Updated for 2009: the Right Kind of Government Handouts

Original article here.

• Retirement contributions lifted to $5k and $15.5k, then indexed to inflation

• Business taxes lowered and write-offs expanded

• Business depreciation accelerated

• Saver’s credit lifted to include slightly more income each year (possibly indexed)

• Indexed exemptions and credits

We already have three of the five listed above.

The proposed extension of the unemployment benefits, handouts to seniors and retirees, and those who paid payroll taxes but not federal taxes is worthless as an economic stimulator. Allowing us to keep more of our money is a worthwhile endeavor—we’re going to spend what we’re going to spend, and not much more. We just don’t need or have room for much else. We’ve already shopped ‘til we dropped, and that’s what caused the economic meltdown.

Handouts such as unemployment benefits, welfare and food stamps, and Medicare only serve to keep you out of certain markets—the government (whether state or federal) is paying you to stay home and out of the work force (or in the case of Medicare, payment to avoid taking control of your own health care matters). You’re being paid to stay home because you aren’t needed any more in any meaningful way. Soon, your kids will be paid to study if a certain Chicago pilot program is enacted nationwide—payment for keeping them off the streets and out of the menial labor market.

Isn’t that what education is for anyway? Why bring money into it? Because the federal minimum wage (the amount paid in this pilot program) is more than the average drug trafficker clears—most drug runners still live at home because they net so little.

Bet you didn’t know that about handouts, did you? This is when benefits are really deterrents. You have a set time limit to get the message: two years for welfare, and so many weeks for unemployment. Food stamps keep you from endeavoring to earn more, because they serve as a fallback to the income you could be making but aren’t. Thank God there’s an income limit for those, but it seems to be enough to deter lots of folks from working harder on their own. They don’t see the incentive to avoid handouts, and it’s freedom.

Instead of cushioning us from personal economic pain, the government should be increasing opportunity for us to work and profit more, hence opening up the spigot on the business side of things. More money (through more tax breaks) to businesses means more hiring, pay increases, more and/or better benefits, investment in newer and better equipment to get those jobs done, and room to lower prices on final goods and services. More money to them means more money or less work burden to you. It also means lower prices for the consumer—the reason why you have a job.

The better you get at your job the more potential you have for future raises—this all depends on how you handle your job. It’s not just the job description, but what’s not put in writing, that’s most important: your job is to help the boss make HIS or HER job easier. Your real job is to balance his/her priorities with your individual job duties—you learn to do that well enough, and it’s a sure ticket to job security and future raises. You’ve learned to make yourself indispensable, and now the boss absolutely cannot do without you (unless someone more skilled at this comes along)—he’ll pay more to keep you around.

This is why tax credits and deductions to BUSINESS are worth more to you than a check in the mail. What’s a mere $500, $800, or whatever number Congress eventually comes up with in the stimulus bill, when you alone have the potential to make that much and more without Congress’s handout? Besides, any check that comes as a result of this stimulus package is just a one-time rebate on your 2009 taxes—it’s not new money, but rather next year’s refund (or part of it) in advance.

If you work right, take the right amount of deductions and exemptions, live frugally, and save like there’s no tomorrow, you earn yourself more than that pittance of a check, because your monthly pay will reflect it.

Whatever check number comes out of Congress should be looked upon as an insult to you. Tell them to keep it—you can make that amount on your own without breaking a sweat! Tell them you’d rather have that handout through your employer instead. Besides, employer benefits are non-taxable. Cash direct to you is 100% taxable, and I wouldn’t be surprised if the IRS instructed us to claim rebate checks as unearned income.

So much of our lives is already subsidized, and we don’t even think about it: us as individuals, our marital status, the dependents exemption, the earned income credit, the child care credit, being blind or over 65, credit for the elderly and disabled, educator expenses, student loan interest, tuition and fees, even our retirement savings,—it’s all right there on your federal tax forms. Tell me what an additional $500, $800, or whatever the final number turns out to be, is going to do for you compared to what we already receive every year. Don’t we already receive adequate handouts from Uncle Sam? He already gives you $3,500 just for being alive and having an income, and that’s only the start. The more involved your 1040 form is, the more loopholes (credits and deductions) become available to you, and the more Uncle Sam supports you.

Pop quiz—which would you rather have?

A) the one-time stimulus offer to families that may end up being taxable

B) the $3,500 deduction that’s available each and every year you file taxes as an individual, or even the $5,450 annual standard deduction for singles

I thought so. I bet you never thought of taxes this way until I brought it to your attention—they can be a real money-maker. Take this time to really scrutinize your tax forms, because there’s money in them. They pay you for just being alive, having an income, having a spouse and maybe some kids (er, I mean future workers), an elderly parent living with you, and so much more. Can you imagine where you’d be WITHOUT all these credits and deductions? None of us could afford to exist, and this would serve to show you what the REAL tax level would be in this country if Uncle Sam wasn’t so generous!

I just did some math, and found a SAHW with no kids to care for would have to earn $8.33/hour, working 40 hours per week, for 51 weeks per year, with a 15% total tax burden (state and federal) to net the same amount of money that the personal exemption and standard deduction would earn her as an individual. She’s worth $8850 (one personal exemption + half the married standard deduction) just to be alive—this is what Uncle Sam pays her (through tax deductions and credits) to stay married and out of the job market. She (and every other SAH individual) is worth this much to make room in the job market for someone else—then they get married, learn this trick, and stay home themselves (making room for another worker), and so on.

If they had kids, each qualifying kid would be worth $3500 just to be alive, and worth more for going to daycare (see EIC, or Earned Income Credit rules). If Grandma moved in and qualified as a dependent, she too would be worth $3500 just to be alive.

Instead of cursing the tax man every April 15th, and clamoring for more handouts, think of these credits and deductions instead—your rich “uncle” is giving you money in ways you never knew before.

If you’re feeling more than slightly guilty over just how much subsidization you get from Dear Uncle, you can send money back to him via check or money order payable to the IRS. Just put the word “contribution” in the memo line. But I wouldn’t worry about it—nobody has done this for a number of years, not even our richest citizens (some of whom ballyhoo about the opportunity to avoid estate taxes).