The Widdershins

Posts Tagged ‘middle class economics

Good afternoon Widdershins. Being the midwife to the midweek post, I have the opportunity to recap and summarize last night’s State of the Union address. If you would like a serious breakdown of the President’s proposals, you can click here and here. Otherwise, if you want to partake in some of my foolishness, read on.

Given that orange is the new black who'd thought both the President and Speaker would be persons of color...

Given that orange is the new black who’d thought both the President and Speaker would be persons of color…

The voices I sometimes hear were on a rampage last night. This ability to hear and translate these voices is not a natural talent. It is a skill I picked up following decades of hoisting tumblers slightly larger than the Exxon Valdez filled to overflowing with the nectar of my friend Glen — Glenfiddich.

Last night my cranial rabbit ears were finely tuned. The voices I picked up were transcontinental in character from the well-heeled neighborhoods with Palm accompanying Beach or Springs in their names, Nob Hill, or just about anyplace in Texas with the exception of San Antonio. My friend Glen’s nectar has given me the apparent ability to eavesdrop on these conversations. The following is what I heard last night in reaction to the SOTU.

There was a lot of chatter from around Bentonville, Arkansas. Best I can tell that chatter was centered around the proposal to plug what is probably the biggest loophole in the whole tax code — the “Angel of Death loophole”. It is so named because when the merciful Angel of Death visits those with gazillions of dollars, she brings with her an exemption worth dying for. Truly, it is a loophole to die for — just ask the grateful children of the dearly departed. It is called, “Stepped up basis.”

All the chatter from Bentonville was probably the Walton family. Here’s how it could have worked for them or the Steve Jobs family or the Bloomberg family or the Koch family or any of the 3,200 other families it really affects. You see, this exemption isn’t just about the 1%. It isn’t about the top one-tenth of the 1%. It really only affects the most Jetson of the jet set — the .001% of the 1% or about 3,200 families.

Here’s how it would have worked with the Waltons. Say old Sam paid $1.00 for his stock in Wal-Mart. Sam worked hard, was successful, didn’t even take a salary. Over his years of hard work, his $1.00 stock became worth hundreds of billions of dollars. Having never cashed his stock, when the Angel of Death delivered her tax exemption at the end of his time, the stock and all of its appreciation from $1.00 to hundreds of billions of dollars passed to his children. Tax due from his children on his stock appreciation — a big fat Z-f’ing-ero.

Angel of Death and IRSSo all that appreciation, essentially employment income, is lost forever as a tax expenditure which is the fancy name for a tax loophole. It is a tax expenditure because those who enjoy it are looking over their shoulders at ordinary people to pay the taxes to operate the government, pave the roads, put boots on an Army, and educate the workers of the country. The same country that enabled them to become so obscenely wealthy.

There was also chatter from the rarefied walls of boardrooms around another proposal. This carping was about returning the capital gains tax rate to 28%, the exact same rate it was under St. Ronnie, husband of Nancy. Here’s the breakdown: Just 400 households, four-hundred, are getting 16% of all capital gains with the top one-tenth of 1% getting half of those. The stock market has more than doubled in the aftermath of the 2008 financial implosion and the total increase envisioned here is 4.2%.

If you totaled up the two proposals — getting rid of the Angel of Death loophole and the slight increase in the capital gains rate, 99 percent of the money comes from the top 1%, with 80 percent of that coming from the top 0.1 percent. The same set of people, in large measure, who caused the financial upheaval and certainly the people who have most benefited during the ensuing years.

The other big voices were from Wall Street bankers. Boy oh boy were they soiling the silk drawers the Bush bank bailout bought them! These voices were complaining about a proposed 0.07% tax on the borrowing of banks. It is ludicrously cheap for the big banks to borrow money and then turn around and gamble it. If that sounds familiar, it is exactly what happened from 2003 through 2008 when the financial world exploded throwing the economy into the River Styx.

This proposal would be an incentive for the big banks to put themselves on a diet and perhaps even break themselves into smaller banks. You will hear lots and lots of talk about this, but here’s the kicker — it only affects banks with assets over $50 Billion dollars — about 100 banks total. Ending this big bank advantage ought to be something America’s smaller community banks should love. We’ll see.

What is on the other side of these proposals? Middle class things like tax credits for married couples with children, boosting the Earned Income Tax Credit, increasing child tax credits for preschoolers when child care expenses are the highest, favorably changing higher education benefits to help families with college-aged children, and the big one — making the first two years of community college free. Investment in the middle class and replacing “trickle down economics” with the catchphrase “middle class economics”.Caller ID for the voices

So you ask, “What are the chances any of this will become law?” About the same chance of success as a shaved-ice kiosk on the surface of the sun in the middle of July. Here’s the point — none of these proposals are welfare. None are entitlement driven. Most have been championed at one time or another by the Republican party.

These proposals are aimed at the middle class. The revenue adjustments are squarely aimed at the 1 percent and more accurately, the top one-tenth of the 1 percent. If anything, perhaps a national conversation will occur.

As a nation, that is a conversation we need to have and not just one imagined in my head.

Take the conversation in any direction you, or your own voices, may want.

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