Fish Heads and Chicken Feet in Your Future?

By SAM URETSKY

President George W. Bush famously said, “Fool me once, shame on … shame on you. Fool me — you can’t get fooled again.” As with so many other things, he was wrong. President Ronald Reagan incorporated the idea of the tax cut that pays for itself into his 1981 budget, and, although it failed to produce the prosperity that had been predicted, tax cuts for the wealthy have been an article of faith for Republicans ever since. In Kansas, Gov. Sam Brownback was so certain of the benefits of tax cuts that in 2013 the state undertook a “real live experiment” — eliminating state income tax for the owners of pass-through businesses, eliminating its top tax bracket and cutting rates across the board. The tax cuts never lived up to their promise, and the state was faced with massive budget deficits in spite of budget cuts and tax increases.

Of the current tax adjustment proposals President Trump has said “the rich will not be gaining at all,” but President Trump has not been known for his honesty, integrity or knowing the effects of proposed policy or legislation. According to Sen. Bob Corker (R-Tenn.), Trump is “an utterly untruthful president” who “has great difficulty with the truth, on many issues,” and a majority of Americans agree with this evaluation – and this is nothing new.

At this point Paul Krugman of the New York Times wrote a column titled “Everybody Hates the Trump Tax Plan,” in which he noted, “The general public strongly disapproves — by a 2-1 majority, according to Quinnipiac, although the majority would be even bigger if people really understood what’s going on.” The plans the Republicans are presenting raise taxes on almost everybody with an income below $1 million a year, and finance the tax cuts by taking health care insurance away from millions of people.

What hasn’t been mentioned is that another aspect of the Republican plan would make Dick Dastardly and Snidely Whiplash proud. (Trivia note, Dick Dastardly’s full name is Richard Milhous Dastardly) proud – the plan to support the tax cuts for corporations and millionaires by removing the tax deductible status of state and local taxes.

The data on retirement savings in the US is both distressing and confusing – confusing because it’s difficult to tell who has what, and distressing because in the majority of cases, people nearing retirement have nowhere near enough savings for retirement. Most retirees are heavily dependent on Social Security, but that pays only $1,333/month on the average. For families where the primary earner is between the ages of 65 and 69 years old, the median net worth is $194,336 — still not good, but beyond that only about $43,000 is in cash. The rest of the money is in the form of equity in their homes. Facing old age and an inability to continue working, some people may still have traditional pensions, while others may move in with adult children, and still more may qualify for long-term care under Medicaid. The result is that most people have to tap the equity in their homes – with reverse mortgages, home equity loans, refinancing, or simply selling the home. These methods are intended to provide the cash needed to get by when salaried income stops.

But home equity is a function of the anticipated selling price of a home, and that depends on how much a buyer is willing and able to pay. Eliminating the deductions for local taxes and mortgage interest raises the cost of living in a house – and the only way to balance that is to lower the price of the house.

If Congress changes the deductibility of state and local taxes, millions of people, not just in blue states, but in every state, will be affected. While it’s true that red states have lower taxes, most also have lower incomes, and there are psychological effects when the estimated selling price of a house goes up or down.

When you see that the average selling price of a house in your town has gone up a few percentage points, you may be in a mood to take the family to a restaurant. See the selling price go down and you might decide to check the price of fish heads and chicken feet (According to Modern Farmer, “Most fishmongers will sell you the head for pennies on the dollar, if not give it to you outright.”

Because the Chinese have been importing chicken feet they’re no longer particularly cheap, but they’re great for making soup.) If the selling price of tens of millions of homes takes a drop, the GDP will fall as well – there should be at least an adjustment, and possibly a recession, Republicans aren’t good at economics, or much of anything else.

Sam Uretsky is a writer and pharmacist living in New York. Email sdu01@outlook.com.

From The Progressive Populist, December 15, 2017

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