Fighters, National Conference of Police Associations, American Library Association, National Association of Retired Civil Employees. Senator CARLSON. Mr. Chairman, I wonder if Mr. Wyatt has any figures as to the number of people who would be affected if we reduced the age limit from 65 to 55. How many people in the teaching profession or of all of these professions on whose behalf you are appearing would be affected?

Mr. WYATT. The statement indicates 1,100,000 persons. I would like to call on Miss Bradley of our research division.

Miss BRADLEY. I think that is contained in section 3 of the statements.

Senator CARLSON. Mr. Wyatt, I understand you are submitting this statement for the record and it will be available in the record? Mr. WYATT. That is right.

Senator CARLSON. That is all, Mr. Chairman.

The CHAIRMAN. Thank you very much, Mr. Wyatt.

(The attachments to Mr. Wyatt's statement follow :)

SECTION 38 OF H. R. 8300-INTERNAL REVENUE CODE OF 1954

(The italicized portions indicate the changes recommended by the National Educational Association and by a number of other national organizations.) SEC. 38. RETIREMENT INCOME

(a) GENERAL RULE. In the case of an individual who has received earned income before the beginning of the taxable year and who has attained the age of 65 before the end of the taxable year, or who has been retired under a retirement system, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the amount received by such individual as retirement income (as defined in subsection (c) and as limited by subsection (d), multiplied by the rate provided in section I for the first $2,000 of taxable income; but this credit shall not exceed such tax reduced by the credits allowed by section 33 (relating to foreign tax credit), section 34 (relating to credit for dividends received by individuals), and section 35 (relating to partially taxexempt interest).

(b) INDIVIDUAL WHO HAS RECEIVED EARNED INCOME. For purposes of subsection (a), an individual shall be considered to have received earned income if he has received, in each of any 10 calendar years before the taxable year, earned income (as defined in section 911 (b)) in excess of $600, or has been retired under a retirement system. A widow or widower whose spouse had received such earned income shall be considered to have received earned income. (c) RETIREMENT INCOME. For purposes of subsection (a), retirement income means income from

(1) pensions and annuities,

(2) interest,
(3) rents, and

(4) dividends,

to the extent included in gross income without reference to this section, but only to the extent such income does not represent compensation for personal services rendered during the taxable year.

(d) LIMITATION OF RETIREMENT INCOME. For purposes of subsection (a), the amount of retirement income shall not exceed $1,500 less

(1) any amount received by the individual as a pension or annuity— (A) under title II of the Social Security Act,

(B) under the Railroad Retirement Acts of 1935 or 1937, or

(C) otherwise excluded from gross income, and

(2) any amount of earned income (as defined in section 911 (b)) in excess of $900 received by the individual in the taxable year unless such individual has attained age 75.

(e) RULE FOR APPLICATION OF SUBSECTION (d) (1). Subsection (d) (1) shall not apply to any amount excluded from gross income under section 72 (relating to annuities), 101 (relating to life insurance proceeds), 104 (relating to compensation for injuries or sickness), 105 (relating to qualified employers' accident

and health plans), 401 (relating to certain employee annuities and insurance contracts), 402 (relating to employees' trusts), or 1241 (relating to private annuities).

ESTIMATES OF TAX LOSS TO THE FEDERAL GOVERNMENT OF THE PROPOSAL TO EXEMPT UP TO $1,200 OF THE INCOME OF RETIRED PERSONS

(Prepared by the Research Division of the National Education Association of the United States)

H. R. 5180, sponsored by a number of public employee groups, proposed to remove certain inequities by allowing a $1,500 exemption from Federal income taxes of the income of retired persons. The general idea was incorporated into the House revenue bill (H. R. 8300) but with certain changes: (a) The amount was reduced to $1,200; (b) the maximum exemption which any taxpayer might have at present tax rates was limited to $240, and the exemption was limited to persons 65 years of age and over (H. R. 5180 applied also to persons 55 to 64 years of age who were retired under a public or private retirement plan).

Part I of this memorandum summarizes the main conclusions of the estimates. Part II consists of a summary statement and statistical tables when the $1,200 is applied to those 65 years of age and over. Part III shows the tax loss to the Government if the exemption were applied to those 55 to 64 years of age. The present memorandum is a series of careful estimates based upon published data of the Bureau of the Census and the Social Security Administration. Because of the limitations of the basic statistics it has been necessary to make a number of assumptions so as to complete the calculations. These assumptions are included in each part of the present memorandum.

PART I. SUMMARY OF THE ESTIMATES

If the $1,200 exemption is made available to retired persons 65 years of age and over, the Federal Government would not receive approximately $64 million in income taxes.

The same exemption applied to those retired under retirement systems who are between the ages of 55 and 64 years would result in a tax loss of approximately $17,500,000.

The total tax loss for the 2 age groups is estimated as $81,500,000; it might be as low as $75 million and it might be as high as $90 million.

PART II. ESTIMATED TAX LOSS ON PERSONS 65 YEARS OF AGE AND OVER

Of the 13 million population 65 years and over, one-fourth (25.4 percent) have no income and presumably are supported by other individuals. Approximately 17.9 percent are living on current earnings only rather than retirement income.' Twenty percent are on public assistance and presumably pay no income taxes.

All of the above groups (63.3 percent of all persons in this age bracket) would constitute no loss in tax to the Federal Government under the provisions of H. R. 5180.

An additional one-third (33.7 percent) of all persons 65 years and over are receiving OASI, railroad retirement, or veterans' benefits which are tax exempt. Persons retired under these plans at the lower income levels pay no income tax, while it is reasonable to assume that most of those at the upper income levels already are receiving tax-exempt income up to, or in excess of, the $1,200 limit. (See assumptions 4 through 8.) The loss in tax to the Federal Government from these groups, therefore, would be slight.

The remaining 3 percent of persons 65 years and over would be the group receiving the most benefits under H. R. 5180 and would represent the bulk of the loss in taxes.

Of the 13 million persons 65 years and over, the research division of the National Education Association estimates that approximately 1,100,000 would

1 Income distribution, number of persons 65 and over with and without incomes, and number with earnings only, from U. S. Department of Commerce, Bureau of Census Series P-60, Nos. 11 and 14, Income of Persons in the United States: 1951 and 1952.

Number of persons receiving income from the various social insurances, etc., estimated mainly from Federal Security Agency, Social Security Administration, Social Security Bulletin, June 1953, vol. 16, No. 12, p. 23.

benefit under H. R. 5180. in Federal income taxes.

On the average these would save about $60 annually The total tax loss to the Federal Government would be about $64 million; the range of this estimate may be from $60 million to $70 million.

Tables 1 through 4 present detailed figures on which these estimates are based. Assumptions used for persons 65 years of age and over

1. That the distribution of income for retired persons over 65 is the same as for all persons over 65.

2. That all women over 65 reported as having incomes were single, widowed, or divorced.

3. That all persons receiving OAA only and OASI plus OAA would have no taxable incomes.

4. That single persons, both men and women, and married men with wives under 65 receiving OASI only having the various total incomes would be receiving the following amounts from OASI which would be exempted from tax:

5. That for these same marital groups covered by OASI plus other plans, the exempted amounts would be increased 10 percent. This assumes that 10 percent of the other plans would be of the tax-exempt type and that the benefits received would be the same as those from OASI. Persons with the following total incomes would be receiving the various amounts which would be exempted from tax.

6. That married men with wives over 65, whose income is high enough to pay tax, would be receiving at least $1,500 exempted income from OASI, veterans' compensation or pension, and railroad retirement. Therefore, there would be no loss in tax from these groups.

7. That single persons and married men with wives under 65, covered by railroad retirement only or veterans' compensation or pensions only, would be receiving the following total incomes of which certain amounts would be exempted from tax.

8. That for these same marital groups, covered by railroad retirement plus other plans and veterans' compensation and pension plus other plans, the exempted tax would be increased 10 percent. (Use same assumptions as given in 5 above.) Persons receiving the following total incomes would have the various amounts listed below exempt from tax:

9. In calculating the tax the following were used:

(a) A standard 10-percent (not to exceed $1,000) deduction. (b) The following dependency exemptions:

Single persons---.

Married men with wives under 65_

Married men with wives over 65-

$1,200

1,800

2,400

(c) That single persons, which included widowed and divorced persons, had no other dependents and that married men had no dependents other than wives. (d) That all married men filed joint returns.

10. The effect of the so-called 3-percent annuity rule was omitted in all calculations. Had this ruling been applied, the tax loss would be somewhat reduced.

TABLE 1.-Estimated total number, income status, and source of income for population 65 years of age and over by sex

$4,000 to $4,499.