While it’s seemingly impossible for lawmakers from across the aisle to agree on Social Security reform, Sen. Rick Scott’s (R-FL) Senior Citizens’ Freedom to Work Act of 2026 offers a rare opportunity for common ground.
My analysis shows that by eliminating Social Security’s retirement earnings test, the proposal would boost economic output, expand the workforce, increase personal incomes, and improve Social Security’s finances — with positive spillover effects also boosting other government revenues.
The retirement earnings test causes Social Security beneficiaries ages 62 to 66 to lose $1 in benefits for every $2 they earn above $24,800, resulting in marginal tax rates as high as 84%. Not surprisingly, that causes many of those affected by the test to work less than they otherwise would.
This outdated component of Social Security — which began in the wake of the Great Depression in 1935 — was originally intended to push older workers out of the labor force to free up jobs for younger workers.
Despite modifications to the test, it still discourages older people from working, even as they’ve become a critical part of the workforce. Beginning in 2034, seniors will outnumber children for the first time in U.S. history. Since 1935, white-collar “knowledge work” has become far more common. In those types of jobs, having decades of accumulated experience is an asset, and many people find their 60s to be the most productive, personally rewarding years of their careers.
If someone is ready to stop working at 62, they can, but Americans who are working less strenuous jobs and living longer, healthier lives than their Depression-era counterparts shouldn’t be ushered into an early retirement by a flawed Social Security provision.
Eliminating Social Security’s retirement earnings test could add up to 1 million older workers to the labor force by removing extraordinarily high tax rates that discourage work.
Under the earnings test, a 62-year-old who earns $30,000 faces a 74% marginal tax rate and has $2,600 taken out of their annual Social Security benefits, and a 64-year-old who earns $70,000 faces an 84% marginal tax rate and loses $22,600 of their Social Security benefits.
While the subtracted benefits are gradually added back into recipients’ Social Security benefits after they reach full retirement age (currently 66 and 10 months and rising to 67 next year), most people perceive the test as a pure tax and subsequently reduce their earnings or stop working entirely. Moreover, individuals who don’t reach the average life expectancy never recoup their lost benefits.
Multiple economic studies find that Social Security’s earnings test significantly reduces older workers’ labor force participation, while others find that most people could work years longer than they currently do.
With more than 20 million people between the ages of 62 and 66 in the U.S., and most people first claiming Social Security benefits at those ages, the retirement earnings test can affect a lot of people.
Based on prior studies’ findings, I estimate that ending the retirement earnings test would add between 166,000 and 1.035 million workers to the labor force and boost personal incomes by $10.5 billion to $65.7 billion.
That extra work and earnings could increase annual revenues by as much as: $8.2 billion for Social Security; $1.9 billion for Medicare; $5.3 billion for federal income taxes; and $2.6 billion for state and local taxes — a total revenue increase of up to $17.9 billion per year. Moreover, ending Social Security’s retirement earnings test could extend the program’s solvency by up to three months and lead to a small reduction in the poverty rate.
The benefits would be more than just economic. Continued work at older ages can have significant positive impacts on individuals’ physical and mental health. And cultural ails — such as an unprecedented plunge in conscientiousness among young Americans — cry out for older workers to share their knowledge, wisdom, and resilience with younger generations.
While nearly every proposal to alter Social Security involves substantial trade-offs, ending Social Security’s outdated retirement earnings test offers a win-win reform. The last time Congress addressed the earnings test by eliminating it for everyone above Social Security’s normal retirement age in 2000, the bill was 100% bipartisan — not a single Democrat or Republican voted against it.
AMERICA’S AI RACE AGAINST CHINA GETS A BOOST
There’s no reason that fully eliminating the retirement earnings test shouldn’t garner similar bipartisan support.
Rachel Greszler is a senior research fellow in Economics and Workforce in the Plymouth Institute for Free Enterprise at Advancing American Freedom and a visiting fellow in Workforce at the Economic Policy Innovation Center.
