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'A Break for Pensioners'

October 14, 1988

Your editorial "A Break for Pensioners" (Oct. 3), regarding Social Security benefits for pensioners who have to work to supplement their retirement checks, is right on target.

However, there is a serious error of fact. The "grossly unfair taxation" is not 50%, as you stated, but rather over 80%.

After retirement two years ago, I became a consultant in data processing. My skills and experience must have some value since I am reasonably in demand. But for every marginal dollar I earn, I pay over 80%--that's right, over 80%--back to a government agency.

This breaks down into 15% to 22% in federal income tax, 2% to 4% in state income tax, 13.02% in self-employment tax (in lieu of Social Security), for a total of 30% to 39%.

Add to that the 50% which I must repay to Social Security, and you see that my true tax rate is between 80% and 89%. To add injury to insult, I also have to pay income tax on the money which is repaid to Social Security.

The actual numbers work out like this: Income of $700 from Social Security, and $1,400 of earnings from work, for a total of $2,100. At minimum rates, I pay 15% of $2,100, or $315 federal income tax; 2% or $42 in state income tax; 13% of $1,400, or $182 in self-employment tax, and $700 as repayment to Social Security, for a total of $1,239, or 88.5% at minimum rates.

And next year it gets worse. The self-employment tax rate goes up, and the Reagan Administration ("I will never increase taxes") imposes a 15% surcharge on my federal income tax.

And to think that a tax on tea was once considered sufficiently onerous to start a revolution!

CHARLES FANWICH

Panorama City

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