Some people who get Social Security must pay federal income taxes on their benefits. But, no one pays taxes on more than 85 percent of their Social Security benefits. Nearly 90% of individuals over age 65 rely on Social Security income to pay for a large portion of living expenses throughout their retirement years. The federal government makes this benefit available to those who have worked and contributed to the system for a certain number of years, but the total monthly benefit varies from person to person. In Europe, the competence for social security and the right to levy income tax lie with the country of employment in cross-border matters. This has two disadvantages. First, the Employment Principle distorts active persons' choice of place of work. Second, the employment-based regulation of state competencies cannot be applied to non-active persons. The Treaty of Maastricht, however, confers the right of free movement to all citizens of the Union. Against this background, this paper pleads for a reform in European policy coordination. The Employment Principle should be replaced with the Principle of Delayed Integration where cross-border matters are concerned.
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