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Money, Death, Taxes – and Corn
(December 11, 2010) As the days continue to shorten, so does the time left for the current Congress to address taxes and, yes, death taxes. A compromise to extend the Bush tax cuts hashed out between Congressional leaders and the President runs into trouble with his own party, with not much time left on the clock…
And what an intriguing package they had cobbled together! Most importantly, Mr. Obama caved totally on the extension of income tax cuts for those “rich” people making $250,000.00 or more a year. The latest history of this battle between the under-$250K set and the over $250K set makes us wonder how that income level came to be considered a rational dividing point in this country.

For instance, how did couples making $250,000 a year in wages get lumped in with those making, say, a million dollars, or ten million dollars a year? It really must gripe those who count their annual incomes in the millions of dollars to be lumped in with such poorer cousins. After all, the deci-millionaires live a life involving resorts where they remember your name, private jets, and box seats at cultural and sporting events that mere quarter-millionaires only get to view from a distance – from the cheap seats, so to speak.

We’re not sure how this $250K income level came to be the definition of “rich,” but it certainly muddies the whole ‘class warfare’ prospect. After all, who really is rich if the qualification is simply that your income is barely as much as the sum a government pensioner from the state of California rakes in? (We hear the town of Bell, CA, is the most rewarding to have ‘worked’ for.)

The trade-off that Mr. Obama sought for denying the federal government the right to reach so deeply into the purses of those who make more than $250,000 annually, involved a year’s extension of unemployment benefits for those who are currently making $0 annually.

Fair enough, but what else? Well, the package also contained a 2% rate reduction in the FICA tax (Social Security) paid by everyone who is employed. FICA is the one payroll deduction that everyone pays, even those whose income is so low as to not be taxable at all. The thinking behind shortchanging the FICA ‘fund’ is that putting extra bucks in the pockets of everyone who has a job is a form of direct stimulation – people will probably go out and spend the windfall, to the benefit of the economy. As for the shortfall for Social Security? Well, somehow, someday, some chance, we'll just put back what we borrowed.

Elsewhere, last week Al Gore admitted that subsidies for ethanol are a mistake, and that his prior support for the scheme stemmed entirely from his warm-hearted sympathy for Tennessee farmers. With Mr. Gore’s admission, we now have a national consensus approaching 100% (outside of the Corn Belt, of course) that making corn into auto fuel is about the dumbest thing ever undertaken. So, of course, it's federally subsidized.

And what do we find in the aforementioned tax compromise that looked like a done deal early last week? A $5 billion ($5,000,000,000.00) continuation of the ethanol subsidy for another year, of course. As Forrest Gump said, “Stupid is as stupid does.”

As for what used to be called estate taxes, now universally referred to as the ‘death tax,’ that’s a whole story unto itself. For the whole of 2010, you have been free to pass on to your reward while passing on your whole estate without any such taxes, but next year, trouble is brewing. Without some Congressional action, estates over $1,000,000 will suffer an onerous 55% taxation rate. So it behooves Washington to do something, and quick. Since the general consensus is that the exemption should be much higher, and the tax rate much lower, the now-stalled compromise included a reasonable $5 million threshold for taxable estates, with a tax rate of 35%.

The whole package is being held up because soon-to-be-ex-speaker Pelosi and a posse of doctrinaire Democrats consider it not a compromise, but a capitulation. It didn't help any that the President’s Tuesday press conference, in which he presented the deal to the American public, was the least-gracious and most politically tin-eared presentation by an American president since television was invented.

The White House even called in Bill Clinton to try to salvage the deal. Whether that silver-tongued devil can make this compromise work……uh…hold on, I hear someone. Oh, it’s my wife. Well, hello – did you have something to say? No, you're not interrupting - go right ahead!

“How can you call this a ‘compromise’? No one is compromising at all. Neither the Democrats nor the Republicans are willing to give up anything. They’re agreeing that we’ll take in less money on this and we'll spend more money on that. What the heck?

I am deeply troubled by this so-called budget compromise. I am in no way an economic scholar or even student. My economic background is as a mom, head of our household’s checkbook and more recently as a bookkeeper for Running a home, running a business or running a country all comes down to this: More money has to come in than goes out.

My husband and I have had to make many economic compromises in our adult lives. When we decided I could be a stay-at-home Mom we cut out restaurant outings. I coupon shopped the grocery store sales and though I “love” clothes I quit the Macy’s sales altogether. That was a compromise that worked for our family.

Later, when we were both making good money, I found I REALLY liked Starbucks lattes. I REALLY liked them and I was making money and didn’t I deserve to treat myself in some small way? Yet something about those lattes nagged at me. I didn’t mind buying the coffee. But the idea of PAYING someone else to do to something I could very well do at home just didn’t sit well with my budget-conscious mindset. That Christmas I asked for and received a latte maker. It seemed like a big expenditure at the time. But since that Christmas I have made lattes at home and I no longer pay someone else to make them for me. It’s a compromise that works for us.

As a bookkeeper I make sure what comes in is more than what goes out. If I find more is going out we reevaluate our position and adjust our expenses. If we had compromised all those years ago by my staying at home with the kids AND going out to eat three nights a week AND my buying the nice clothes I like, we’d be bankrupt. Can it be that different for our country?”


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