Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 16, 1993 TAG: 9302160132
SECTION: NATIONAL/INTERNATIONAL PAGE: A1 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
MANY WON'T GET SOCIAL SECURITY IF EMPLOYERS DON'T PAY TAX, WORKERS DON'T
Thousands of people work for cash - washing dishes, harvesting vegetables, cleaning homes and office buildings. But when they retire from the nation's underground economy, there may be no monthly Social Security check to protect them from poverty.It's not clear how many employers fail to pay Social Security taxes for workers, although the issue is the subject of an Internal Revenue Service study. But there are signs it is a sizeable number.
The IRS estimated in 1991 that only one-fourth of an estimated 2 million household employers filed the required tax forms for workers.
Experts say thousands of workers could wind up in poverty when they retire because their employers failed to report some - or any - of their earnings to the government. Social Security retirement benefits are based on a worker's lifetime, reported earnings.
B "There is an awful lot of cheating going on," says Dan Schulder, legislative director for the National Council of Senior Citizens. "It's scandalous."
Commerce Secretary Ron Brown and Zoe Baird, President Clinton's first nominee for attorney general, called attention to the situation when they acknowledged they had not paid Social Security taxes for their domestic help.
But other occupations - farmworkers, day laborers, janitors, restaurant and hotel help, some construction workers - are also affected by employers who fail to pay taxes on their workers' earnings. Many are immigrants, people of color, or people who don't speak English, experts say.
"It's a class issue as well as a racial issue," Schulder says. "It's one of the messy, dirty little secrets of our society."
Under the law, an employer who pays a worker more than $50 in any quarter of the year also owes Social Security and Medicare taxes. The employer and the employee each are required to pay 7.65 percent of wages, although some employers pay the full amount.
It takes roughly 10 years in the work force to qualify for a Social Security pension, and less time to qualify for disability or survivor's benefits. The maximum monthly retirement benefit for an individual is $1,128; the average check is $653.
Social Security used to pay a minimum benefit of $122 a month, but the Reagan administration and Congress eliminated that in a cost-cutting move in the early 1980s.
The biggest checks go to middle- and upper-income workers. But the benefit formula actually provides a more generous return to low-wage workers in comparison to taxes paid.
A full-time worker who retired this year at 65 after a lifetime of minimum-wage work would qualify for a monthly Social Security check of $496.
Low-income retirees or disabled workers may also qualify for Supplemental Security Income, a welfare program. But the benefits, even when combined with food stamps, often are not enough to pull someone out of poverty.
"There's no doubt about the fact that people on SSI are the poorest of the poor," says Arthur Flemming, chairman of the Save our Security Coalition. "They have to decide each day whether to spend the small amount of cash that they have for food or housing or clothing."
The maximum monthly SSI payment is $434 and the average is $362, although some states may supplement that amount. Some 5.4 million elderly, disabled or blind Americans receive SSI.
Not all needy retirees or disabled workers, particularly those in rural America and those who do not speak English, are aware that they may be eligible for SSI, the General Accounting Office told Congress last year.
The agency said hired farmworkers are especially at risk of not getting Social Security benefits or of receiving smaller checks than they should.