There was a scene in an episode of “Game of Thrones” where Jamie Lannister and his men sacked a castle and took off with loads of grain and other food stuff. That is how the vast majority of us feel during tax season: that the government, like Jamie Lannister, is coming around to haul away more of our stuff in the form of taxes.
The tax burden by my qualitative assessment, is increasing for the middle class. I and two friends in between racquetball games lamented on the good old days where we would each expect Uncle Sam aka Jamie Lannister to send us a refund check. The current experiences of today’s middle class make those refund days a thing of distant memories.
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In a piece on Kiplinger.com, writer Katelyn Washington made the following observation:
“Often, being in the middle class means acquiring a lot of debt, struggling to pay the mortgage, and living paycheck to paycheck. If that sounds like you, you are not alone.”
Ms. Washington points out that while the average middle-class taxpayer has approximately $45,000 more in income than a family of four living below the poverty line, after accounting for $38,000 in annual costs of living, tax withholdings, tax credits, and ineligibility for certain government programs, a middle-class family with an average income of $74,580 is taking home $6,291.08 more per year than an impoverished family that earns approximately $30,000.
Higher incomes mean higher marginal taxes. Higher incomes means being less likely to qualify for earned income tax credits, food stamps, and other social benefits. And let us not think of those dreaded student loans which may take decades, yes, decades, to pay off.
The current administration has offered taxpayers a number of proposals to combat the inflation it, the Congress, and the Federal Reserve System have created. The irony is that with a decreasing money supply and fiscal policies designed to address taxpayer fears of inflation, taxpayers down the road may see no relief from a higher bill created by excess government-generated money. It is a feedback loop that the taxpayer is not paying much attention to.
Adding to the stress is the beginning of the political silly season. The taxpayer is being asked to occupy her usual position as a member of the electorate where she is encouraged by politicians to limit her influence on the process by going into a ballot booth and casting a vote. I think this is no longer enough.
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The additional $6,300 in earnings Ms. Washington cited may have to be deployed more aggressively to not only generate retirement savings, but to generate income and influence. We, as the middle class, may have to become our own banks not merely in terms of hiding money under our mattresses, but financing the government as bondholders and threatening to pull back the punch bowl when government does not act withing our economic interests.
The concern with this approach is that we are connected to the feedback loop so any tactics deployed by the taxpayer turned bond holder must keep potentially adverse impact in mind. But I believe voting like a bond holder has psychological and political benefits greater than those benefits garnered as a mere taxpayer.
Why aren’t we sacking the castle?
| Underlying Future | March 2024 option price | Strike price | Spot price | |
| EUR FX (6EH4) | 1.07285 | 1.0925 | 1.0717 | Call option: OTM, Put option: ITM |
| JPY/USD (6JH4) | 0.0068225 | 0.006685 | 0.006645 | Call option: OTM, Put option: ITM |
Source: CME Group, x-rates.com. At 9:37 am EST
| United States 10-year bond | Germany 10-year bund | Japan 10-year bond |
| 4.27% | 2.38% | 0.71% |
Source: Bloomberg. At 9:40 am EST
| Binary options contract-One week ending 16 February 2024 | Buy | Sell | Strike price | Spot price |
| EUR/USD | $25.25 | $13.25 | >1.0775 | 1.0717 |
| USD/JPY | $63.00 | $51.50 | >150.25 | 150.4890 |
Source: NADEX, x-rates.com. At 9:40 am EST
Alton Drew
13 February 2024
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Lawyers Write the Bets. Bankers Sell the Bets. 