My wife recently received a communication from the Social Security Administration. It was a form SSA-1099, which listed the amount of her total disability benefits paid to her by Social Security during tax year 2006 that may be taxable. The amount potentially taxable was somewhat more than 50% of the total paid to her. Why a form 1099? Well, the back of the form is an IRS Notice 703, which is a calculation sheet to determine if her Social Security disability payments are taxable. Thus, the form 1099.
Most of us know that folks who receive regular Social Security retirement benefits will be taxed on those benefits if they work during any tax year and earn amounts in excess of $40,000 or so. I donít remember the exact amount and I know it has been changed a few times. But monies that you earned during your normal working years that were taxed first for regular income taxes and then taken from the pretax gross at 5 to 6 percent for Social Security will be treated again as earned income during your retirement if you have other sufficient earned income in a given retirement year. Unless, of course, the taxable amount is limited to that which your employer(s) contributed on your behalf during your working years.
Recall that employers sent in matching amounts for you. But also recall that folks who donít have other taxable income in retirement do not have their Social Security payments taxed due to earlier employer contributions. In short, a double standard is being applied that penalizes those who contributed the full amount and were prudent financially such that they have other sources of income during their retirement years. Is it not enough to tax those other sources of income?
This is, of course, double taxation for the middle class or those who continue to work into their retirement years. Actually, it is far worse than double taxation when the effect of long-term inflation is dialed into the calculation. No, the inflation adjustment applied annually now to Social Security benefits does not in any way accurately reflect the increase in cost of living for retirees. But letís set that aside and return to my wifeís situation.
First, she has long-term disability insurance through her employer, for which she has paid the premiums. The disability income she receives from that insurance is not taxable because she paid the premium for the insurance from her normal monthly salary. But there is a caveat. Per the terms of the insurance policy she was required to sign up for SSA total disability benefits, thus reducing the amount of disability benefit paid by the insurance company, by the amount paid by Social Security. That sounds kind of cheap but not completely unexpected. Apparently, following those rules would result in no net change in total disability income. As you can see from the above discussion, that assumption is faulty.
She did as required and SSA approved her total disability status immediately, as she has a malignant brain tumor. It is clear that SSA does not expect her to receive benefits for very long, nor do they figure she is able to work. She is thus most likely never to get back even a small percentage of what was paid into Social Security during her working years, regardless of how anyone computes the value of that amount in todayís dollars.
Alas, here we are today, finding out that her SSA total disability benefits are indeed taxable. This because she worked part of tax year 2006, prior to the identification of the brain tumor, and she also cashed in most of her remaining stock options to generate tangible, hard savings for future needs. Isnít it cute? She will, as expected, pay income tax on her earned income and on her profit derived from her options exercise. But on top of that, IRS expects to take back part of her total disability benefit, which did not start until after she no longer earned a salary and after she exercised the stock options.
For this present tax year, as with 2006, all taxable income is considered in determining if some or all of the total disability benefit from Social Security is taxable. Here is where the rubber meets the road. Our pensions are taxable income, and pension income is considered when determining whether her disability income is taxable, and since we are married the combined pensions push us into an income bracket (anything above $32,000) in which the total disability benefit from Social Security is certain to be taxable. Now, were we divorced Ö you fill in the blanks. Oh, married filing separately? Look at the tax schedules, esp. the rate for separate/single vs. married filing jointly. The game that we are forced to play is fixed, and not in our favor.
So, let me summarize. Disability income from regular insurance is not taxable because the beneficiary paid the premiums for the insurance. Disability income from Social Security is taxable even though the beneficiary and his/her former employer(s) paid the entire benefit amount. Huh? Is there some kind of logic that explains this difference? Of course there is, and I will launch into that discussion next. But do note that the IRS feels justified in taking part of a total disability SSA payment from a person who cannot work and who will likely not live very long Ö and who most certainly will never get back anywhere near the benefit amount that actuarial tables would suggest for healthy people. Are they bastards or simply stupid? Why do we support this government?
By coincidence, I happened to read an article this morning about the likely increase in the federally mandated minimum wage, which if signed into law will require a minimum wage of $7.25 per hour. Hmmm Ö I wonder if the illegal immigrants will get that much (HAR, HAR!)? Okay, what about our citizens? How many jobs are off the books or based on commission only and pay far less than $7.25 per hour and will continue to do so? But even more germane to this article is the question: What standard of living will an individual or a couple be able to have if the earned amount is the minimum wage?
I suppose I should provide you, the reader, with a statement of where I am coming from. Am I off base if I declare that we citizens have a total and unarguable right to expect our government to create a legal environment that will maximize our ability to enjoy a productive life? I think not. But what is the reality? Consider quality and availability of education due to underfunding. Consider fair pay job losses do to offshoring and illegal immigration. Consider dissembling by a controlled media. Consider tax burdens shifted away from corporations onto the little people.
Letís suppose you are married and both of you earn the proposed new minimum wage. Your combined gross annual income is 2 (earners) times $7.25/hr times 2000 (working hours/year). That is $29,000. You are above poverty level and you will pay income tax. You will likely not have any medical insurance paid by your employer. You will likely not have a 401K plan, and you certainly will not be able to put money into an IRA. You will certainly not be participating in a non-contributory pension plan. Why?
For starters, your combined income is so small opposite the cost of living that you have to devote every cent towards basic survival, and that survival isnít very sweet. You are at the bottom of the barrel of recognized income earning citizens and youíd best pray that medical costs and ongoing inflation donít destroy even your meager existence. This means a lifetime of substandard apartment living with no hope of ever owning a home. Your neighborhood is dangerous to you and your children, as the near poverty occupants are frustrated to the point of regularly committing larceny and physical violence. Do you wonder why some of those people deal illegal drugs?
How well will you eat? Would you like fries with that, sir? Will you have a nice and dependable car? Will you be able to use it for other than transportation to and from work? When will you have a nice vacation? Likely never. Your furnishings in your apartment will be second hand or really cheap poor quality "bargain" furniture. How about the quality of your clothing? I guess it doesnít matter because you donít have enough money to go anywhere nice anyway, so who needs nice clothing?
How is the quality of the school district where you live? Will your latchkey children learn enough to qualify for some type of scholarship so they can rise above your station in life? That is very doubtful. Avoiding gangs and violence will occupy most of their time, and who knows, they may even become violent and join a gang to feel like they have a place where they belong. Isnít this issue really the point? Do you understand that you are not part of the population that can have the "American Dream?" While Iím at it, how many children will you have and why? Are you doing them any favor by rearing too many of them in a near poverty environment. Do you want your progeny to fail too? Do you like providing cannon fodder from your womb for the next senseless war?
Life, liberty and the pursuit of happiness exist only for people who have serious income or equivalent provided funding. That leaves you and your progeny out. Oh, you can fool yourself into believing that you have a "cool" life, provided you are blind to the wealth and possessions and lifestyle of other people outside your employment or your neighborhood. Perhaps it is best if you stay in your little world, for then you wonít have to admit that your society considers you to be a bottom feeder. Ahh Ö the American Dream!
It ainít yours, baby! Your government has allowed wealth to polarize. Corporations and wealthy individuals own the government. All legislation of consequence supports those people remaining wealthy at your expense. Just consider the usury level interest rates that you pay for your credit cards. And consider how convenient it is for you to waste your tiny income on idiot lotteries that are simply keyed to your ignorance and your vulnerability and your near hopeless dreams. You are and will be stripped to the bone for your entire life.
To point, give me one good reason why our low-income citizens should even consider working when the compensation is so pathetic. Why would anyone with any common sense be motivated in that environment? Jobs Americans wonít do? This is simply blatant crime committed by our businesses and our government in destroying the quality of life of our citizens of lesser abilities and low opportunities. The parallel with bringing in illegal immigrants and educated Indians who will work for crap wages is very clear when we consider the "scabs" the corporations brought in to break strikes in the 1800ís and early 1900ís. Can anyone remember how those companies even resorted to killing recalcitrant employees in large numbers (ex: copper mines)? Do you not grasp that what is happening today is a massive destruction of fundamental pursuit of happiness rights of our citizens? The perpetrators are our corporations, wealthy individuals and our federal government.
Now it is appropriate to mention that the low and no income people characteristically over populate wherever they are in the world. They arenít very bright. They certainly arenít properly educated. Their "cultures" are asinine as they individually never look ahead to consider the long-term consequences of their behaviors on their societies. They will quickly overtax any entitlement or relief programs created on their behalf. It is no wonder the wealthy treat them like dirt. But all that could be managed in a very kindly way if we used mandatory sterilization after individuals have reproduced themselves one for one. Yet that simple, fair and completely effective idea is considered to be a violation of human rights! It is "politically incorrect" to even mention mandatory birth control. Isnít that a hoot? Letís let them reproduce like flies and make slaves of them and subject them to sub-human living conditions, right? Well, that is what is happening on a global scale. It is time to stop that bullshit.
Okay, so much for the poor Ö and that is after the proposed minimum wage increase. Now how about the ordinary folks who have experienced decent income and have acquired security, as in owning (if they can ever pay off the mortgage) their home. What vile plans (like "loan to own") on the part of the wealthy and the politicians are used to steal that security? Trust me, those in control expect to return all other people to conditions of servitude, financial weakness, poverty Ö and ultimately slavery, globally.
There is no conspiracy, for conspiracy contains the element of secrecy, but there has long been a lot of "strategic planning" and accompanying tactical legislation to support financial polarization. The behaviors of the corporations and government lackeys are obvious and open and you wonít hear about any of it in a negative light, or necessarily at all, as the media is owned by the wealthy. I submit that in two more generations the entire world will consist of a few thousand wealthy owners, hundreds of thousands, if not millions of paramilitary forces working for the wealthy (just like now!) and billions of slaves. Unless, of course, there is a major and successful revolution here and elsewhere before it is too late to act. Or is it already too late?
Downwardly mobile? You bet! There is no shame whatever on the part of the politicians or wealthy corporations, banks or individuals as they fleece you of every possible cent. This includes, for example, the income side (push salaries and wages down), the assets side (increase property taxes for the little people) and the "investments" like your set it and forget it 401K plan that somehow never seems to keep pace with inflation. And that is true only if you are among the fortunate lower middle, middle or upper middle class. The poor folks donít have anything, and the middle class is disappearing.
Just how do you think this process can be reversed? Think long and hard about that. Good luck to you if you follow the rules established for your financial demise. Sheep to the slaughter come to mind.
Now I must conclude by adding a few thoughts for my conservative Republican friends to ponder. If you entered the work force prior to 1975 you lived at a time in American history when opportunity for a middle class career was excellent. Benefits and secure employment were the rule not the exception. The evolution of careers in the USA from the late 1880ís to 1980 was one of growth and opportunity, with some bad years between 1930 and 1938 due to the Depression, in which up to 20% of the labor force couldnít find work.
What most of you folks who still vote Republican donít seem to understand is that your society changed radically since 1980, on behalf of destroying opportunity for all but a few. All of us remember "outsourcing." Later we experienced "offshoring." Now we have the latest disaster, which is importing really cheap labor Ö educated labor. What you enjoyed in affordable education and subsequent career is not there for your children or your grandchildren, and there isnít a damn thing they can do about it. If you sensed the negative changes in the USA instead of defending what were sensible political positions in the 1940ís to the 1980ís, you would gag and change your belief structure. I am always in favor of hard work and intelligent thinking leading to success. And I hate entitlement programs. But where are we today?
Your leaders would have you believe that our young people are lazy. Well, they arenít. We have a wrecked primary and secondary educational system, absurd college and university costs and a lousy job market for those who would apply themselves. Our businesses import foreign labor that is educated well by subsidization/foreign government spending on education. And these people work for shit salaries here. Are you starting to understand that your children and grandchildren have been screwed? If you had faced a business climate in the USA like the one they face today would you have been motivated to even try to be successful?
Understand that the major economic forces that have been reshaping our world noticeably since 1980 are destroying life for the middle class in the USA. When the standard of living goes down continuously our successive federal governments have failed us. Reagan launched this hard evolution and Democrats have been just as bad as they are an equal part of all of the economic problems we have now. Business owns the government by owning the elected people of both parties. The two party system means exactly nothing.
Anyway, you have enough wealth to see you through retirement to death. You donít have to open your eyes to the present realities. Your children donít have that choice. Your grandchildren are lost. But if you have a grain of motivation left, figure out how to get us back on track and let all of the rest of us know. Oh, and do think about the latest attempt to use hearsay "evidence" to prosecute the, uh, terrorists. How far away are we from that disaster in our regular courts if it proceeds in Gitmo? Do you want to live in that world?
Our ancestors, according to what I read in history books as a child, emigrated from their native lands to escape oppression of three types: 1)religious, 2)economic, and 3)criminal law. They had a place to go. It was called America. And now Ö where do we go?