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Comments for the Record
House Ways and Means Committee
Subcommittee on Social Security
Hearing on Securing the Future of the Social Security Disability Insurance Program

Friday, September 14, 2012, 9:30 AM

by Michael Bindner
The Center for Fiscal Equity

Chairman Johnson and Ranking Member Becerra, thank you for the opportunity to submit our comments on this topic.   We have twice commented on this topic with essentially identical remarks reflecting our view of this issue, which is made in the context of our overall proposal for tax and entitlement reform.  These comments were made to the first session on December 2, 2011 and the second on December 9, 2011.  In these comments, we will answer the questions which have arisen earlier in the series and summarize our proposals.

First, is the concept of disability that prevailed at the start of the program in 1956 still appropriate today given advances in medicine, rehabilitation, and the workplace?  

We believe the answer must be no.  Since the passage of welfare reform, the concept of disability has increased to include people with learning disabilities brought about by prenatal exposure to illicit drugs, while retaining coverage of people with mood disorders that can be treated quite effectively with medication.  Current incentives are more a bar to rehabilitation, as no one wants to give up a life-time benefit for a life-time of work if they have any degree of rationality left.  While there are still many mentally disabled people who need continuing assistance, ways should be pioneered to give them incentives to both participate in rehabilitative programs and employment opportunities.

Second, are there ways to better support individuals with disabilities to stay in the workplace?  

Given the time required to receive assistance, this is almost a rude question.  It is not easy to get on the disability rolls.  Additionally, many who are seeking disability already cannot work, especially in this economy, so the question of staying in the workplace is largely overcome by events.

Third, can the decision-making process be strengthened so that, when appropriate, awards are made as early as possible and decisions on applications and appeals are made with greater accuracy and consistency?

Yes.  Indeed, the initial award can be made in cooperation with the last employer, who would provide at least a portion of disability income as well as rehabilitative training in lieu of a higher disability insurance tax payment.   Such a system would bring about faster determinations of disability, without the need to provide a case management and appeal infrastructure which provides make-work for both bureaucrats and disability lawyers, both of which add no real value to the program while costing taxpayers more and more as backlogs continue to grow and cases are summarily denied on the first reading.

In summary, our solution is to shift funding for disability insurance and rehabilitation entirely to an employer-paid, VAT-like Net Business Receipts Tax, with the payment of disability benefits and rehabilitative care to be covered by either the last employer or a future employer who wishes to take on the new employee’s “case” and provide both continued benefits and services until that worker can be productive without continued assistance.

As stated, our proposed solutions are made in the context of a four part tax reform, which form the basis of our analysis.  The key elements are:

•  A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure that every American family pays something.

•  Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other international spending, with graduated rates between 5% and 25% in either 5% or 10% increments.  Heirs would also pay taxes on distributions from estates, but not the assets
themselves, with distributions from sales to a qualified ESOP continuing to be exempt.

•  Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive.

•  A VAT-like Net Business Receipts Tax (NBRT), which is essentially a subtraction VAT with additional tax expenditures for family support,  health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age 60.

Please allow us to now repeat our proposed solution, which is identical to prior submissions.  We will deal with how each of these proposals relates to the circumstances of program participant.

In the event a VAT is adopted, we propose that program participants receive a one time cost of living adjustment (COLA) at the VAT rate in the year the VAT takes effect, with further adjustments in any year the VAT rate increases.  This is also applicable if our proposals for a regional VAT are enacted as amendments to the United States Constitution.  

We propose that Disability Insurance payroll taxes be repealed, with funding coming from our proposed Net Business Receipts Tax.  Repealing this tax provides a justification for decoupling the benefit level from past income.  An income based benefit should be replaced with a standard benefit.  During the application phase, instead of forcing participants onto state welfare rolls, the last employer would pay the standard benefit – which should be at least the minimum wage for a full time worker, if not higher – with this payment offsetting the employers NBRT liability and, if necessary, its VAT collections.  

If the employee has dependent children, each child will also receive the refundable expanded Child Tax Credit with their benefits (currently estimated at $52o per child per month).  Please note that we propose elsewhere that the minimum wage be increased to $12 an hour so that no one is paid primarily through the Child Tax Credit and that both the minimum wage and the credit be automatically adjusted for inflation.  

As stated elsewhere, the expansion of the credit is funded by consolidating it with the Earned Income Tax Credit, the deduction for children and limitations on or elimination of the mortgage interest and property tax deductions.  The extension of this credit to non-workers is offset by abolishing supplemental retirement programs, such as Supplemental Nutrition Assistance and housing assistance.

Once the application process is complete, the Federal (or regional) government will distribute payments, as well as the expanded refundable Child Tax Credit for any dependent children, all of whom would qualify for Medicare, including any long term care provisions transferred to the federal government from the Medicaid program.

If vocational or educational training is required, as it likely should be in some cases, then the training provider will serve as both “case worker” and conduit for additional benefits, including the Child Tax Credit.  Participants would be paid the minimum wage for engaging in training, along with any additional stipend provided to program beneficiaries of the benefit level were set higher.  

Client health care would be funded by the federal government, but could conceivably be provided through the health care system provided to employees of the training provider.  This is also our proposal for providing education to TANF beneficiaries.  This care could take the form of health insurance or of staff medical personnel and facilities.  In the event health care reform devolves into a public option or single payer system, the question of who pays for health care will be moot.

Clients who are incapable of completing training and finding employment will be transferred back to beneficiary status, with the training provider paying benefits during any transition period.

Program participants, like TANF participants, would not pay OASI payroll taxes, nor would program providers pay an employer contribution on their behalf or distribute any personal retirement account shares to them as an offset to their Net Business receipts taxes.

Unless they have significant outside income from an inheritance, tort judgment or lottery prize, it is doubtful that program participants will be hit with the Income and Inheritance Surtax.  In any case, benefits and tax credits received would not be counted in determining adjusted gross income for this tax, although training stipends probably should be.  

Program participation should not be means tested based on any judgment, although beneficiaries of significant inheritances should probably be excluded from the program, although that level should be set rather high – likely at the level where such benefits are taxed, currently proposed at $50,000 for individuals and $100,000 for joint filers and qualifying widow(er)s.

Thank you for this opportunity to share these ideas with the subcommittee.  We are always available to discuss them further with members, staff and the general public.

Originally posted to Michael Bindner on Thu Sep 27, 2012 at 02:09 PM PDT.

Also republished by Social Security Defenders.

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Comment Preferences

  •  Tip Jar (0+ / 1-)
    Recommended by:
    Hidden by:
    cai
  •  Michael: (2+ / 0-)
    Recommended by:
    cai, whaddaya

    How has the definition of what constitutes a disability evolved since this programs inception?  How has the program itself changed?  What, currently, is the fastest growing class of disabled applying for and receiving benefits?

    Oregon: Sure...it's cold. But it's a damp cold.

    by Keith930 on Thu Sep 27, 2012 at 02:31:03 PM PDT

    •  The Definition of Disability (0+ / 0-)

      Is unchanged since President Eisenhower signed the legislation. it is as follows:

      Definition of Disability

      (d)(1) The term “disability” means—

      inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months;

      My source:  http://www.socialsecurity.gov/...

      This is the definition is for adults who apply for SSA disability.  I worked on SSA/SSI Disability Claims for 15 years, so I have some knowledge of this program from one perspective.

      I hope this helps.  

      Unfortunately, I don't have time to answer all of your questions my pillow monster beckons my name.  

      Life is not a problem to be solved but an adventure to be experienced.

      by DarkHawk98 on Sat Sep 29, 2012 at 01:01:28 AM PDT

      [ Parent ]

  •  I know many people who would gladly give up (5+ / 0-)

    a "life-time benefit" for a "life-time of work".  In a cold minute.

    Furthermore, just because drugs exist to treat various psychiatric disorders does not mean they work for everyone.  If you knew anybody who had struggled from one drug to the next, from hospitalization to hospitalization, sometimes resorting to electro-convulsive therapy, you would not breezily suggest that such disorders can be easily treated.

    © cai Visit 350.org to join the fight against global warming.

    by cai on Thu Sep 27, 2012 at 02:55:40 PM PDT

    •  Put me on that list. I want to work...but can't (5+ / 0-)

      I have at least five separate conditions that hinder this.
      I wish I did not.  I wish I was still working.

      Dear budget cutting GOP'ers: Public transit is my “car.” And frankly, I’d like it back.

      by imfunnytoo on Thu Sep 27, 2012 at 03:01:21 PM PDT

      [ Parent ]

      •  Brother Disabled (5+ / 0-)

        My brother has social phobia, panic disorder, OCD, generalized anxiety, and suicidal thoughts. He has been seeing psychiatrists for over 17 years without interruption. He has tried many different therapies besides medications. The medications he currently takes help him, but he can't work. He needs to take each day at his own pace. He lives with our parents. Someday, he will live with me. He once had a great career, but mental illness destroyed it. He would like to work. He tried part-time work, temporary work, but he could not keep up and was let go each time. His current medical regimen lets him live with his illnesses, but life must stay on an even keel. He needs a quiet, peace, which can be provided at home.  A few stressful events put him in the hospital.

        •  Thank you for accepting your brother's needs with (4+ / 0-)

          such grace.

          One terrible thing people with disabilities often face are family members -- not immune from the larger society -- who judge and reject them for things they cannot help.

          © cai Visit 350.org to join the fight against global warming.

          by cai on Thu Sep 27, 2012 at 04:27:24 PM PDT

          [ Parent ]

          •  We Are Family (0+ / 0-)

            No one in my immediate family would ever turn his/her back on each other. We have always believed that we would help one another through thick and thin. I want my brother to live with me so that I know he is safe. I love my brother. I would never want him alone, abandoned when he has family. My parents feel the same way. We will never take money from him to live with us. Family is all about helping one another. I wish more families would see it that way.

            I know the Republicans would see my brother as a parasite, a loser. They would say he deserves to die. The Republicans frighten me. I think they want to get rid of anyone, disabled and elderly.

            The ill are not sick by choice. The Republicans are a party of sickos. I think a lot of them could use psychiatric treatment. They seem delusional and dangerous. I do fear for others who are sick, disabled, will become so in the future, and the elderly.

    •  Yeah, including my wife (3+ / 0-)
      Recommended by:
      cai, FloridaSNMOM, whaddaya

      If her condition went into remission, she'd be back in the workforce in a heartbeat.

      She LIKED working.

      It took 6 freaking years, an appeal and legal action to get her classified as disabled (mostly because of a judge that didn't believe in her condition).

      The paperwork, medical tests, etc are REALLY FREAKING HARD.  If she'd been on her own, she never would have succeeded.  I had to provide a lot of help, especially with the paperwork and getting her to all the appointments (she often isn't safe to drive).

  •  I do not HR lightly, so I've given this some (3+ / 0-)
    Recommended by:
    Panama Pete, FloridaSNMOM, whaddaya

    thought.  I don't generally HR anything non-egregious, or anything where the diarist might be in good faith.  

    However, I have decided that even if the diarist is writing in good faith, the errors and attitude are so egregious -- not just a right-wing frame, but repeating ableist assumptions about who disabled people are -- that it deserves the donut.

    © cai Visit 350.org to join the fight against global warming.

    by cai on Thu Sep 27, 2012 at 04:10:38 PM PDT

  •  Expanding on the errors: (5+ / 0-)

    1)  Many to most people with disabilities that prevent them from working wish like hell they could work.  Work is a source of identity, meaning, satisfaction, accomplishment, pride, and self-worth, as well as a source of money.

    2)  Following from this, many to most people who become disabled and unable to work have tried everything they can to be able to work, including, in many cases, actions that later hurt them.  (Either by making their conditions worse, or, in some cases, reducing their disability benefit if they attempt to work part-time.)  The people who do not make such attempts generally have the sort of disabilities (either congenital or acquired) that have zero chance of improvement.

    3)  Disability is not some cushy, easy lifestyle.  It is enough to keep body and soul together -- sometimes -- but it is far from luxurious.  Disability payments are a fraction of what people have earned prior to becoming disabled, which means that if they could work, they would earn far more than their disability payment.  (The only exceptions are people who have insufficient work history but get disability payments based on need.  And those payments are even lower.)

    © cai Visit 350.org to join the fight against global warming.

    by cai on Thu Sep 27, 2012 at 04:18:28 PM PDT

  •  Yeah, my wife was making 80k a year (3+ / 0-)
    Recommended by:
    cai, FloridaSNMOM, whaddaya

    She qualified for the maximum disability benefit.

    It's something like 1/3 of her prior earnings, and it is taxed.

  •  The Old Bureaucrat Speaks (0+ / 0-)

    So, according to the author of this post, all we have to do to "secure the future of SS Disability" is revise the IRS code, institute a VAT tax, completely revise the meaning of disability under the SS Act and and give people a few refundable tax credits for themselves and their kids (if I understand correctly.) Meanwhile, other people who commented here explained how it really is, out here in the real world.

    Based on my 32 years of experience in SSA, I'd say the commenters here understand the DIB program a great deal better than the author of this post. Still, I'm not willing to HR Mr. Bindner's post. It's just not important enough. Whaddaya

    •  Amen (2+ / 0-)
      Recommended by:
      whaddaya, maryann26

      thanks for saying so.  I was a DDS examiner for 15 years. Tough system to administer. Very harsh standards that are very difficult to meet, equal or functionally equal winks especially at the initial claims level.  

      I used to tell my claimants very clearly, "listen it is not that I don't believe you, however, the laws and Social Security Regulations require me to be able to prove your disability on paper, unfortunately the medical records I have received do not prove you are disabled as defined in the law.  I am sorry.  You have a right to appeal this decision and I suggest to all my claimants that they file and appeal because we do some times make inaccurate decisions at this, the initial claims level.

       I changed careers 5 years ago, the DDS production pressures "to close more cases" I could no longer tolerate after 15 years of constant pressure, always about "trying to close more cases; hurry up, close more cases" don't take vacations, you need to close more cases, while you are gone on vacation we are going to put these 15 cases per week on your desk and we expect you to close them as soon as possible as soon as you get back.

      Needless to say, it ruined my marriage, ruined my health and nearly destroyed my relationships with my children.  

      Now 5 years later, I work out doors everyday to the benefit of the natural environment, my wife and I have reconciled and we remarried; my adult daughter and her fiancee are our roommates because we like living together, and my son is a Marine honorably serving our country. AND I can sleep at night, every night.  My health? time will tell;  I am fighting a cancer right now that who know's I may ended up filling for disability on laughs talk about irony's. amazing eh? chuckles

      Life is not a problem to be solved but an adventure to be experienced.

      by DarkHawk98 on Sat Sep 29, 2012 at 01:22:16 AM PDT

      [ Parent ]

      •  Good for you, DH98 (0+ / 0-)

        Sorry your management didn't know how to keep the pressure off you and your peers. Don't forget--file when you need to. Don't delay a minute. We both know how important that is. Good luck and good wishes for your return to health. Whaddaya

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