Blast #320

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                                                        Let’s Talk Taxes
                                       (The Trump Trifecta will continue on Saturday)
 
                  The Republicans unveiled their “tax reform” plan yesterday, called the “Tax Cuts and Jobs Act.”  It is probably not what will finally be passed or go crashing into oblivion like the “repeal and replace” act.  Nonetheless, the spineless and ineffectual Paul Ryan was heralding this plan as a boon for the Middle Class, noting that a family of four would now get to keep $1182.00 more per year than they have now!  Wow.  $1182.00 per year.  Now we know Trump’s Director of the Economic Council, Gary Cohn, has informed the public about what they can do with the $1000 per year:

"If we allow a family to keep another thousand dollars of their income, what does that mean? They can renovate their kitchen, they can buy a new car, they can take their family on vacation, they can increase their lifestyle. That's what our tax plan has to do." (CNBC, Sept. 28, 2017)
 
             Given that Gary Cohn’s net worth is $266 million, he may actually, honestly, believe that $1000 can “renovate a kitchen . . . buy a new car . . .take (a) family on vacation. . . increase their lifestyle!”  The man simply makes phone calls for such items --- or has his “person” do that --- and has no idea what things cost in the real world.  As point of fact, let’s take a look at how much this tax cut actually does help that family of four making $59,000 per year.

              Simple math tells us that keeping $1182.00 a year in tax cuts provides $98.00 per month “extra” to spend.  Let’s see how that stacks up compared to the expenses an “average” family of four has each month.  All of the statistics used here have been researched on credible sources (valuepenguin.com, us.gov sites, etc.) and I believe they are conservative estimates.  If a family of four’s income is $59,000 per year, that’s $4,916.67 per month with no taxes taken out. If we’re going to get $1182.00 per year ($98.00/month) to keep via this tax cut, we’ll assume, for the moment,  we’re not paying any taxes.  So, with that $4916.67 as our “stake” for a month, let’s take a look at the monthly expenses for our family of four.

          A family of four, according to valuepenguin.com, pays a mortgage of $1492.00 a month.  On the MotleyFool.com website it says the cost is $1494.00 per month so we can say that the average family of four is paying $1493.00 a month for a mortgage.  According to the Department of Agriculture, an average family of four spends between $1095.40 to $1282.10 per month on groceries,  depending on the age of the two children in the family.  That’s an average of $1,188.75 per month, so we’ve already got $2681.75 in monthly expenses, just for a roof over our head and food on the table.

             Let’s consider the other “incidental” expenses most of us dole out.  A monthly electric bill is $147.77; the Internet costs an average $58 (that’s without cable or phone service --- a streaming household).  If  the family only has one car and drives about 1100 miles a month at 22 mpg for the national average of $2.62/gallon, that’s another $131.00.  The insurance for the car, which varies from state to state,  will be around $100 a month, as will home insurance.  Life insurance, if you’re a non-smoker and got the policy at age 30 will only run about $30 a month.  So, those “incidentals” add up to another $566.77 per month.  Added to our housing and food costs, we’re now up to  $3248.52 per month for what most people would consider “necessities.”

             That leaves $1668.15 per month in “discretionary” funds, right?  AND that additional $98.00 a month to boot!  However, there are a number of expenses that aren’t noted in our bare bones household monthly budget.  This budget does not include Social Security and Pension deductions ($460 on valuepenguin.com); it does not include any Health/dental Care (the new plan eliminates Medical deductions --- valuepenguin estimates $300/month), apparel (which valuepenguin.com estimates as $133/month), or “entertainment” ($213/month on valuepenguin.com).  Those addition costs total $1106 per month, leaving our “discretionary” money at  $562.15 ($6745.80 per year).

     What's been left out?  Car payments or other transportation expenses (valuepenguin.com estimates $750/month), Smartphone bills (and insurance --- about $90/month), eating out (fast food & restaurants, takeout ---averages between $110-200, minimum) and, of course, state and local taxes (we pay an “excise” tax for owning a car in Connecticut) --- these are all additional monthly expenditures --- and we haven't even considered savings for college or retirement!  Needless to say, we have far exceeded our monthly budget at this point and we can see why credit card companies are thriving.  So, how does that $98.00 a month look now?

           I grew up in a family of four --- but in a far simpler time.  Even accounting for inflation, our family was working-class (below middle class) and I was shocked to learn, in 1973, my $12,776 per annum salary as a secondary teacher was greater than what my parents made together that year, working full time jobs for New York State.  I don’t know how they did it --- the car, the mortgage, helping with my college expenses, and so on.  I’m sure, though, that the additional $98.00 a month would have changed our lives, as Gary Cohn noted.  You can bet my folks would have sat back and wondered if they should spend it on that new car or the kitchen renovation --- NOT!!

                 As Matthew Cooper reported in the November 2, 2017 Newsweek:

"The most striking aspect of the GOP tax proposal is the skewing of its benefits in favor of corporations and wealthy individuals, rather than middle-income families," said Duke University law professor Lawrence Zelenak, an expert on tax law and policy.
 
              The Republicans have been dreaming about this tax cut for 30 years and now they think they’re going to get it done.  If you want to see what happens when this kind of program is implemented, take a look at Kansas, where Sam Brownback’s scorched earth tax plan has decimated the state.  Make your voice heard.  Let your Senators and Representatives know how you feel about this “Tax Cuts and Jobs” travesty.  And then let them know again.  And again.