Finance

Eating the Rich…and Other Survival Strategies

/ MeltdownMessiah / Leave a comment

It should come as no surprise that a rallying cry with its origins in the French Revolution is seeing a resurgence in modern-day America. “When the poor have nothing more to eat, they will eat the rich,” often attributed to Jean-Jacques Rousseau of Geneva, retains a certain resonance today thanks to parallels in the social conditions present in pre-revolutionary France. Much of what we consider modern political and economic thought derives from Rousseau and his Age of Enlightenment contemporaries. Income and Social Inequality aren’t unfamiliar to us today.

Almost all of us, whether we recognize it (or choose to acknowledge it) or not, live in a state of perpetual, low-grade fear. We know–at least deep inside–that everything we have can be taken from us. That we can lose everything, including the false sense of security we shelter ourselves with in our day-to-day lives, is something few of us can afford to ignore. And no, I’m not talking about a natural disaster, a freak accident, or a random act of violence. This isn’t one of those things about which we go through every day thinking, “It can’t happen to me,” while being mostly correct in our assumption.

I’m talking about a layoff, an extended or severe illness, a kidnapping (because it isn’t deportation when you’re an American citizen), or an arrest by a federal agency with no respect for your rights or the concept of Due Process. That last one becomes an even greater fear if you happen to be part of one or more marginalized/vulnerable groups. And the root causes for those fears are only becoming worse and more pronounced.

I’m tempted to argue that the biggest problem is that there’s a whole class of people who have forgotten what it is to be afraid. Over the centuries, they’ve forgotten the lessons of the French and Bolshevik Revolutions. They’ve spent so long believing they’re untouchable that they don’t recognize they’re only untouchable because of a shared reality (and morality) among the rest of us, thinking that they are. We believe the lie, and they perpetuate it.

This isn’t a Republican or Democrat thing, nor is it really a wealthy or poor issue, though wealth is one of the components that enables certain people to begin feeling as if they’re untouchable.

It is possible to be ethical and to accumulate wealth. That’s one thing most of us sincerely agree on, and an issue I have with a small minority of people on the fringes of the left. The assumption that wealth equals predation, cruelty, and exploitation is erroneous. Certain people hear the phrase “eat the rich,” and assume it applies to anyone with wealth above a certain quantity, but that’s not the case.

Professional athletes (by and large) don’t accumulate their wealth through unethical means. They dedicate their lives to the pursuit of goals, often placing themselves at significant risk of injury in the process. For the small minority who can find success in that arena, they can hardly be considered predatory or exploitative in achieving it. Whether we agree that they deserve what they earn for these pursuits is irrelevant. If people are willing to pay to see them display their athletic prowess, then that’s not our place to condemn it.

Musicians, filmmakers, and actors/performers who have managed to overcome the predatory behavior of record labels, film/TV/streaming studios, producers, and large venues to accumulate wealth haven’t done so through any unethical means. They, like all of us, may behave unethically in their personal lives, but their success is not derived from that questionable behavior.

Successful medical specialists, surgeons, and research scientists may accumulate wealth without ever displaying any unethical behavior. It’s not greedy doctors who are increasing the costs of medical care in the United States. Those rising costs can be laid almost squarely on the shoulders of insurance providers who receive as much as 70% of their profit through government subsidies, while raising the operating costs of hospitals by requiring additional layers of bureaucracy for submitting claims and fighting the denial of them.

People have started successful and thriving businesses that provide value or fill a need, while still taking care of their employees and without benefiting from child labor, overseas slave labor, exploitative practices, or price gouging. Some of those business owners manage to become wealthy in the process, depending on how you define “wealthy.”

People can (and do) make wise investments with the finances they have access to, and are consciously involved in where their money is going. Several of these individuals are careful to avoid supporting unethical corporations or ventures, and some of them manage to become wealthy along the way as well.

There is even a small minority of wealthy authors and artists out there in the world, many of whom haven’t behaved in any way that could be considered unethical. I may not be one of them, but they most certainly exist. What they do with the money they’ve earned can certainly be unethical and cruel, but there’s nothing inherently unethical in how they’ve obtained their wealth. Unless they’re stealing from others in the process, whether through direct theft or through the consumption derived from Generative AI, they are simply creating things that other people find beautiful or otherwise worthwhile.

So, it’s wrong to simply assume that “the rich” are the enemy or that they’re somehow morally compromised because they’ve met with success. Many of those people also dedicate resources to charitable organizations, causes important to them, and improving the lives of people who haven’t experienced their good fortune. I’ve known several people who are quick to condemn anyone with wealth and success, but who have done proportionally far less to help other people than some of those wealthy individuals they malign.

This, of course, isn’t to say that people who obtained their wealth through ethical means aren’t subsequently putting that money to use in unethical ways, but it’s disingenuous and reductive to assume most people are like that. Successful people are not a monolith any more than unsuccessful people are.

I fully agree that those who accumulate their wealth through unethical means or use their wealth for unethical purposes should be held accountable. They should be treated as enemies. Simply having wealth, however, does not make someone an enemy, despite what a small number of people will tell you, and despite what fear-mongers who oppose social and economic justice will claim is meant by the people who say, “eat the rich.”

“Eat the rich” is a great slogan. But like all slogans, it’s simple and lacking in nuance. We have to trust the people reciting slogans to understand that they are not comprehensive philosophies, and we need to trust the people hearing and seeing them to comprehend that a call to action needs to be pithy, for it to catch on. The same was true with the rallying cry of “defund the police.” For most people, it wasn’t about dismantling the justice system and getting rid of police, and most people recognized that. It was about bloated police budgets, militarization of law enforcement, and a lack of accountability for those hiding behind the thin blue line.

How Income Taxes Work…and Why The Big Beautiful Bill Isn’t So Beautiful

/ MeltdownMessiah / Leave a comment

It stands to reason that I’m no fan of the Congressional Budget Bill that was recently signed into law. There’s a lot to hate about the contents of that legislation, and I’ve touched on some of those things previously. But it’s worth taking a moment to look at the “good” portions of what we’ve all heard referred to as the “Big Beautiful Bill” as well. This is, after all, the bill that everyone is so proud of and so certain you should be proud of too.

Before I get to all of that, unfortunately, I’m going to have to spend some time on a bit of a tangent. This will be long, tedious, and number-heavy, but I will do my best to make it at least marginally interesting too. It could be beneficial for everyone to read it. It seems like many people don’t understand the basics of how taxes work, so I also want to take some time to delve into that, while discussing how we are shortchanging Social Security and our Federal Revenue by catering to the wealthiest people in America. To do that, a discussion of how Taxes work is sort of imperative.

The 2017 Tax Cuts were set to expire this year, but are now permanent. However, I’m not sure how many people actually comprehend how tax rates are applied or how the brackets work, so it might be worthwhile to dedicate some time to explaining that.

For an individual (I’m not doing this for all statuses, you can do that shit yourself):

We’re going to make this simple; we’re going to pretend you earn $1 Million a year. Yes, I understand that less than 0.5% of Households fall into that category. In America, fewer than one million Households earn at least $1 Million in annual income. Congratulations on becoming part of the Top 1%, you magnificent bastard.

For the first $11,600 you earn, you owe 10% of that in Federal Taxes, which is $1,160. The math on that little bit is simple, just remove a 0 from the end.

For every dollar you earn between that amount and $47,150, you owe 12% in Federal Taxes. This comes out to $4,266. So, if your income were exactly $47,150 per year, you would only owe $5,426 in total. But that’s not you. You’re earning a whole hell of a lot more than that now.

For every dollar between $47,150 and $100,525, you are paying 22% in Federal Taxes, which translates into an additional $11,742.50.

The next bracket takes you all the way up to an income of $191,950. At that point, you are paying 24%, or another $21,942. If you’ve been paying attention, you’ll see that our current Tax Burden is sitting at $39,110.50.

From $191,950 to $243,725, we are looking at a rate of 32% paid out to the Federal Government. That adds another $16,568 to your tax bill.

The next bracket is in effect up to $609,350, at a rate of 35%. That tacks on an additional $127,968.75. Your total Tax Burden is now sitting at $183,647.25. I know, that seems like an awful lot. But, come on, you’d be earning more than $600,000, giving up less than a third of that doesn’t seem so bad. Don’t be so greedy.

For every dollar above that, regardless of how much more you earn, we’re looking at a static rate of 37%. So, for the rest of your $1 Million income, it’s only another $144,540.50. See, that really isn’t so bad.

So, on your brand new $1 Million salary, you’d owe the IRS a grand total of $328,187.75 for the year, leaving you with $671,812.25 of your income.

Of course, there’s also Social Security Tax, which is currently 6.2% on everything up to $176,100. If that seems unreasonably low to you, next year the cap will be higher, because it adjusts annually according to the average wage index.

We’re going to stop here for a moment. Consider it the equivalent of a Scenic Overlook on a road trip. Much like a Scenic Overlook, you can take this as an opportunity to relieve your bladder. If you’d like to know one major reason Social Security is going to be depleted by 2032, we just skirted past it. One primary cause is that you (with your $1 Million annual salary) are not paying into Social Security on $823.900 of your earnings. That would have been $51,081.80 that could be contributed in addition to the $10,918.20 you’re paying in. The math on that one is easy, too, because it’s another example of simply removing a 0 or two. Instead of paying $62,000 into the Social Security fund, you only paid $10,918.20. If your salary were $5 Million, you avoided paying $299,081.80. That hardly seems reasonable, does it?

As we discussed (you lucky bastard), fewer than 0.5% of American households had an annual income of more than $1 Million in 2022, according to the World Economic Forum. Somewhere in the vicinity of 400,000 to 500,000 people earn $1 Million or more a year. Assuming they were all capped at exactly $1 Million, and there were 400,000 of them, that would be $20.4 Billion not being collected for Social Security every year because of that cutoff at $176,100. This has been a problem since the 1980s, because earnings for upper-income levels have risen substantially faster than those of the rest of the population.

Despite President Trump’s assurances that the Congressional Budget Bill would remove taxes on Social Security, that is not what happened. Instead, what we received was a temporary Deduction that applies to all income for people 65 and over, though it does include Social Security income.

The final version passed by the Senate makes this a $6,000 Deduction for individuals with adjusted gross income of up to $75,000 annually, or $150,000 for couples filing together.

The deduction will expire after four years and does not apply to all recipients, including those who claim Social Security benefits before they turn 65. So, unless you’re over the age of 61, you won’t be benefiting from this temporary deduction.

This is where we locate yet another major driver behind the failure of our Social Security program. Some estimates suggest this will accelerate the depletion of Social Security by two years, pushing the date up to 2032. All while increasing the federal debt by 7% over the next 30 years. So, suppose you’re under 58 years old as you’re reading this. In that case, you can dispel any assumption that you’ll be able to benefit from the tax-free Social Security (or Social Security at all) when you do turn 65, because the Social Security Trust will more than likely be empty, no matter how much you personally paid into it throughout your employment history. I’ll come back to the depletion of Social Security after I finish going over how your taxes work and take some time to touch on the other “good” things found in the Congressional Budget Bill.

Moving on, there’s the Medicare Tax of 1.45% up to $200,000, and 2.35% on every dollar beyond that, so you’re paying $21,700 into Medicare for the year.

Deductions then factor in, and the odds are that your effective tax burden will be substantially decreased.

First, there are Above-The-Line deductions. These are subtracted from that $1 Million you earned for the year before anything else factors in, decreasing your Tax Burden by formulating your Adjusted Gross Income.

If you paid toward Student Loans, used a Health Savings Account, contributed to a traditional IRA, or any of several other things that contribute to your overall deductions, that’s something you can figure out on your own. Those things are deducted before the Standard Deduction.

The Senate version of the Congressional Budget Bill allows people to deduct income paid as tips (in careers where tips are customary). This amount is capped at a maximum of $25,000. I’m not sure how common it is for someone to earn more than $25,000 in tips over a year, but since most tipped workers are at or below the Federal Poverty Level, it seems unlikely that there are many. This is only in effect through 2028.

The Senate proposal limits that deduction on Overtime Pay to $12,500 per individual. This is also temporary, expiring after 2028.

So, those are some of the “positive” things we can look forward to.

The Standard Deduction was previously $15,000 for an individual or $30,000 for a married couple filing jointly. Once the changes took effect, the Standard Deduction increased to $15,750 and $31,500, respectively.

The new Standard Deduction of $15,750 is a given, but anything else beyond that is specific to the individual. Assuming none of the Above-The-Line deductions apply to you, what that means is that you will only be taxed as if you earned $984,250 instead of $1 Million, which would knock $5,817.50 off of your tax bill. That doesn’t seem like much, but it’s not nothing. Of course, if you have to itemize your deductions, the change in the Standard Deduction is irrelevant.

Non-itemizing filers can now claim $1,000 in charitable giving per year, and couples can claim $2,000 for deductions.

The Senate’s version of the Child Tax Credit, while slightly lower, is permanent. So, instead of a deduction of $2,500 per child, it’s $2,200, but at least it doesn’t expire in 2028 as some of the Above-The-Line deductions will.

The State and Local Tax Deduction will increase from $10,000 to $40,000, and increase by an additional 1% every year until 2030, when it will revert to $10,000. I don’t know if you live in a state where you pay State Income Tax, but chances are good that you do. That percentage is extremely variable, depending on where you live (which you know if you read what I wrote regarding Single-Payer Healthcare), so I won’t bother calculating it. I live in a state without it, but work in a state where there is State Income Tax, so this is beneficial to me.

The changes to the Estate and Gift Tax will benefit almost no one.

It increases from an exemption of $13.99 Million to $15 Million for individuals and $27.98 Million to $30 Million for couples who file jointly. I say this will benefit almost no one because the minimum net worth to be part of the wealthiest 1% is $13.7 Million as of this January, according to Investopedia. So, less than 1% of the population has the potential to leave an Estate or Gift of $15 Million.

Now, the trouble is that the people who could benefit from that increased exemption are the ones who really don’t fucking need it.

Individuals like Elon Musk, Mark Zuckerberg, Peter Thiel, Jeff Bezos, and other multi-billionaires avoid paying Income Taxes in several ways. Elon Musk receives no salary from Tesla, but was approved for a ten-year pay plan from the company last year that had a value of $44.9 Billion. The trick is that it was all in stocks, which means he won’t be paying any Federal Income Tax on that, while he can still use the stock value as collateral for loans, credit, and the like.

Mark Zuckerberg received an annual income of $1 last year, but received compensation amounting to $27.2 Million, which included $14 Million to cover his security and an estimated $1 Million in private jet travel. The rest, as you would imagine, came in the form of stocks.

Peter Thiel’s income is not publicly available. That’s something you might find amusing, considering what Palantir is capable of. Despite not knowing his annual income, we do know he has invested more than $5 Billion in Roth IRAs, which cannot be taxed, assuming he waits until retirement to liquidate them.

Jeff Bezos typically received a salary of $81,840, with total compensation that added up to $1.68 Million in 2022. Because of how he earns most of his money, via stock options, it was estimated he earned $8 Million every hour of the year between 2023 and 2024. And yet, there are several years in which he paid no Federal Income Tax, and has maintained an effective Tax Rate of 0.98% compared to his accumulation of wealth.

If you’re noticing a trend, you’re at least moderately observant. These people at the top of the American financial ladder are not even coming close to contributing their fair share in taxes. In part, because we don’t tax Unrealized Gains, which means all the stock options contribute to their Net Wealth and allow these people to live as they do, but are never taxed until they sell shares, and then Capital Gains Tax comes into play.

If something doesn’t seem wrong about that, you’re not paying attention.

There are years when the wealthiest people in the world are literally paying less in taxes than the people below the poverty level, and not just by percentage, but by dollar value.

Putting an end to that should be a priority. All it would take is implementing an Unrealized Gains Tax above a certain dollar value, maybe a 50% Tax on anything above $15 Million (just like the Estate and Gift Tax). Hell, Kamala Harris was far more generous, proposing a 25% tax on Unrealized Gains for anything over $100 Million. People freaked out over that because they had no idea what they were talking about, and because they were fed misinformation and fear-mongering that led them to believe their home’s increasing sales value would further increase their taxes. In reality, her proposal would have impacted fewer than 11,000 people nationally, and if you’re reading this, you’re probably not one of them. You probably don’t even know any of them, at least personally. That’s the kind of Tax Reform we need from something that anyone would consider worthy of calling a Big Beautiful Bill.

Now, I promised I’d get back to this, and I like to keep my promises. There’s one more massive driver behind the imminent failure of our Social Security program. It’s time to finish the discussion of why Social Security is likely to be bankrupt in only seven short years. We can thank Ronald Reagan and his Social Security Amendments of 1983 for that lovely little “fuck you,” with powerful assists from Alan Greenspan and a complicit and lazy 98th U.S. Congress.

Unfortunately, Trickle-Down (Supply Side) Economics was working out precisely as anyone but a moron would expect it to, and the decreased tax rates (for the highest income earners) were generating far less revenue than was promised. Our economy was in pretty big fucking trouble, because nothing but the delusional fantasies of our President happened to be trickling down. Reagan convinced a large number of people that Social Security was on the verge of bankruptcy, even though it wasn’t. But he had a solution. It was a two-pronged approach that would save everyone.

Surplus Social Security revenue generated by a Payroll Tax Hike implemented under Reagan, to the tune of roughly $2.7 Trillion, was meant to be invested in U.S. Treasury Bonds and held in trust until approximately 2010. That was it. That was his brilliant solution. It might have actually paid off, but Ronald Reagan was (predictably) Ronald Reagan.

Of course, Reagan, being the piece of shit he was, the surplus revenue raised by the payroll tax hike went into the General Fund instead of U.S. Treasury Bonds. Reagan then proceeded to spend every dime of that surplus that appeared during his remaining time in the White House. George H.W. Bush, Bill Clinton, and George W. Bush followed suit and treated it like a fucking slush fund as well. Instead of putting $2.7 Trillion into trust, the money was spent on wars, covering the deficit from additional tax cuts for the wealthy, and shoring up other areas of the government.

Maybe this would have worked out if Social Security hadn’t stopped generating surplus revenue back in 2009, but it did. In 2010, it ran at a loss for the first time since 1983, by more than $40 Billion. This was money we borrowed from China. And we’ve had to borrow money from somewhere every year since then.

Well, we all sort of see where it goes from there. What’s worth noting is that, assuming we’d just kept the $2.7 Trillion where it belonged, and our Social Security shortage was by roughly $50 Billion every year, it could still be solvent through 2064, or 32 additional years from what is now projected.

The Dragon’s Path by Daniel Abraham, Narrated by Pete Bradbury

/ MeltdownMessiah / Leave a comment

It’s not uncommon to encounter political machinations and glimpses of the underlying bureaucratic structure of the world in fantasy novels. Along with the history of the realms and people in question, understanding something of the politics of those fictional worlds is an important element in making them feel like real places. Daniel Abraham has taken this world-building further than most authors by focusing a great deal of his storytelling attention on the facets of finance and trade within the world of The Dragon’s Path. What’s superbly surprising about Abraham’s novel is how interesting he manages to make the details of this commerce.
Of course, it isn’t all banking and trade relations. Abraham has packed this first novel of The Dagger and the Coin series with conflict (both small and large scale), gods and myth, political intrigue, and plenty of witty dialogue.
Cithrin is a half-breed orphan raised as a ward of the Medean banking house of Vanai, and she carefully studied under the tutelage of Magister Imaniel. As the armies of Antea approach the city walls, the only way to keep the resources of the bank safe from plunder is to send them away from the city. Cithrin is tasked with escorting the bank’s property to safety as part of a caravan headed by the tragic hero, Marcus Wester.
As it happens, Cithrin isn’t the only member of Wester’s party who isn’t who they seem. Marcus has replaced some of his complement with a troupe of actors led by Master Kit, the performers playing the role of soldiers and guards. But Master Kit is more than he seems as well. A past he’d thought he escaped will come back to haunt him again before the tale concludes.
In the middle of everything is Sir Geder Palliako, a bookish and weak man who finds himself tossed about by fate and the machinations of those above him in the royal court of Antea. Struggling against forces he only barely recognizes as nudging him along, Geder becomes the key to leading the world down a path from which there will be no turning back.
Abrahamson packs this novel with a diverse cast of characters, both sympathetic and flawed in equal measure, and he sends them on a series of adventures as captivating as they are well-thought-out. It would be virtually impossible to reach the end of The Dragon’s Path without wanting to see where this tale will take us.
Pete Bradbury’s narration spectacularly breathes life into the vast cast of characters populating this story, setting them apart from one another without any apparent difficulty. His voice propels the listener through the circuitous web of the narrative, leading us to the end far more quickly than we want to arrive.