Are you prepared to adjust your lifestyle for another downfall? I recently viewed the movie “The Big Short”. It’s based on true events, recounting the housing market crisis in 2007-2008 where a few highly intelligent investors bet against the housing market and made a huge profit in spite of the mass economic devastation caused around the country. I had to watch the movie twice in one sitting because I could not believe what I had just watched, wondering where was the public outrage at the practices of the Securities Exchange Commission (SEC) and big banks. I assume people couldn’t become too enraged because they were too occupied trying to keep their assets and lifestyles from unraveling too fast, or it simply went over a lot of heads. For me personally, I witnessed part of the housing market fraudulent activities when I worked for a bank in the mid to late 90’s. The Clinton administration enacted The Community Reinvestment Act (CRA) for banks to lend to lower income residents and businesses. It’s intent is to ensure that banks use fair lending practices to those who have little to no assets. I saw for myself people defrauding this regulation. It usually happened one of three ways: 1) customers who usually did not qualify for the standard bank loans were granted loans through CRA with inflated rates, causing the debt to increase over time, creating a higher debt to income ratio for the life of the loan, which ends in default (unpaid); 2) customers using their parents’ assets to secure loans, also known as ‘projected income’, monies that are likely to be earned in the future (an inheritance for example); 3) customers who actually had large assets forge or omit their actual earnings to obtain a low rate loan (ex. a business using the financial records of a smaller subsidiary to benefit its growth). I’ve seen the rich defraud IRS through loan applications. I remember one in particular that astounded me the most. It was a customer who was a certified public accountant (CPA) that would come to the bank weekly in a different Mercedes Benz to make his deposits. They were always a few thousand a week. He applied for a commercial building loan and listed his prior year income around $25K, and provided prior tax returns proving it. However, his business had assets “worth hundreds of thousands” (according to my manager at the time), so the bank decided to overlook his reported income and grant the multi-million dollar loan in spite of the low income reporting. I remember the bank manager being perplexed about the situation. I was a Head Teller at the time, so I was a part of the management team, consisting of me and two branch managers. We had a conversation, and the branch management found granting the loan completely unfair. However, they had to do it because the executives in headquarters approved. The branch manager was particularly upset because another loan applicant who reported $100K income was denied a similar loan. What further discouraged me in the banking industry is how they impose fees on customers who cannot afford them, yet give “free banking” to those who could afford to pay. I remember my assistant manager explaining it as a “courtesy to keep the customers’ money with the bank”. These practices industry wide had a snowball effect over the next few decades, causing the calamity of the housing crisis of 2007-08.
So what does any of this have to do with President-elect Donald Trump? Directly, not much. He didn’t bank where I worked (as far as I know). Indirectly, history has proven that the wealthy protects their assets first, and try to make your wealth a part of theirs as well. Trump has given Americans many reasons not to trust him, and I believe we are all waiting with bated breath to see what’s about to happen next. But, what he’s proposing doesn’t look good for the middle class or lower income portion of the population. I am especially concerned about his plan to revamp that tax system to include cutting out head of household filings, no taxes for incomes less than $50K, and the wealthy only paying 15%. It’s very simplistic and easy to understand, but has horrendous consequences and creates a slippery slope that erodes democracy.
The Repercussions of Cutting Head of Household (HoH) Filing
Ending higher refunds to single parents will cripple the consumer economy. Most single parents use the refunds for shopping, down payments for cars and homes, purchase vacations, and the smarter ones catch up or pay off debts, invest or add to their savings. The consumer economy is dependent on the tax refund season. Don’t think so? Then why all of the “bring in your refund and you’re approved” advertisements for consumer, home, auto loans? Tax preparation companies constantly advertise their “rapid refund” high rate loan options against tax returns. They make millions from the products. For millions of single parents in this country, tax season is the paid holiday to catch up on Christmas debt, and pay for Easter. Taking it away will not only take income from the household itself, but millions of other households within the aforementioned industries will have to operate with a declination of funds. I’ve read reports of the HoH elimination proposal. What I haven’t read is how doing this will benefit the tax base or consumer economy. Most recently, I’ve read news articles stating IRS will delay the process of HoH filing this year because of fraudulent returns in the most recent years totaling over $10B. If that’s the case, scrapping HoH seems like a perfect solution; however, another solution is to hold IRS more accountable for its processing and audit procedures. At face value, the multi-billion dollar tax fraud problem and the slow rise of the working class seem to correlate, meaning as more people went back to work, they found ways to increase their refunds. I believe if the IRS were to investigate instances of fraud on an individual basis, the greater number of offenders will be in the higher income working class rather than the working poor. However, it’s the working poor families that will be punished by the termination of HoH filing. Moreover, the highest number of single family households are parented by working class white women. So for all of you women Trump supporters, you voted in favor of taking food out of your children, grandchildren, nieces, nephews and cousins’ mouths. You voted for your sister to continue to have to struggle making ends meet, and taking away probably the largest chunk of money they’ll receive at one time within the year. Should Trump have his way and it passes, which is highly likely with a Republican dominated Congress, I can say ‘thank you’ if it proves to be a success. I’m a humble person. It’s not difficult for me to say it. But if it’s a failure, are you prepared to make room in your household to help out the sister and her family whom you voted to bankruptcy without being able to claim the head of household status the next coming years?
No Taxes for Annual Incomes Less than $50,000
Sounds lovely, doesn’t it? The potential to make up to $50,000 a year federal tax free sounds like a dream come true. People can easily become homeowners, build their nest eggs, lay a financial foundation for future generations…Right? I’m not certain of that. According to Social Security Administration:
about 67.4 percent of wage earners had net compensation less than or equal to the $46,119.78 raw average wage. By definition, 50 percent of wage earners had net compensation less than or equal to the median wage, which is estimated to be $29,930.13 for 2015. (2016 Wage Statistics available mid October 2017) https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2015
That means more than half of America’s population will be excluded from paying federal taxes. I’m no expert, and expertise isn’t required to conclude that any nation or government entity will have trouble operating if more than half of its population is not paying taxes. Vital programs that benefit the sick, elderly and poor will have to be terminated. Monies for federal grants and projects will not be supplied. That affects education, businesses, healthcare, everything that relies on federal funding. It is historically proven when government decides to “trim the fat” or “cut the pork”, they always cut into a major artery and cause a metaphorical bleed out that leads to a slow and agonizing death of the poor. The perfect analogy to describe this phenomena is demonstrated in the movie “The Big Short”. They use the game Jenga to describe the housing securities collapse. The same principle applies to the tax base. Take away from the less fortunate of the population, which is the base to our economy, and the whole thing collapses. Would you like to sacrifice what you’ve already financial structured to commit to a complete rebuild of the system?
Payment of taxes ensures our participation as citizens within the government as well as maintaining infrastructures like roads, buildings, and programs. Residential neighborhoods and commercial sites are based on the level of taxes that its occupants can pay. It’s how the dilapidated conditions of inner cities were created. People who cannot afford to pay higher taxes do not receive the same level of service from the government. Those that dwell in the suburbs pay higher taxes and as a result, live in better conditions. This disparity reaches over into the practices and mindset of government officials. State senators represent causes that provide more funding and lobbying, and pay little to no attention to those who cannot afford it. In other words, more than half of America will not get the same level of service if they were to stop paying taxes. Are you ready for your tree-lined neighborhood to get an inner city make under?
Not paying federal taxes also leaves citizens prone to increased taxes at the state level, resulting in higher costs of living. One thing I know for certain, is when the federal government changes its policy regarding finances, the state government and private sectors are ravenous vultures, plucking on the fading carcass of household incomes. Case in point is the federal Supplemental Nutrition Assistance Program (SNAP) food stamp program. I can recall around 2005-07 or so, grocery and food prices increased significantly. It was around the same time that food stamp participation was at historically high levels. With more of the population receiving federal aid, grocery and other major store chains increased their prices. I was not on the program at the time. I was dutifully employed by Montgomery County Police Department; however, I was a single mother, and one hundred dollars could no longer fill my cart and feed my family for a month. It increased to well over three hundred dollars a month. I’ll admit, I was unhappy about the unemployed person in the check-out line who could easily swipe their EBT card to pay for their food, then go home and rest, while I had to use the money from working sixteen hour night shifts to pay for mine. But as God’s will would have it, I became unemployed in 2011 due to health issues, and ended up feeding my family using the SNAP program from 2011 to 2013. I’ve also participated in the WIC program over the years when my children were under the age of five. Those programs are vital and necessary for the working poor. In 2012 or 2013, the Republican Congress decided to cut funding to the program. It wasn’t until after the cuts were made that it was discovered that 55% of the program’s participants were military families. Is this how government and private sector should treat their constituents and consumers? And even though funding was cut, the grocery store prices remained and increased in most instances. If federal taxes are eliminated for lower incomes, I would assuredly believe the states will increase property and business taxes, banks will go back to unfair lending practices, and consumer prices will increase because they will assume that households will have more to spend with less federal taxes to pay. All of those increases could accumulate to actually be more than paying federal and state taxes at their current rate. So, the plan to eliminate taxes for lower incomes certainly has a nice ring to it, but it can lead to devastating results.
The Wealthy Paying Only 15% Taxes
I’ve never been financially wealthy, but I can assume that a flat tax rate of 15% rather than different rates for different types of taxes is more convenient. However, those different types of taxes go to funding programs. If the taxes are eliminated, so are the programs. This includes business taxes and regulations that provides funds for fair and safe labor standards, small business grants and loans, infrastructure development and healthcare. More jobs may be created, but monies for small business start-ups will be jeopardized. Cutting the taxes of the wealthy is another simplistic plan with complicated results.
Taxation is our representation within this democracy. It is proven that people with more money have more power. Paying the fair share for what can be individually afforded is our voice. However small and feeble, it exists. If we don’t pay taxes, our voices no longer exist and other civil liberties can fade away just as well, without us having the power to stop it. This is the very definition of oppression, when those who are in power attempt to gain more power by sifting the least of the population. I wish President-elect Trump was more descriptive about how his plans will benefit all Americans because I do not trust ‘just wait and see’. I’d rather be prepared the best that I can. Or as an adage goes, “pray for the best, prepare for the worst.” My coffers are empty. I have nothing to lose (I think). My piggy bank has been slaughtered and fried for bacon a long time ago. However, for those that live high on the hog, and think you’ve been called to supper to get fatter by the upcoming administration, are you certain that you’re not being called to the slaughterhouse?
There are only two things I heard out of Trump’s mouth that captured my attention, and make me feel hopeful. The first one is controversial, when he stated to the African-American community: “What do you have to lose?” In my personal aspect, that questionable statement is correct. My answer is a resounding: Nothing that you’d want or can legally obtain. I don’t have anything financially to hoard and keep safe. If his plan works, then I’ll gain a new piggy bank, with the hopes to upgrade it to a hog. For that, I can say thank you for his leadership in spite of my disagreement with his overall personality. I’m not going to act out of my character because of his character or anyone else. I’m prepared and hoping to thank President-elect Trump for financial success of this country. But if it fails, I’m already at the bottom and know how to survive with millions of others. President-elect Trump mentioned that he wanted to provide tax alleviation and support to families with stay-at-home mothers. Well, that is me. I am a stay-at-home mother by my choice. It is the best support to provide for our autistic son, who has several delays and disorders. I would love for my companion to get a tax break for agreeing to be the only wage earner in our household, but not at the expense of millions of single parent households by passing HoH filing elimination.
My optimism is for my own personal growth the next four years. It doesn’t matter if the president was Trump or Clinton. To quote a gospel song: “What God has for me, it is for me.” I do not believe the occupant of the White House has a direct affect into my personal daily decisions. I’m going to be me and take care of mine regardless. This blog is mostly a reminder to those that pray, don’t forget to watch. The Holy Bible (NIV) in Luke 21:36 says: “Be always on the watch, and pray that you may be able to escape all that is about to happen, and that you may be able to stand before the Son of Man.”
Tamika Trammel is a Christian-Urban fiction author. She has written two novels: 18 Years of Grace and Mercy: A Teenage Mother’s Testimony, Vol. 1 and The Pusher, the Prostitute and a Preacher. Both available in soft cover and eBook with any online retailer including Amazon, B&N, and Facebook Store https://www.facebook.com/18yearsgraceandmercy/shop/?rid=504785346257613&rt=9&ref=page_internal. Connect with Tamika on Facebook, LinkedIn, Twitter @18graceandmercy, IG mikameekauthor and WordPress
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