ring ring.
“Dunn’s Certified Public Account Service, how may I help you??
“Yes, hello. May I speak to Mr. Dunn?”
“May I ask who is calling?”
“Gerald Mackenzie.”
“Ahh, Mr. Mackenzie, I thought that was your voice. I hope you and the family as doing well.”
“We are doing just fine, thanks for asking. I hope you are as well, Betsy. I imagine business is boom at the moment.”
“We are certainly busy, Mr. Mackenzie, and everyone is happy and healthy! Give me a minute to get John on the phone.”
“Thank you, Betsy.”
beep…… beep……
click. “Good morning Gerald!”
“Good morning John, I hope you’re doing well.”
“Yes sir, we are booming at the moment. ‘Tis the season they say, and the Federal stimulus doesn’t hurt either. What can I do for you?”
“Well, John. I- I think the IRS just took a couple hundred dollars out of my account, and I wanted to see if you could verify and maybe shed some light on the subject.”
“Certainly, Gerald. In fact I know exactly what you’re talking about. It turns out that the government was serious when they decided to apply the graduated stimulus this year. You should have received a notification already. You did, didn’t you?”
“John, I received no letter or any other notification. That is partially why I called. I figured that since you have been handling my taxes all these years, maybe they notified you instead.”
“No sir, their stance – and correctly so if I might add – is that they must communicate directly with the taxpayer. If I had received something for you, I would have called immediately. Anyway, they were supposed to notify you only if you would be in the reverse stimulus group. On the other hand, if you were to be the recipient of a standard stimulus check, they would just deposit it and move on.”
“Hmm, I see. So I have been deemed to be a part of the reverse group. How does that work, John? Apparently I did not pay enough attention to the announcement.”
“Well, let me pull up the graduation chart. –Ahh, here it is. You and I fall within the 48 states and Washington D.C. column, and with your two kids and wife… Okay. Poverty level for our state with four members of the household is $35,340. Anyone with that income or less gets the standard credit of $2,000 per household.”
“Uh huh.”
“I am speaking in terms of married filing jointly, Gerald. Any household with an income between $35,340 and $85,000 gets $1,500. Between $85,000 and $115,000 the amount drops by five cents per dollar earned above the $85k. So when your household earns $115,000, that household receives no stimulus. You following me so far?”
“Yes sir, I am. And with my job and Helen’s both making roughly $70,000 per year, we are over the $115,000, right?”
“Yep. Not by much, just a little over once income is adjusted. Now listen closely here, Gerald, because this is where the rubber meets the road for you. When they enacted the first stimulus, they devalued the currency so much and set expectations that there were a bunch of issues in the following years. But because everyone loves a handout, they also set a new precedence for wealth transfer. People wanted new handouts for any crisis.”
“It has been at least one stimulus every few years, has it not?”
“Yes sir, I have a full list of them somewhere, but the last time I looked it was about one per presidential term. It usually happens during voting season too, and once one guy does it, it becomes the new bar for the rest of them, and the only way to win in a rigged game is to participate. But- anyways. The last treasury secretary raised a bit of an alarm and said that the stimulus was unsustainable in the long run without some changes.”
“No kidding!”
“They found a new way of making it quote-unquote ‘pay for itself’. They adjusted the graduation table to include reverse stimulus. So once your household’s adjusted income goes past $115,000 the stimulus goes into the red – so to speak – and instead of getting paid, that household now has to pay. I think the rate they applied was four cents on the dollar above $115k. If your adjusted was $120,000 that would put you at $5k into the red and that would mean you would have to pay $200 into the stimulus bucket.”
“Okay, so I am paying money into a fund for everyone else.”
“Just those who make less than $115k.”
“Right, but- “
“For a moment picture a guy and his wife making $200k. They would pay $8,000 in reverse stimulus, and it would be worse for them since the standard deduction is phased out at $190k. And that has nothing to do with their tax bill, which they still have to pay.”
“That is crazy. How can they do that?”
“That $8k pays for four whole stimulus checks at the poverty level. It is a way to balance the books.”
“-But at the expense of people who make more.”
“Certainly, Gerald. The poor get free money and those with good jobs pay for it. After all, the government doesn’t generate any of its own money. It has to come from somewhere. It’s no different than a graduated tax rate, it has just been taken to an obvious conclusion.”
“Well, John, I’m an electrician and Helen is a stylist. We are not rich, hell, have you seen my car? We are solid middle-class!”
“I know, I know. It’s not about rich or poor really, although there are a lot of rich people and many of them will pay dearly. Some won’t because they have connections or tax havens.”
“Who can blame them? If your money is circling the drain it would be smart to scoop it into some net that can keep it safe.”
“I agree. This is really about politics. Once a politician is sure that they can take from one and give to another, they have the power to purchase votes with the public’s money. The main group of people get free stuff, the politician gets entrenched, and the minority here – the small fraction who have a better income – get fleeced. They don’t matter though because there are just too few of them to vote it away. Eventually I think people in that range will exit the game and find greener pastures.”
“I find this pretty disturbing, John. It seems that there is really no end to the spiral.”
“Well, they will probably raise that four-cents to five and up every few years which increases the payout. They can also change the maximum level to capture more households into the paying net. If one were to take this far enough, there would be a real financial crisis where every person with a job in the reverse stimulus range would be reduced financially into the non-reverse range, age out of their job, or even just quit. There would be no way to pay for the freebies. They would probably reduce the thresholds some more, but eventually the system would balance out to where the only way to continue is by printing or borrowing money. The currency would become so devalued and the debt would be so high that there would be some other kind of major collapse.”
“Like what?”
“I don’t know to be honest. It’s years away and too hard to predict. This is a shell game with a lot of factors involved.”
“Hmm. Well, what can I do while they kick the can down the road?”
“Work harder, pay attention to the reverse stimulus rates and plan to save for that new expense. Don’t let it catch you by surprise. I’ll work within the tax system to get you every benefit possible to reduce that amount.”
“Thanks, John.”
“Have a good one, Gerald, and good luck.”
