Brown v. Bowen

Citation905 F.2d 632
Decision Date04 June 1990
Docket NumberNo. 1132,D,1132
Parties, Unempl.Ins.Rep. CCH 15733A Jerome BROWN, Plaintiff-Appellant, v. Otis R. BOWEN, M.D., as Secretary of the Department of Health and Human Services, Defendant-Appellee. ocket 89-6271.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

William W. Berry, Legal Services for the Elderly, Disabled, or Disadvantaged of Western New York, Inc., Buffalo, N.Y., for plaintiff-appellant.

Lynda Guild Simpson, Deputy Asst. Atty. Gen., Office of Legal Counsel, argued, Stuart M. Gerson, on the brief, Washington, D.C., Asst. U.S. Atty. Gen. Civ. Div. (Dennis C. Vacco, U.S. Atty.; William G. Kanter and Michael J. Singer, Attys., Appellate Staff, Civ. Div., Dept. of Justice, of counsel), for defendant-appellee.

Before KAUFMAN and WALKER, Circuit Judges and LEVAL, District Judge. *

LEVAL, District Judge:

This appeal challenges the constitutionality of the Social Security Act's provision for deductions from old-age insurance benefits on account of excess earnings, 42 U.S.C. Sec. 403(b). Under this provision as it stood in 1983, a beneficiary who continued to work after reaching retirement age, up to the age of 70, would suffer a reduction of benefits of $1 for every $2 earned (above a specified exempt amount). 1 We find no merit in plaintiff's contentions and affirm the district court's dismissal of the action.

Background

Plaintiff-appellant Jerome Brown applied for Social Security retirement benefits on October 19, 1983, shortly after his 65th birthday. He went to the local Social Security office, where a Claims Representative interviewed him and assisted him in completing his application. Brown told the Claims Representative that he planned to retire from his employment early in 1984. A statement appears on Brown's application, filled in by the Claims Representative upon information furnished by Brown, that he would not earn over $6,960 during 1984. 2

Brown's Social Security application also states in capital letters, "I agree to file an annual report of earnings. The annual report is required by law and failure to report may result in a monetary penalty." Brown's signature appears on the page below the statement.

At the time of the interview, Brown was given a printed information sheet. That sheet stated that if his earnings were over $6,600, the Social Security Administration might deduct $1 for every $2 earned above that amount. Brown also received two claim receipts, one for himself and one for his wife. The claims receipts included a section entitled, "Changes to be Reported and How to Report." That section provided that "Work Changes," including wage levels, must be reported to the SSA "at once," by telephone, mail, or in person.

Contrary to his expressed intention to retire in 1984, Brown did not retire until June, 1985. During 1984, he earned $25,173. Brown did not report his earnings for 1984 to the Social Security Administration until July 1985. He collected full Social Security retirement benefits in 1984, and his wife also received benefits during that time. Benefit overpayments to the Browns for 1984, according to the Secretary, amount to $8,485.80. 3

In April, 1986, the Social Security Administration requested a refund of the overpayments and assessed a late filing penalty. Brown requested a waiver of recovery of the overpayment. That request was denied. He then requested a hearing before an Administrative Law Judge.

On May 15, 1987, the ALJ found, pursuant to 20 C.F.R. Sec. 404.507, that Brown was not "without fault" in causing the benefit overpayments. Accordingly, the ALJ denied waiver of recovery of the overpayments. The Appeals Council of the Social Security Administration affirmed the ALJ's decision on August 16, 1988. 4

Brown then brought action under 42 U.S.C. Sec. 405(g) in Federal District Court for the Western District of New York before Judge Richard J. Arcara to review the Secretary's determination. He advanced two arguments: first, that the excess earnings provisions of the Act, 42 U.S.C. Secs. 403(b), 403(f)(3) deprive him of equal protection of the laws; and second, that the Secretary's determination that Brown was not without fault was unfounded. The district judge rejected both claims.

Discussion
I. The Level of Scrutiny

Distinctions made in social welfare statutes are typically reviewed for rational basis. See, e.g., Lyng v. International Union, 485 U.S. 360, 108 S.Ct. 1184, 99 L.Ed.2d 380 (1988) (statutory provision barring a household from becoming eligible from food stamps when a member of the household goes on strike upheld on rational basis test); City of Cleburne v. Cleburne Living Center, Inc., 473 U.S. 432, 440, 105 S.Ct. 3249, 3254, 87 L.Ed.2d 313 (1985); Mathews v. de Castro, 429 U.S. 181, 185, 97 S.Ct. 431, 434, 50 L.Ed.2d 389 (1976); Dandridge v. Williams, 397 U.S. 471, 90 S.Ct. 1153, 25 L.Ed.2d 491 reh'g denied 398 U.S. 914, 90 S.Ct. 1684, 26 L.Ed.2d 80 (1970) (upholding AFDC program limitations). It is the responsibility of Congress, not the courts, to determine how public funds should be spent and how they should be raised. Such legislative decisions are constrained by fiscal necessity. Every desirable program cannot be funded, nor can the full needs of every funded program be met. Lines must inevitably be drawn, and it is the legislature's province to draw them. The choices made by the legislature will be upheld unless they are "clearly wrong, a display of arbitrary power, not an exercise of judgment." Bowen v. Owens, 476 U.S. 340, 345, 106 S.Ct. 1881, 1885, 90 L.Ed.2d 316 (1986) (quoting Mathews v. de Castro, 429 U.S. 181, 185, 97 S.Ct. 431, 434, 50 L.Ed.2d 389 (1976)). The standard of review for such statutes is to determine whether they have a rational basis and do not engage in invidious discrimination, regardless whether flaws may be found in their logic. Dandridge, 397 U.S. at 486, 90 S.Ct. at 1162.

Jimenez v. Weinberger, 417 U.S. 628, 94 S.Ct. 2496, 41 L.Ed.2d 363 (1974), cited by appellant, is not to the contrary. In Jimenez, the Court struck down a statutory provision denying Social Security disability benefits to certain illegitimate children on the grounds that "the blanket ... exclusion ... is [not] reasonably related to the prevention of spurious claims," the government's ostensible objective. 417 U.S. at 637, 94 S.Ct. at 2502.

Appellant contends, however, that because the excess earnings deduction discriminates on the basis of wealth and because it burdens the right to work, it must pass a higher standard of scrutiny than rational basis. Although conceding that strict scrutiny is not warranted, he advocates a "heightened" scrutiny test. See Zablocki v. Redhail, 434 U.S. 374, 98 S.Ct. 673, 54 L.Ed.2d 618 (1978) (heightened scrutiny exercised over a Wisconsin statute which interfered with the "fundamental" right to marry).

He argues first that heightened scrutiny is warranted because the statute impinges on the right to work for pay. Assuming arguendo that the right to sell one's labor is fundamental, see Hampton v. Mow Sun Wong, 426 U.S. 88, 103, 96 S.Ct. 1895, 1905, 48 L.Ed.2d 495 (1976), the statute does not directly and substantially interfere with it. It places no legal barriers in front of those who wish to work for pay. Although it reduces the net benefits of working for pay, it by no means eliminates them. Heightened scrutiny is not warranted for this reason.

Appellant's second argument, that the statute must be subjected to heightened scrutiny because it discriminates based on wealth, is also without merit. The Act does not distinguish between the rich and poor. The earned income of both is taxed identically. Appellant's complaint is with the statute's failure to also reduce the benefits of beneficiaries who receive passive income. The gist of plaintiff's argument is that the statute must be reviewed with heightened scrutiny for failing to discriminate based on wealth. In other words, those who have more should pay more or receive less. If appellant's argument were accepted, every governmental charge from court filing fees, to car registration charges, to fishing licenses, to sales tax would be suspect unless it were scaled to means. There is no such rule. Heightened scrutiny is not warranted on this basis.

II. Rational Justification

Appellant contends it is irrational to tax wages while failing to tax earnings from dividends and interest. He argues that the excess earnings charge discriminates irrationally against those who lack invested wealth, requiring them to bear more than their fair share of the burden of financing the Social Security system, or depriving them of their fair share of benefits.

The argument is based on the supposition that the system of benefits derives its justification from the goal of providing (at retirement age) for the needy. That is not the case. H.R.Rep. No. 615, 74th Cong., 1st Sess. 1 (1935). The program is rather a forced participation in retirement insurance in which wages are taxed to finance guaranteed retirement benefits. Eligibility is not based on need. Indeed, the needy are ineligible to receive benefits unless they have contributed sufficiently by working for a specified minimum number of quarters in employment subject to the Social Security tax. Benefits are payable to wealthy beneficiaries equally with the needy. Further, benefits are not funded by contributions based on wealth or unearned income. They are funded by taxes imposed on wages (and other equivalent earned income). See 42 U.S.C. Sec. 401(a). In short, the Social Security old age retirement insurance system is not based on the system of values presupposed in plaintiff's irrationality argument.

The purpose of the old age benefits provisions is to provide workers and their families with payments at an age when their earnings are likely to diminish by reason of old age or illness. See Mathews v. de Castro, 429 U.S. at 186, 97 S.Ct. at...

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