Taxes Part 2: The Tax on Social Security Benefits

Note to readers: Part one of this two-part essay was about FICA, and how a hidden tax affecting only people who work for wages is used to levy a heavy tax on those workers. Part of the strategy behind that tax is to hide half of it behind the employer, calling it a matching tax.

This part of the essay deals with another tax, this one not so hidden, but its creeping nature slowly taking more and more benefits from Social Security recipients each year. The means by which they accomplished this were diabolically clever.

This essay will be a bit more complicated than the one before, so if you find the calculations incomprehensible, merely skim them, as I will describe the  outcome in understandable terms.

As Johnny Carson used to say of comedy, “If you buy the premise, you buy the bit.” The premises behind taxation of Social Security benefits are two: (1) The program is in dire straits, and will soon run out of money, and (2) Recipients receive a gift in the form of the employer match, so that it is just to levy income tax on half of the benefits paid.

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