Elimination of the double taxation on social security that occurs when a worker from one country works in another country and has to pay social security taxes to both countries with the same income. As a result of existing totalization agreements, U.S. workers and employers are currently saving about $800 million a year in foreign taxes that they do not have to pay. Totalization agreements promote international trade, protect benefits for people who have worked abroad, and eliminate double social security taxes paid by employers and their workers while working and residing in countries where social security systems are parallel. As Mexicans are thought to account for a large portion of the millions of unauthorized workers in the United States, a totalization agreement with Mexico has raised concerns that they would be eligible for social benefits again. In order to shed light on the potential impact, the GAO was asked to describe (1) the processes of the Social Security Administration (SSA) for the development of the agreement with Mexico, (2) to explain how the agreement could have an impact on the payment of benefits to Mexican citizens and (3) to assess the cost of such an agreement. This agreement may be amended by endorsements considered to be an integral part of this agreement. Disagreements over the interpretation or implementation of this agreement are resolved through consultations between the parties. The United States has agreements with several nations, the so-called totalization conventions, in order to avoid double taxation of income in relation to social contributions. These agreements must be taken into account in determining whether a foreigner is subject to the U.S. Social Security Tax/Medicare or whether a U.S. citizen or resident alien is subject to the social security taxes of a foreign country. TSCL is concerned about the financial impact that a totalization agreement with Mexico would have on social security, because millions of people have worked there illegally.
Under current legislation, the Social Security Administration uses all income to determine the right to benefits, even if the jobs were treated illegally under invalid or fraudulent social security numbers. According to the latest TSCL Senior Surveys, 87% of seniors believe that the government should do more to prohibit the payment of social security benefits on the basis of illegal work. These international social security agreements are called „totalization agreements“ and have two main objectives: an agreement would also fill gaps in benefit protection for American workers who have worked in both countries, but not long enough in one or both countries to qualify for benefits. In Mexico, once the agreement is signed, the Mexican Senate will have to give its approval. The Social Security Administration has 24 totalization agreements – most with other industrialized countries such as Canada and Japan. The agreements help workers who share their careers between the United States and their home countries. Workers may not be entitled to social security benefits from one or both countries because they have not worked long enough in one country or because they have not worked long enough to meet the minimum eligibility requirements. Self-employed workers are also exempt from double taxation by two social security schemes. However, the country in which contributions are to be collected is by source of social security income, the duration of self-employment (increased or random income) and, for some countries, by nationality and not residence (i.e.: