People below the poverty line often aren’t really poor. Many of them receive tax-free income and welfare benefits that aren’t even considered in determining whether someone is below the government’s official poverty line.
One sign of that fact is that middle class people (households in the middle fifth of households in terms of income) consume only 29 percent more per person than people in the bottom fifth of all households — the so-called poor. That’s what economists at the Federal Reserve Bank of Dallas found, as they noted in Sunday’s New York Times.
Moreover, most Americans below the poverty line live better than the average Western European, and possess things — like air conditioners, cable TV, and dryers — that many European households lack. Moreover, many of them own their own homes, typically, a three-bedroom house.
Many forms of income are invisible under federal law. For example, Billionaire Kirk Kerkorian’s ex-girlfriend, Lisa Bonder, received $600,000 per year in child support from him for her child (even though the child turned out not to be his), but none of that was taxable. That’s because child support isn’t treated as “income” by federal law, no matter how big the child support award is, or how much of it is actually spent on the custodial parent, rather than the child. So a recipient can be rich, yet qualify for all sorts of means-tested government welfare benefits.