison to Poverty Level: Not applicable.
under oath that he or she is unable to defray the cost of nec-
essary hospital care elsewhere. The "ability to pay" statement
(7) Other Benefits/Related Programs: Veterans Outpatient Care.
is not required for veterans who have service-connected disabil-
ities, who are 65 years of age or older, or who are in receipt
J. Cost and Caseload Information: 1974 estimates of the total number
of a VA pension. Priority for admission is extended to veterans
of veterans treated in VA hospitals totalled 1,014,000 at a cost of
requiring treatment for a service-connected disability.
$1,975,697,000. Projected FY 1975 cost amounted to $2,137,741,000.
A spouse or child of a veteran who has a total disability,
Source: U.S. Office of Management and Budget, Catalog of Federal
permanent in nature, resulting from a service-connected disability,
or the widow and surviving child of such a veteran are eligible
Domestic Assistance, 1974, U.S. G.P.O., Washington, D.C., pages 6-75.
for medical benefits under the CHAMPVA program. Normally, this
K. Interactions With Other Programs:
care will be provided in non-VA facilities.
(2) Income Test: None, except for statement of "inability to pay."
(1) Program Eligibility: Automatically entitled to Veterans Out-
patient Care.
(a) Treatment of Earned Income: Not applicable.
(2) Program Income: Income from other programs is not taxed.
(b) Treatment of Unearned Income: Not applicable.
(3) Asset Test: None.
*Inform~tion for this program description was taken from Office of Management
and Budget, Catalog of Federal Domestic Assistance, 1974, U.S. G.P.O., Wash-
ington, D.C.
- 115
- 114
(2) Income Test: None.
22. VETERANS OUTPATIENT CARE*
A. Legislative Objective: To provide medical and dental services,
(a) Treatment of Earned Income: Not applicable.
medicines and medical supplies to eligible veterans on an out-
(b) Treatment of Unearned Income: Not applicable.
patient basis.
(3) Asset Test: None.
B. Governing Regulations: 38 U.S.C. 17; 38 U.S.C. 612.
(4) Other Eligibility Conditions:
C. Administering Agency: Veterans Administration, Department of Medicine
and Surgery.
(a) Work Requirements: None.
D. Financing: Annual appropriations.
(b) Citizenship Requirements: None.
E. Population Coverage: Nationwide.
(c) Institutional Status: None.
F. Types of Assistance: Provision of services.
(d) Residence Requirement: None.
G. Uses and Use Restrictions: Outpatient services available at VA facil-
ities or under fee basis hometown care program when properly authorized.
I. Benefits: Benefits provided are in the form of services.
H. Eligibility Requirements:
(1) Determination of Benefit Amounts: Not applicable.
(1) Categorical Requirements: The following veterans are eligible for
(2) Relationship of Benefit Amounts to Family Size: None.
outpatient care: (1) those suffering from a service-incurred or
service-aggravated illness or injury; (2) those suffering from a
(3) Relationship of Benefit Amount to Place of Residence: None.
nonservice-connected illness which has aggravated a service-
connected injury; (3) those with established eligibility for
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
pre- and post-hospital care; (4) Spanish American War veterans;
(5) those entitled to vocational rehabilitation; (6) military
(5) Current Benefit Amounts: Not applicable.
retirees; (7) those with a service-connected disability rated at
80 percent or above; (8) those receiving increased pension or
(6) Comparison to Poverty Level: Not applicable.
additional compensation as a result of being permanently house-
bound; (9) those who require outpatient care to obviate the need
(7) Other Benefits/Related Programs: Veterans Prescription Service.
for hospital care; (10) the wife or child of a permanently dis-
abled veteran; the widow, widower or child of a deceased veteran
J. Cost and Caseload Information: Estimated fiscal year 1975 cost figures
whose death was service-connected, (under the CHAMPVA program).
treated. amount to $574,418,000. In fiscal year 1973, 10,858,491 patients were
Outpatient dental care may be provided to: (1) veterans with
service-connected compensable dental disability; (2) former
Source: Office of Management and Budget, Catalog of Domestic Assis-
prisoners of war with service-connected non-compensable dental
tance, 1974, U.S. G.P.O., Washington, D.C.
disabilities; (3) veterans with a service-connected non-compensable
dental disability resulting from combat wounds or service trauma;
K. Interactions with Other Programs:
(4) those veterans in need of training to achieve independence;
(5) veterans of the Spanish American War, the Indian Wars, the
(1) Program Eligibility: Automatic eligibility for Veterans Prescrip-
Philippine Insurrection or the Boxer Rebellion; (6) veterans
tion Service, except for those individuals whose income exceeds
with a service-connected non-compensable disability who apply
the maximum allowable income limit.
for treatment of such conditions within one year following
discharge from active duty.
(2) Program Income: Does not tax income from any other program.
*Information for this program description was taken from Office of Management
and Budget, Catalog of Federal Domestic Assistance, 1974, U.S. G.P.O.,
Washington, D.C.
- 116
- 117
23. VETERANS NURSING HOME CARE*
(c) Institutional Status: None.
A. Legislative Objective: To accommodate individuals who do not need
hospital care but require skilled nursing care, related medical
(d) Residence Requirement: None.
services, supportive personal care, and individual adjustment services
in a homelike atmosphere.
I. Benefits: care and provision Benefits of consist of nursing care, medical
B. Governing Regulations: P.L. 88-450; 38 U.S.C. 5001.
activities and opportunities. social, diversional, recreational services, and spiritual personal
C. Administering Agency: Veterans Administration, Department of Medicine
J. Cost 2,459,575 and Caseload Information: In Fiscal Year 1975,
and Surgery.
of $102,672,983. days of care were provided to 10,532 veterans a total at a cost of
D. Financing: Annual appropriations.
E. Population Coverage: Nationwide.
Source: Veterans Administration, Department of Medicine and Surgery.
K. Interactions with Other Programs:
F. Types of Assistance: Provision of services.
G. Uses and Use Restrictions: Services provided in VA nursing home
(1) Program program. Eligibility: No automatic eligibility for any other
care units.
(2) determination Program Income: Income from other programs is included in
H. Eligibility Requirements:
of eligibility for nursing home benefits. not
(1) Categorical Requirements: Veterans must require skilled nursing
care and related medical services for an extended time. Need for
nursing home care is determined by a designated physician. Direct
admission to private nursing homes at VA expense is limited to
(1) veterans who require nursing care for a service-connected dis-
ability after medical determination by the VA, and (2) any person
in an Armed Forces hospital who requires a protracted period of
nursing care and who will become a veteran upon discharge from the
Armed Forces. VA may transfer hospitalized veterans who need a
protracted period of nursing care to a private nursing home at VA
expense. Normally VA authorized care may not be provided in
excess of six months except for veterans who require such care
for a service-connected or adjunct disability.
(2) Income Test: None.
(a) Treatment of Earned Income: Not applicable.
(b) Treatment of Unearned Income: Not applicable.
(3) Asset Test: None.
(4) Other Eligibility Requirements:
(a) Work Requirements: None.
(b) Citizenship Requirements: None.
*Information for this program description was taken from: Office of Management
and Budget, Catalog of Federal Domestic Assistance, 1974.
- 118 -
- 119 -
24. VETERANS DOMICILIARY CARE*
(c) Institutional Status: None.
A. Legislative Objective: To motivate the veteran to return to the
community in a self-sustaining and independent living situation or
(d) Residence Requirement: None.
to assist the veteran to reach optimal usefulness in a protective
environment.
I. Benefits: Benefits provided are in the form of services.
B. Governing Regulations: 38 U.S.C. 610; Executive Order 5398,
July 21, 1930.
(1) Determination of Benefit Amounts: Not applicable.
C. Administering Agency: Veterans Administration, Department of Medicine
(2) Relationship of Benefit Amounts to Family Size: None.
and Surgery.
(3) Relationship of Benefit Amount to Place of Residence: None.
D. Financing: Annual appropriations.
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
E. Population Coverage: Nationwide.
(5) Current Benefit Amounts: Not applicable.
F. Types of Assistance: Provision of services.
(6) Comparison to Poverty Level: Not applicable.
G. Uses and Use Restrictions: Provision of preventive medical assistance
and physical, social and psychological support in a sheltered environ-
(7) Veterans Other Benefits/Related Services: Veterans'
ment.
Nursing Home Care; Veterans State Domiciliary Hospitalization; Program.
H. Eligibility Requirements:
J. estimated Cost and Caseload to be Information: Expenses for fiscal
number of patients $45,685,000. provided care In was fiscal 10,261. year 1973 the year average 1975 were daily
(1) Categorical Requirements: Eligible applicants include: veterans
discharged from active duty for an injury that is service-incurred
or aggravated by performance of duty; permanently disabled veterans
Source: Catalogue of Domestic Assistance Programs, page 685.
receiving disability compensation; or war veterans unable to defray
K. Interactions with Other Programs:
the expenses of necessary domiciliary care.
(2) Income Tests: None, except that veterans must state that they are
(1) program. Program Eligibility: No automatic eligibility for any other
unable to defray the cost of comparable medical care at a civilian
facility.
(2) Program that recipient Income: can Income from all sources must be
(a) Treatment of Earned Income: Not applicable.
no specific income limits declare are inability established. to pay for services, sufficiently however low
(b) Treatment of Unearned Income: Not applicable.
(3) Asset Test: None.
(4) Other Eligibility Requirements:
(a) Work Requirements: None.
(b) Citizenship Requirements: None.
*Information for this program description was taken from: Office of Management
and Budget, Catalog of Federal Domestic Assistance, 1974, U.S. G.P.O., Wash-
ington, D.C.; and Veterans Administration, Federal Benefits for Veterans and
Dependents, U.S. G.P.O., Washington, D.C., January 1, 1975.
- 120
- 121 -
25. VETERANS PRESCRIPTION SERVICE*
(b) Citizenship Requirements: None.
A. Legislative Objective: To provide veterans and certain dependents and
(c) Institutional Status: None.
survivors in need of regular aid and attendance with prescription drugs
and prosthetic devices.
(d) Residence Requirement: Must reside in the U.S.
B. Governing Regulations: 38 U.S.C. 612, P.L. 91-500, P.L. 93-82.
I. Benefits: Benefits provided are in the form of prescription drugs at
no expense to the veteran.
C. Administering Agency: Veterans Administration, Department of Medicine
and Surgery.
(1) Determination of Benefit Amounts: Not applicable.
D. Financing: Annual appropriations.
(2) Relationship of Benefit Amounts to Family Size: None.
E. Population Coverage: Nationwide.
(3) Relationship of Benefit Amount to Place of Residence: None.
F. Types of Assistance: Sale, exchange or donation of property and goods.
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
G. Uses and Use Restrictions: Limited to drugs prescribed by physicians.
(5) Current Benefit Amounts: Not applicable.
Prescriptions for alcoholic beverages or dietary supplements used for
weight control are not filled.
(6) Comparison to Poverty Level: Not applicable.
H. Eligibility Requirements:
(7) Other Benefits/Related Programs: Veterans Outpatient Care.
(1) Categorical Requirements: Eligible persons include veterans,
dependents or survivors in receipt of increased pension or
J. Cost to and Caseload Information: Fiscal year 1975 expenses were estimated
compensation based on the need for regular aid and attendance or
filled. be $7,309,000. In fiscal year 1973, 1,731,000 prescriptions were
by reason of being permanently housebound. Veterans whose pension
payments have ceased because their income exceeds the applicable
maximum limitation continue eligibility for prescription services
Source: Catalogue of Domestic Assistance Programs, page 687.
until their income exceeds the pension income maximum by more than
K. Interactions with Other Programs:
$500.
(2) Income Test: None, except that veterans whose pension payments
(1) Program program. Eligibility: No automatic eligibility for any other
have ceased because of receipt of income in excess of the allowable
limit become ineligible for prescription services when their income
is in excess of $500 above the allowable income limit.
(2) Program Income: Income received from any source in excess of $500
loss of prescription service benefits.
above allowable income limit for veterans pensions causes automatic
(a) Treatment of Earned Income: Benefits cease when income
(either earned or unearned) exceeds the maximum allowable
income limit by more than $500.
(b) Treatment of Unearned Income: See Treatment of Earned Income.
(3) Asset Test: None.
(4) Other Eligibility Requirements:
(a) Work Requirements: None.
*Information for this program description was taken from: Office of Management
and Budget, Catalog of Federal Domestic Assistance Programs, 1974, U.S. G.P.O.,
Washington, D.C.; and Veterans Administration, Federal Benefits for Veterans
and Dependents, U.S. G.P.O., Washington, D.C., January 1, 1975.
- 123 -
- 122 -
SERVICE PROGRAMS
2. those persons whose needs were taken into account in
determining the needs of AFDC recipients; and
26. GRANTS TO STATES FOR SERVICES*
3. recipients of SSI benefits or State supplementary
A. Legislative Objective: For the purpose of encouraging each State to
payments.
furnish services directed toward: (1) achieving or maintaining economic
self-support and self-sufficiency; (2) preventing or remedying neglect,
(b) those who meet eligibility requirements based upon the status
abuse or exploitation of (children and) adults unable to protect their
of their income, that is, individuals are eligible if the
own interests or preserving, rehabilitating or reuniting families; (3)
family's monthly gross income is less than 115 percent (or at
preventing or reducing inappropriate institutional care by providing
the State option, a lower percentage) of the median income of
for community-based, home-based or other less intensive forms of care;
a family of four in the State adjusted for size of family.
and (4) securing referral or admission for institutional care when
other forms of care are not appropriate or providing services to
A fee for service to an eligible individual must be imposed by the
individuals in institutions.
State if the individual's monthly gross income is more than either
80 percent of the State's median income for a family of four ad-
B. Governing Regulations: Title XX of the Social Security Act. The title
justed for family size or the national median income for a family
became effective October 1, 1975.
of four adjusted for family size.
C. Administering Agency: Department of Health, Education and Welfare,
(2) Income Test: None, except that non-AFDC, non-SSI recipients are
Social and Rehabilitation Services, Community Services Administration.
eligible only if the family's monthly gross income does not exceed
115 percent of the family-size-adjusted median income of a family
D. Financing: Annual appropriations.
of four.
E. Population Coverage: Nationwide.
(a) Treatment of Earned Income: All earned income is included
in the determination of eligibility for non-AFDC, non-SSI
F. Types of Assistance: Federal matching grants to States equal to 90
recipients.
percent of the total quarterly expenditures for the provision of family
planning services and 75 percent of the total expenditures for the
(b) Treatment of Unearned Income: All unearned income (with the
provision of other social services.
exception of Food Stamp bonus amounts) is included in the
determination of eligibility for non-AFDC, non-SSI recipients.
G. Uses and Use Restrictions: Funds must be expended for the operation
of approved service programs under Federal regulatory requirements
(3) Assets Test: None.
(45 CFR 228).
(4) Other Eligibility Requirements:
H. Eligibility Requirements:
(a) Work Requirements: None.
(1) Categorical Eligibility Requirements: Eligibility is determined
on an individual basis under Title XX except where States have,
(b) Citizenship Requirements: None.
under previous service legislation (Title IV-A or Title VI),
provided for group eligibility to potential recipients of service,
(c) Institutional Status: None.
and then only until March 31, 1976 (see 45 CFR 228). The following
individuals are eligible for services under Title XX:
(d) Residence Requirement: None.
(a) those who meet eligibility requirements based upon income
I. Benefits: Benefits consist of services provided and may not include
maintenance status; including:
cash benefits to individual recipients for income maintenance purposes.
1. recipients of AFDC;
(1) Determination of Benefit Amounts: Not applicable.
(2) Relationship of Benefit Amount to Family Size: None.
*Information for this program description was taken from U.S. House of
Representatives, Committee on Ways and Means, The Social Security Act As
(3) Relationship of Benefit Amount to Place of Residence: None.
Amended Through January 4, 1975 and Related Laws, U.S. G.P.O., Washington,
D.C., February 12, 1975.
- 125
- 124 -
27. STATE AND COMMUNITY PROGRAMS ON AGING*
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
A. Legislative Objective: To encourage and assist State and local
agencies in the development of comprehensive and coordinated systems
(5) Current Benefit Structure: Not applicable.
of social services to pesons age 60 and over.
(6) Comparison to Poverty Level: Not applicable.
B. Governing Regulations: Title III of the Older Americans Act of 1965,
as amended; Title 45 CFR Part 903.
(7) Other Benefits/Related Programs: None.
C. Administering Agency: Department of Health, Education and Welfare,
J. Cost and Caseload Information: None available since program did not
Office of Human Development, Administration on Aging.
become effective until October 1975.
D. Financing: Funds are appropriated by the Congress and distributed to
K. Interactions with Other Programs:
States under a statutory formula set forth in Section 306 of the Older
Americans Act, which is based in part on the State's proportion of the
(1) Program Eligibility: No automatic eligibility for any other
total U.S. population age 60 or over.
program.
E. Population Coverage: Nationwide.
(2) Program Income: Income from all sources included in the determina-
tion of eligibility for receipt of benefits for non-AFDC, non-SSI
F. Types of Assistance: Program planning and administration at State and
recipients, (except for Food Stamp bonus coupon amounts).
local levels and support for social services programs including trans-
portation and escort services, outreach services, counseling services,
health related services, preventive services (which include periodic
screening and evaluation, homemaker services, home health services,
homemaker-home health aide services, chore services, friendly visiting
services, telephone reassurance services, protective services, and
housing assistance), recreational services, continuing education
services, legal services, welfare services, nutrition services,
employment services, information and referral services, and any other
services determined to be necessary for the general welfare of older
persons.
G. Uses and Use Restrictions: None.
H. Eligibility Requirements:
(1) Categorical Requirements: To qualify for the benefit of available
services persons must be age 60 or over.
(2) Income Tests: None.
(a) Treatment of Earned Income: Not applicable.
(b) Treatment of Unearned Income: Not applicable.
(3) Asset Test: None.
*Information for this program description was taken from the Department of
Health, Education and Welfare, Office of Human Development, Administration
on Aging.
- 127 -
- 126 -
28. NUTRITION PROGRAM FOR THE ELDERLY*
(4) Other Eligibility Conditions:
A. Legislative Objective: To provide Older Americans with nutritionally
(a) Work Requirements: None.
sound meals served in strategically located centers, offering supportive
services including nutrition education.
(b) Citizenship: None.
B. Governing Regulations: Title VII of the Older Americans Act of 1965,
(c) Institutional Status: None.
as amended, Secs. 701-710.
(d) Residence Requirement: None.
C. Administering Agency: Department of Health, Education and Welfare,
Office of Human Development, Administration on Aging.
I. Benefits:
D. Financing: Annual appropriations are used to make grants to States.
(1) Determination of Benefit Amounts: Not applicable.
Grant amounts are determined according to the ratio of the State's
population aged 60 or over to the total U.S. population aged 60 or
(2) Relationship of Benefits to Family Size: None.
over. No state is allotted less than one-half of one percent of the
total appropriation for the fiscal year; and Guam, American Samoa, the
(3) Relationship of Benefit Amount to Place of Residence: None.
Virgin Islands and the Trust Territory of the Pacific Islands are each
allotted one-quarter of one percent of the total fiscal year appropria-
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
tions.
(5) Current Benefit Amounts: Not applicable.
E. Population Coverage: National coverage.
(6) Comparison to Poverty Level: Not applicable.
F. Types of Assistance: Cash grants to provide nutritional meals plus
supportive services for which individuals may make contributions.
(7) Other Benefits/Related Programs: Older persons are eligible to
participate in the Community Service and Continuing Education
G. Uses and Use Restrictions: Funds are to be used toward payment of the
Programs authorized under the Higher Education Act of 1965; the
cost of operating congregate nutrition projects for the elderly. Home
Adult Education Act Programs; the Older American Community Service
delivered meals may be provided through a project which is primarily
Employment Act Program; the Economic Opportunity Act Programs; the
congregate-setting-oriented.
Older Americans Volunteer Programs authorized under the Domestic
Volunteer Service Act of 1973; the Urban Mass Transportation Act
H. Eligibility Requirements:
of 1964, as amended; the Comprehensive Employment and Training
(1) Categorical Eligibility Requirements: All persons aged 60 or
Act of 1975.
above who either: (1) cannot afford adequate meals; (2) do not
J. Cost and Caseload Information: The current (FY 1976) Title III Program
possess the skills to select and prepare nourishing meals;
appropriations are $91 million: $15 million for State Agency activities
(3) have limited mobility which may impair their ability to shop
and $76 million for Area Planning and Social Services. Caseload infor-
and prepare their own meals; or (4) suffer from a feeling of
isolation which removes the incentive to prepare a meal and eat
mation is not available.
alone, are eligible to participate in this program. No other
eligibility criteria are imposed.
K. Interactions with Other Programs:
(2) Income Tests: None.
(1) Program Eligibility: Receipt of benefits from this program does
not automatically entitle recipient to benefits from any other
(a) Treatment of Earned Income: Not applicable.
program.
(b) Treatment of Unearned Income: Not applicable.
(2) Program Income: Does not tax income from any source.
*Information for this program description was taken from United States Senate,
Committee on Labor and Public Welfare, Subcommittee on Aging, Older Americans
Comprehensive Service Amendments of 1973, Washington, D.C., U.S. G.P.O., May
1973.
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(3) Assets Test: None.
29. SENIOR COMMUNITY SERVICE EMPLOYMENT PROGRAM*
(4) Other Eligibility Requirements:
A. Legislative Objective: The program is designed to provide, foster and
promote useful part-time work opportunities in community service activ-
(a) Work Requirements: None.
ities for economically disadvantaged persons aged 55 or over.
(b) Citizenship: None.
B. Governing Regulations: Older Americans Community Service Employment
Act, Title IX of the Older Americans Act (as amended in 1975) 29 CFR 89.
(c) Institutional Status: None.
C. Administering Agency: Department of Labor, Office of Manpower Develop-
(d) Residence Requirement: None.
ment Programs.
I. Benefits: The benefits to individuals are nutritious meals provided
D. Financing: Annual appropriations. The Secretary of Labor allocates
diet in a and an attempt to dispel feelings of loneliness or isolation, with
congenial social setting which combines the provisions of a good
funds from the general Treasury not to exceed 90 percent of costs of
establishing and operating a project for the employment of older
supportive services available.
persons in community service activities, except that he is authorized
to pay 100 percent of the cost of any project which is an emergency or
(1) Determination of Benefit Amounts: Not applicable.
disaster project or is located in an economically depressed area. The
funds are allocated to the States by use of a formula grant.
(2) Relationship of Benefits to Family Size: None.
E. Population Coverage: Nationwide.
(3) Relationship of Benefit Amount to Place of Residence: None.
F. Types of Assistance: Direct cash assistance with specified use.
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
G. Uses and Use Restrictions: Assistance payments must be used to
(5) Current Benefit Amounts: Not applicable.
establish and/or operate a project for the employment of older persons
in the provision of community services.
(6) Comparison to Poverty Level: Not applicable.
H. Eligibility Requirements:
(7) Other Benefits/Related Programs: Participants may use Food Stamps
as a contribution for meals.
Applicant Eligibility:
J. Cost and Caseload Information: The Fiscal Year 1975 Title VII Program
(1) Categorical Requirements: Public or private nonprofit organiza-
appropriations amounted to $125,000,000. As of June 30, 1975, approx-
tions, agencies of a State or local government or combinations
imately 240,000 meals were served daily in 4,941 nutrition sites located
of political subdivisions and Indian tribes on Federal or State
reservations are eligible for Federal assistance if they conduct
in 682 Nutrition Projects.
a program which will provide employment for eligible individuals
in the community or near the community where the eligible individ-
K. Interactions with Other Programs:
ual resides which will result in an increase in employment oppor-
(1) Program Eligibility: No automatic eligibility for any other
tunities for eligible individuals and will not displace employed
workers or impair existing contracts. Projects cannot involve
program.
political parties, nor can work be performed on any facility used
(2) Program Income: Since there is no income test, there is no
as a place for sectarian religious instruction or worship.
taxation of any income from any other source.
*Information for this program description was taken from the Federal Register,
Vol. 40, No. 116, Monday, June 16, 1975, pp. 25562 ff. and the Older Americans
Comprehensive Service Amendments of 1973, prepared by the Subcommittee on
Aging of the Committee on Labor and Public Welfare, U.S. Senate, May 1973,
U.S. G.P.O., Washington, D.C.
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- 131 -
Beneficiary Eligibility:
J. Cost and Caseload Information: In Fiscal Year 1976 approximately
$42,000,000 will be spent on an estimated 12,400 part-time positions.
(1) Categorical Requirements: Individuals who are aged 55 or older
The Department of Labor estimates that approximately 20,000 different
with low incomes and who have or would have difficulty in securing
individuals will be employed under the program during Fiscal Year 1976.
employment are eligible for employment under this program.
[It should be noted that cost figures include funds that have been
Preference is given to individuals aged 60 or above.
appropriated for Operation Mainstream which has been folded into
Title IX. None of the above estimates take into account the extra
(2) Income Tests: Individual must be a member of a family whose
quarter in Fiscal Year 1976.]
annual income is at or below the Federally established poverty
level or be a member of a family receiving SSI payments.
K. Interactions with Other Programs:
(3) Asset Test: None.
(1) Program program. Eligibility: No automatic eligibility for any other
(4) Other Eligibility Conditions:
(2) Program Income: All income including Federal benefits are
(a) Work Requirements: None.
considered as income for the determination of this program,
with the exception of Federal SSI and State Supplemental SSI
(b) Citizenship: None.
payments, and Food Stamp bonus coupon amounts.
(c) Institutional Status: None.
(d) Residence Requirement: None.
I. Benefits:
(1) Determination of Benefit Amount: Benefits for this program consist
of the subsidized employment of older workers. Workers are paid
the highest of: (a) the minimum wage established by the Fair Labor
Standards Act; (b) the applicable State or local minimum wage; or
(c) the prevailing rates of pay for persons employed in similar
public occupations by the same employer.
(2) Relationship of Benefit Amount to Family Size: None.
(3) Relationship of Benefit Amount to Place of Residence: None,
except that some States or localities have higher minimum wages
than others.
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
(5) Current Benefit Amounts: Vary according to the higher of the
Federal minimum wage or applicable State or local minimum wage,
or prevailing rate of pay for persons similarly employed. The
average annual wage is $2,500.
(6) Comparison to Poverty Level: Not applicable.
(7) Other Benefits/Related Programs: Yearly physical examinations,
job training, personal and job-related counselling and, in some
cases, placement into regular unsubsidized jobs.
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I. Benefits: Older persons are provided an opportunity for useful service
30. FOSTER GRANDPARENT PROGRAM*
interacting with children with exceptional needs; children receive
A. Legislative Objective: To provide opportunities for low-income persons
needed care and attention from a concerned adult. Foster parents serve
aged 60 and over to render supportive services to children having
a maximum of 20 hours per week with a modest stipend to permit them to
serve without extra cost to themselves.
exceptional needs.
B. Governing Regulations: Title II, Part B of P.L. 93-113.
(1) Determination of Benefit Amounts: Not applicable.
(2) Relationship of Benefits to Family Size: None.
C. Administering Agency: ACTION.
(3) Relationship of Benefit Amount to Place of Residence: None.
D. Financing: Annual appropriations.
E. Population Coverage: Nationwide.
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
F. Types of Assistance: Grants to public and non-profit private agencies
(5) Current Benefit Amounts: Not applicable.
and organizations.
(6) Comparison to Poverty Level: Not applicable.
G. Uses and Use Restrictions: Money must be used to pay part or all of
the cost of development and operation of projects designed to allow
(7) Other Benefits/Related Programs: Retired Senior Volunteer Program,
persons 60 or over to serve children with exceptional needs.
Senior Companion Program.
H. Eligibility Requirements:
J. Cost and Caseload Information: The fiscal year 1975 budget amounted
to $28,287,000. As of June 30, 1975, the program had 13,627 volunteers.
(1) Categorical Eligibility Requirements: Eligible persons include
persons aged 60 or over of low income who are no longer in the
K. Interactions with Other Programs:
work force. Assignments may not result in the displacement of
employed workers.
(1) Program Eligibility: No automatic eligibility for any other
program.
(2) Income Tests: None.
(2) Program Income: No taxation of income from other programs in
(a) Treatment of Earned Income: Not applicable.
determining benefit amount.
(b) Treatment of Unearned Income: Not applicable.
(3) Assets Test: None.
(4) Other Eligibility Requirements:
(a) Work Requirements: None.
(b) Citizenship Requirements: None.
(c) Institutional Status: None.
(d) Residence Requirement: None.
*The information for this program description was taken from U.S. Senate,
Committee on Labor and Public Welfare, Subcommittee on Aging, Older Americans
Comprehensive Services Amendments of 1973, U.S. G.P.O., Washington, D.C.,
May 1973.
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31. RETIRED SENIOR VOLUNTEER PROGRAM*
(1) Determination of Benefit Amounts: Not applicable.
A. Legislative Objective: To create a variety of meaningful opportunities
for persons 60 years of age and over to participate more fully in the
(2) Relationship of Benefits to Family Size: None.
life of their communities through volunteer service.
(3) Relationship of Benefit Amount to Place of Residence: None.
B. Governing Regulations: Title II, Part A of PL 93-113.
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
C. Administering Agency: ACTION.
(5) Current Benefit Amounts: Not applicable.
D. Financing: Annual appropriations.
(6) Comparison to Poverty Level: Not applicable.
E. Population Coverage: Program is nationwide.
(7) Other Benefits/Related Programs: Foster Grandparent Program,
F. Types of Assistance: Grants to public and nonprofit private agencies
Senior Companion Program.
and organizations.
J. Cost and Caseload Information: The RSVP budget for Fiscal Year 1975
G. Uses and Use Restrictions: Grants are made to pay (on a cost-sharing
amounted to $15,980,000. As of June 30, 1975, there were 149,602
basis) for the cost of development and operation of local projects
volunteers participating in the program.
designed to allow persons 60 or over to offer their services to the
community.
K. Interactions with Other Programs:
H. Eligibility Requirements:
(1) Program Eligibility: No automatic eligibility for any other
program.
(1) Categorical Eligibility Requirements: Eligible persons must be
age 60 or over, retired or semi-retired. Assignments may not
(2) Program Income: No taxation of any income from any other source.
result in the displacement of employed workers.
(2) Income Tests: None.
(a) Treatment of Earned Income: Not applicable.
(b) Treatment of Unearned Income: Not applicable.
(3) Assets Test: None.
(4) Other Eligibility Conditions:
(a) Work Requirement: None.
(b) Citizenship Requirement: None.
(c) Institutional Status: None.
(d) Residence Requirement: None.
I. Benefits: Older Americans are provided with opportunities for volunteer
service in their retirement years. They are helped to use their skills,
experience and talents to meet community needs, permitting them to enjoy
the self-respect and satisfaction that comes from being needed and
serving others.
*This program description was prepared by staff members at ACTION.
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32. SENIOR COMPANION PROGRAM*
I. Benefits: Older persons are provided opportunities to contribute to
their communities and enrich their retirement years by serving adults
A. Legislative Objective: To provide meaningful part-time volunteer
having special needs. Senior Companions serve a maximum of 20 hours
opportunities to low-income persons, age 60 and over, who give help
per week and receive a stipend that permits them to serve without
and support to adults with special or exceptional needs in health,
extra cost to themselves.
education, welfare and related settings.
(1) Determination of Benefit Amounts: Not applicable.
B. Governing Regulations: Title II, Part B of PL 93-113.
(2) Relationship of Benefits to Family Size: None.
C. Administering Agency: ACTION.
(3) Relationship of Benefit Amount to Place of Residence: None.
D. Financing: Annual appropriations.
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
E. Population Coverage: Eighteen projects are presently in operation.
It is anticipated that the program will be expanded to place projects
(5) Current Benefit Amounts: Not applicable.
in all 50 States.
(6) Comparison to Poverty Level: Not applicable.
F. Types of Assistance: Grants to public and non-profit private agencies
and organizations.
(7) Other Benefits/Related Programs: Retired Senior Volunteers
Program, Foster Grandparents.
G. Uses and Use Restrictions: Grants are made to community sponsors for
development and operation of projects designed to allow low-income
J. Cost and Caseload Information: The Fiscal Year 1975 budget amounted
persons age 60 or over to offer support and companionship to adults
to $1,600,000. As of June 30, 1975, the program included 1,028
with special or exceptional needs.
volunteers.
H. Eligibility Requirements:
K. Interactions with Other Programs:
(1) Categorical Eligibility Requirements: Eligible persons must be
(1) Program Eligibility: No automatic eligibility for any other
age 60 or over of low income who are no longer in the work force.
program.
Assignments may not result in the displacement of employed workers.
(2) Program Income: No taxation of any income from any source.
(2) Income Tests: None.
(a) Treatment of Earned Income: Not applicable.
(b) Treatment of Unearned Income: Not applicable.
(3) Assets Test: None.
(4) Other Eligibility Conditions:
(a) Work Requirement: None.
(b) Citizenship Requirement: None.
(c) Institutional Status: None.
(d) Residence Requirement: None.
*This program description was prepared by staff members at ACTION.
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33. SENIOR OPPORTUNITIES AND SERVICES PROGRAM
G. Uses and Use Restrictions: For grants to CAAs and other public
and private non-profit agencies.
A. Legislative Objective: Congress, in the 1967 amendments to the
Economic Opportunity Act, established a program to be known as
H. Eligibility Requirements:
"Senior Opportunities and Services" (SOS) designed to identify and
meet the needs of older, poor persons above the age of 60 in one or
(1) Categorical Requirements: Programs for those persons above
more of the following areas:
the age of 60 ordinarily residing in poverty neighborhoods as
defined by the local Community Action agency. Criteria used
(1) development and provision of new employment and volunteer
to determine poverty neighborhoods is the number of families
services;
below the national OMB poverty threshold.
(2) effective referral to existing health, welfare, employment,
(2) Income Tests: None.
housing, legal, consumer, transportation. education and recrea-
(a) Treatment of Earned Income: Not Applicable.
tional and other services;
(b) Treatment of Unearned Income: Not Applicable.
(3) stimulation and creation of additional services to remedy gaps
and deficiencies in presently existing services and programs;
(3) Asset Tests: None.
(4) modification of existing procedures, eligibility requirements,
(4) Other Eligibility Conditions:
and program structures to facilitate the greater use of, and
participation in, public services by the older poor;
(a) Work Requirements: None.
(5) development of all - season recreation and service centers
(b) Citizenship: None.
controlled by older persons themselves;
(c) Institutional Status: None.
(6) such other activities and services as determined by the Director
to be necessary or especially appropriate to meet the needs of
(d) Residence Requirement: None.
older poor and assure them greater self-sufficiency.
I. Benefits: Benefits consist of services provided.
B. Governing Regulations: Economic Opportunity Act of 1964 as amended
in 1967.
(1) Determination of Benefit Amounts: Not Applicable.
C. Administering Agency: Community Services Administration (formerly
(2) Relationship of Benefits to Family Size: None.
Office of Economic Opportunity).
(3) Relationship of Benefit Amount to Place of Residence: None.
D. Financing: Annual appropriations to local grantees, ordinarily
Community Action agencies (CAAs).
(4) Relationship of Benefit Amount to Cost of Living Changes: None.
E. Population Coverage: Nationwide.
(5) Current Benefit Amounts: Not Applicable.
F. Types of Assistance: Cash grants to grantee agencies to provide
(6) Comparison to Poverty Level: Must comply with poverty guidelines.
some or most of the following programs:
(7) Other Benefits/Related Programs: Not Applicable.
senior centers, civic influence and action, outreach and referral,
home health aid service, other health services, homemaker services,
J. Cost and Caseload Information:
housing assistance, home repair services, handyman services,
transportation assistance, legal services, employment training or
$10 per individual served; caseload 990,000. (The $10 individual
job finding, consumer education, other education, credit unions or
cost is exclusive of additional Community Services Administration
buying clubs, feeding programs (home delivered meals, congregate
funds such as Local Initiative, Community Food and Nutrition, and
meals), recreation and/or social, handicrafts, friendly visiting
Emergency Energy and Winterization Program. This amount also does
service, telephone reassurance.
not include other Federal funds and the non-Federal matching monies
and in-kind services.)*
*Information supplied by the Community Services Administration.
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34. COMPREHENSIVE EMPLOYMENT AND TRAINING PROGRAMS
K. Interaction With Other Programs:
A. Legislative Objective: To provide job training and employment
(1) Program Eligibility: No automatic eligibility for any other
program.
opportunities for economically disadvantaged, unemployed, and
(2) Program Income: Since there is no income test, there is no
underemployed persons and to assure that training and other
taxation of any income from any other source.
services lead to maximum employment opportunities and enhance
self-sufficiency by establishing a flexible and decentralized
system of Federal, State and local programs.
B. Governing Regulations: Titles I and II of the Comprehensive
Employment and Training Act, P.L. 93-203. Also, the Emergency
Jobs and Unemployment Assistance Act of 1974, P.L. 93-567 which
adds a new Title VI to the aforementioned Act. (29 CFR 94-96
and 98 and 29 CFR 99.)
C. Administering Agency: U.S. Department of Labor, Office of
Manpower Development Programs.
D. Financing: Annual appropriations.
E. Population Coverage: National coverage.
F. Types of Assistance: Formula grants and project grants with
specified uses. The Title I program is directed to providing
training and employment opportunities to the unemployed,
underemployed, and disadvantaged. Program activities are:
Classroom Training; On-the-Job Training; Public Service Employ-
ment; Work Experience; Services to Clients; and other allowable
activities. The Title II program is directed to employing
unemployed persons residing in areas of high unemployment in
jobs which provide public services. The Title VI program is
directed to providing temporary public service employment for
unemployment persons.
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G. Uses and Use Restrictions: Title I funds are allocated to
either of which contain areas of substantial (6.5 percent
governors for: (1) State Vocational Education agencies to
or more) unemployment. Title VI - Applicants qualified
provide their services to prime sponsor areas; (2) costs
under Title I and Indian tribes on Federal or State
incurred in staffing and servicing State manpower services
reservations.
councils; and (3) provision of State manpower services to
Beneficiary Eligibility:
prime sponsor areas. Ninety percent of the Title II funds
(1) Categorical Requirements: Title I - Economically disad-
made available must be used to pay wages and fringe benefits
vantaged, unemployed, or underemployed persons. Title II -
to participants. Funds may not be used for supplies, equip-
Persons unemployed first 30 days prior to application or
ment, or other property except in specific training situa-
unemployed and residing in an area of substantial unemploy-
tions. Under Title VII, preferred consideration is given to
ment. Title VI - Persons unemployed for 30 days prior to
workers who have exhausted all unemployment compensation or
application (except in areas of excessively high unemploy-
are not eligible for it and workers who have been without a
ment in which case persons need only be unemployed 15 days)
job 15 weeks or longer. The Title VI program is subject to
or be underemployed.
the restrictions under Title II, except in areas of excessively
(2) Income Tests: Individual must be a member of a family
high unemployment where some of the Title II restrictions are
whose annual income is at or below the OMB established
waived.
poverty level.
H. Eligibility Requirements
(3) Asset Tests: None.
Applicant Eligibility:
(4) Other Eligibility Conditions:
(1) Categorical Requirements: Title I - States, units of
(a) Work Requirements: Information not obtained.
general local government having a population of 100,000 or
(b) Citizenship: None.
more, consortia of local government units, at least one of
(c) Institutional Status: None.
which has a total population of 100,000 or more, are con-
(d) Residence Requirement: None.
sidered eligible by the Secretary because of special circum-
I. Benefits:
stances, and a limited number of Concentrated Employment
(1) Determination of Benefit Amount: Benefits for this program
Program grantees. Title II - Applicants qualified under
consist of subsidized employment for qualified applicants.
Title I and Indian tribes on Federal or State reservations,
Workers are paid the highest of the Federal minimum wage or
the applicable State or local minimum wage.
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(2) Relationship of Benefit Amount to Family Size: None.
(3) Relationship of Benefit Amount to Place of Residence: None,
except that some States or localities have higher minimum
wages then others.
(4) Relationship of Benefit Amount to Cost of Living Changes:
None.
(5) Current Benefit Amounts: Vary according to the higher of
the Federal minimum wage or applicable State or local
minimum wage.
(6) Comparison to Poverty level: Not applicable.
(7) Other Benefits/Related Programs: Not applicable.
J.
Cost and Caseload Information:
*
K.
Interaction With Other Programs:
(1) Program Eligibility: No automatic eligibility for any
other program.
(2) Program Income: Information not obtained.
*The National Council on Aging estimates that 1,126,000 individuals are employed
under Title I program, 6.1% of whom are age 45 or over; 227,100 individuals are
employed under Title II, 13.4% of whom are age 45 or over; and 157,000 individuals are
employed under Title VI, 13.8% of whom are age 45 or over.
DEPARTMENT OF
HEALTH, EDUCATION, AND WELFARE
POSTAGE AND FEES PAID
WASHINGTON, D.C. 20201
U.S. DEPARTMENT OF H.E.W.
OFFICIAL BUSINESS
U.S.MAIL
HEW-391
DHEW Publication No. (OHD) 76-20951