Monday, March 13, 2023

on "crowding out" with SS, FICA, and the poverty rate

Fun with FICA/SS, with Jim Ulaszek making a point I hadn't considered previously...

With respect to the most popular expression of "the poverty rate", Govt takes credit for the impact of SS benefits, but takes no blame for its FICA costs. (And overall, those are roughly equal per person.) They use *pre-tax* income when you're working to determine whether you're in poverty, so they ignore the role of the 12.4% FICA tax on every dollar earned. And when you start to receive SS, they treat it as an "income" (which may be sufficient to get you above the poverty line).

Found this useful resource to give some specifics on how SS benefits are calculated-- most notably, on "the bends" (which indicate that it is already a combo of retirement and redistribution). 


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