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Fully Taxated, Part 2
I now repeat an essential point from the previous part: To thrive in any system, you must first recognize the reality of that system, and then act accordingly in order to manipulate its energy to your own purpose. As I have said before, we too often project our own individual decency and honesty onto the current system, and then delude ourselves into thinking that the actors within it are merely misguided, so thwarting its noble purpose. To thrive in this system and not be perpetually frustrated, or worse, you must accept the premise that our system is not fundamentally noble, but was specifically designed to feed a class of certain very wealthy people.
With that in mind, let me get something out of the way. Everywhere I go I hear different versions of the same theme: "UCC this and UCC that". I hear this from people who are clearly flakes, and from people whose opinion I respect.
If you accept the previous essential point, you must recognize that rules don't exist for tyrants, they only exist for you. If we could wave a magical UCC wand and avoid taxes, we wouldn't have a problem. If we do live in a tyrannical system, and I believe that we do, then you can't just go up to the tyrant and make a mystical incantation and expect him to comply. There is no noble court or jury out there which will save you, no matter what you hear to the contrary. Instead, you will face a jury of monkeys who depend on the tax code, and your compliance to it no matter how illegal you can prove it to be, to feed them at your expense. These jurist monkeys will be told what to decide by monkeys in suits and robes, with their decisions enforced by monkeys in uniforms with guns and badges.
No, if you are going to taxate yourself in any way which has a practical chance of success, you must do it in such a way that you seem to wear a monkey suit in your professional life, but monkey coveralls in your private life. To understand this point fully, you must read and understand the previous article.
Now, for our examples, we're going to use three fictional persons to represent different scenarios: Andy, Bob and Chuck. All three of these guys are married to one woman each, and each has two kids. Andy makes $30,000 per year as an employee, Bob makes $100,000 per year as an employee, and Chuck bills his clients $100,000 per year as a contractor. To keep things simple we are going to ignore investments, interest, dividends, capital gains, tax-free munis, home mortgage interest, and the big daddy of them all, the Alternative Minimum Tax (AMT). Consideration of AMT would certainly make the distinction much more dramatic, but the examples will be fine without it. We are also going to use standard deductions and ignore state taxes, but again, these would only make the lesson more dramatic.
As with many thought-experiments, I encourage you to get the forms and follow along for yourself. Prove me wrong in some substantive way, in other words. Details of piddlery don't count.
To the Ruling Class, Andy is far more valuable than Bob or Chuck. Andy is much more likely to join large voting blocks, like unions or churches or become a cop or schoolteacher. Should he choose to join a union, he will be rewarded with higher undeserved pay. Should his miserable poverty-line life become too much, he will drift toward pulpiturally-inspired exhortations to obey all the rules, including coming up with more cheek to turn. There he will also be told how Jesus wants him to send his children to war to die for the banksters' interests by playing Wii Holy War to kill Jesus' long-lost way-back cousins. After all, those commercials on TV do look exciting. Be all your conscience can ignore, kiddies.
Or, Andy can become a cop of one kind or another (like a schoolteacher) to push people like Bob and Chuck (or miniature versions of them) around while enjoying unofficial corruption as he waits for his officially corrupt pension payoff. Andy is also far more likely to send his kids to public school so that they can be indoctrinated there, too. He is also effectively trapped by medical benefits, necessary so that his wife and kids can serve as unwitting lab animals for pharmaceutical experiments. We can go on and on about how valuable Andy is.
So Andy, hardly ever one to do anything for himself, has someone fill out his 1040 for him, and comes up with the following result. His adjusted gross income (AGI) is $30,000 in our simple example, which dwindles to a scant $4000 in taxable income after the standard deduction and exemptions. At 2010 rates, Andy is on the hook for a whopping $400 in federal reserve income tax. But, he also qualifies for $400 child tax credit, which wipes that out.
We're not done yet. Add in another $800 for the "making work pay credit" (note: this credit has since been phased out, but look forward to similar gravy for this tax bracket), $3232 for the "earned income credit" and $1600 for the "additional child tax credit" as self-defined "payments" on lines 63 through 65. Now Andy walks away from the tax table with $5632 in his pocket, on top of whatever tax withholding he had throughout the year. Granted, he also paid $2295 in social security and medicare tax, but his net gain from being a "taxpayer" is $3337. To put it another way, Uncle Sugar just gave our hero an 11% raise. All he had to do is keep his nose clean and do as he is told. And be a low-wage breeder. After all, the banksters have to get cops and soldiers from somewhere; they sure as hell aren't going to get shot at themselves while stealing what they want.
OK, so Andy "earned" $30,000, but ended the year with $33,337. And we didn't even add in low-income assistance such as housing or school lunches, etc. No wonder Andy is ready to wave a little flag when they hand him one. "Put your boys on this here bus, Andy, we'll do 'em up right. One of 'em might even be a gen u wine hero, and you'll get yourself some purty ribbin and an o fishal flag." This is the greatest freaking country in the world, alright. Larry the Cable Guy says so every week on The History Channel.
No, they don't want Andy's money. He has so little of that anyway. What the banksters really want from the Andys of the world is his soul and devotion, which they can purchase for a pittance and the right kind of media influence.
Now, Andy might want to do a little better for himself. Among the Ruling Class this is fine, so long as he doesn't start getting uppity. Some of the gravy we've talked about coasts upward for a while, but really starts to dwindle away in the $40,000 range. I leave it as an exercise for the reader to determine the tipping point. For you homeschoolers out there, this would make a great software exercise for the kiddies who have taken my programming courses.
So now let's switch to Bob. Bob probably has a college degree, which nowadays is really nothing more than a slave certificate, as we'll soon see. We'll use the same assumptions as with Andy, so his taxable share of his original $100,000 is $74,000. This puts him on the hook for $10,869 at the same point Andy was liable for $400. Care to guess which way this is headed? Remember, we're ignoring the AMT, so what we're about to discover isn't even worst-case for most people like Bob.
Now, Andy's tax got wiped out first with a $400 child tax credit. Bob's slice of that same credit is the full amount, or $2000. Lucky guy! That leaves him paying only $8869 when Andy was at $0. Bob also qualifies for the $800 making work pay credit, reducing his bill to $8069. But, due to his vast riches and higher earned income, Bob does not qualify for the earned income credit. And, since he took the full child tax credit, there is no additional child tax credit to add. Now, let's add in the 7.65% in social security and medicare taxes ($7650) and his total national tax bill is $15,719, while Andy received $3337. For each Bob in slavery, the banksters who own this country's "stock" can pay the bonus to four Andys to watch him, and still turn a profit.
If you still think that voting is going to make any difference, you are a complete freaking idiot. Voting is a shell game to make you keep hoping something will change two years from now, so you won't get your rifle out today. You wouldn't know who to shoot anyway. Give it time, it will come to you.
Note that the difference between Bob's tax and Andy's negative tax is about $19,000. Somewhere along that $70,000 difference in income $19,000 in taxes is raised. In that range, on average, the marginal tax rate is about 27%, meaning that for every additional $1000 earned, about $270 is paid in taxes. Now, it isn't linear, which means that the gravy hangs in there for a while in the range paid to cops and schoolteachers, the collective trustees for the adults and children alike. So, the marginal tax rate around Bob's income level is higher. I don't want to spoil the fun of your figuring it out for yourself, so let's just throw out 40% as a number. But Bob thinks he is only paying about 15.7 percent, when in reality each additional dollar he makes is 40 cents lighter (add in state taxes and it's even worse).
Go above that level, and things get even worse faster. This continues for a time, until around $300,000 to $400,000 (doctors and highly-compensated merger attorneys) things get better. But, those people don't play the income game anymore, as we'll discuss in a future piece.
But what about quality of life? Well, Andy makes a lot less money, for sure, but he has more free time to spend. After all, in his job, overtime probably means time and a half, and he's still in the gravy zone. Bob, as a salaried professional, probably works as much as 50% more, at no additional pay, leaving less free time. Bob probably is also living in a nice house in a suburban subdivision that is currently underwater mortgage-wise. Accordingly, Bob can't just up and move, while Andy can move from government-subsidized hutch to government-subsidized hutch practically at-will. To make that $100,000 in the first place, Bob's profession will typically require him to reside in a high cost-of-living area, whether he wants to or not. The tax code makes no adjustment for his situation.
Further, in such snooty digs, Bob's neighbors are also probably more likely to notice if he punches the old lady in the mouth when she complains after he didn't get her a big enough diamond ring for Slaventine's Day to "show her he loves her all over again". Bob also probably has to look forward to paying college tuition so his kids can be slaves, too. On the other hand, Andy's kids will get some kind of benefits if they have a head left after shooting at Semites (the kind it is OK to shoot at) for a couple of years.
Bob also pays property taxes and homeowner's association fees, has nicer cars that don't "go" any better than Andy's beater, has student loans to pay, has to keep his snoot grass cut and always wonders whether Andy's kids are selling his kids drugs. After all, from whom better to buy your drugs than from a cop's (or teacher's) kids? Bob's kids could have their futures ruined. No problem, the banksters' recruiters are more than happy to take in kids of economically-ravaged families, the more economically-ravaged the merrier, so long as they are willing to pull the triggers to get those damned recalcitrant Afghanis off those mineral piles. We've got mines to dig, damn it, and you can't do that with all those armed Muslims running around thinking that they own the place. Those next-generation smartphones aren't going to sprout their own rare-earth magnets, are they?
Plus, after deciding to be a cop or schoolteacher, Andy is looking forward to a nice fat pension at 55 (or sooner). Or, if he joined that union, will probably get a nice bailout ala-GM, while Bob's 401k gets the tail-end drippings. After all, there are more Andys to vote than Bobs.
But, not everyone in the Andy zone is looking forward to a nice, fat cop (or schoolteacher or other government choad or union) pension. Many of these people actually work for a living, foolishly providing original value to the world. If you are say, a welder or a mechanic, and wifey works too, your combined income is headed right back up into the Bob zone yourself, shedding Andy gravy all the way. So, for the rest of this series, anytime I mention Bob, this means Al-the-Welder-Plus-Alicia-the-Wicked-Hot-Hairstylist, too.
So it's a wash, but want to guess which one, ThugAndy or Bob (or Al/Alicia), feels more free? Delusions are a great thing, sometime.
Now, even though there are enough Bobs (or Al/Alicia combo packs) right now to pay for a whole jackboot full of ThugAndys, this is clearly an unstable situation. Sooner or later, something has got to give. Care to guess who is going to be tickled when Bob's 401k gets nationalized to pay their fat pensions, or inflated away to nothing? It's a damned good thing that Bob went to all that effort to get edumacated, and forewent that income into his retirement savings. And bought that nice house. And married that damned whining yacking biatch who thought she was getting the hell out of the trailer park.
Here's a few words of encouragement for all those Bobs out there. The reason she is difficult to live with right now is because, like all the rest of us, she recognizes that the future is a scary, uncertain place. It always has been, but now is especially bad because the mirage we've enjoyed for our entire life is starting to evaporate. If she has any sense at all (and some do), she's also starting to regret having gleefully participated in your emasculation for so long. But, since wheedling you is the only coping strategy she has ever known (and it has worked wonders for women in the recent past), she, like many people, is just flailing around in desperation.
But Bob, no matter how much she is on your case right now, don't punch her in the mouth; it messes up her looks and nobody wants that. A rolled-up newspaper to the thighs makes the point, makes a fun jiggle, and doesn't leave any permanent marks. You might find it kind of turns her on, too, which is probably the point of all her biatching; she may have been trying to draw the caveman from hiding within your hollowed-out soul.
Just kidding ladies. After all, you are grown women, not bad puppies. So, a belt is much more appropriate. But, it has to be one of those heavy country-boy kinds, not that flimsy little thing you make hubby wear when you haul him by the nose to church. Besides, who subscribes to newspapers anymore? Whacking you girls on the butt with a Kindle doesn't really do it for anyone. The, uh, bottom line is that if you want him to be strong for you in this horror we are all about to experience, then you have to be strong by accepting correction from him when you deserve it. And find another church; we have all turned far too many cheeks already.
Oh, and that 401k? Bob, it was gone the day you made that deal with the tax devil. Don't believe me? Try to get it back and see what happens. But you won't even try, will you? And that's the whole point of that. We'll talk more about 401ks some day, including the fact that whatever you think you see as gains, is simply an inflationary effect in the paper value of companies that don't make anything of value anymore. About all you can do now is simply stop giving them more, and, instead, use that money improving your position, as fighting-hole Marines put it.
One last thing before moving on. You must remember that passive income is the king of the tax code. But there is a special kind of passive income, interest, which is the emperor. All throughout the tax forms and instructions you will see reference to "interest paid to banks." Interesting, isn't it, that not only this particular expense, but the recipient, is singled out? Interest paid to non-bank recipients is even called out as "other interest". Poker players call this a "tell". Most people see this facet of the tax code most clearly when they are itemizing their home mortgage interest deduction, but it's all over the tax code. As you get deeper into this yourself, you will see what I'm talking about.
Now, we've been told our entire life that this particular deduction is to reward home-ownership and to get people to "buy-in to the American Dream". Ask people in Atlanta how that particular nightmare is working out for them right now (I can tell you from personal experience that it sucks). Many of them can't even leave to take a job somewhere else without filing for bankruptcy, but what does that do to their employability? If you don't live in Atlanta or a similarly bank-ravaged area, don't worry. This particular nightmare is coming soon to a neighborhood near you, too, unless you live near a pocket of government spending.
Anyway, the point is that interest is treated as a special case. Why must people reaching for the "American Dream" buy a home? So they can pay a mortgage, of course, and to a bank. Note that if you rent a place to live, you get penalized. There is no itemized deduction for rent. There are, however, tax advantages to the passive-income recipient of your rent. Your landlord gets some gravy (in the form of qualifying for expense deductions and the avoidance of social security and medicare taxes on that income), but the renter is in the cold. Why? Because anyone can buy a house and rent it out, but only specially monkey-certified banks can write a mortgage. Ergo, special incentives to generate demand for the latter.
Care to imagine the ripple-effect in the economy if the mortgage interest deduction were ever repealed? This will never happen, of course, but working through the scenario in your head will tell you what your suburban home is really worth. In most cases, you can't even keep a chicken for fresh eggs there. But, you have a hard time getting a job anywhere that you can keep a chicken. Think about it.
So, having handled the Andy and Bob scenarios, this leaves Chuck. We'll talk about him in the final parts of this series as we tie all of this together. We'll also see that Bob, and the Al/Alicia combo pack, have a tax opportunity that the institutionalized pension-seeking Andy does not.
Read the third part of this series ...
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