Mom and Pop

In light of the major specifics on which both political parties are diametrically opposed, there is surprising agreement on generalities. Both parties unabashedly claim to be against corruption and in favor of prosperity, although in the latter case Republicans might settle for a little less as long as this man is president. Even their proclaimed priorities aren’t that different. Republicans trumpet concern for “small business” while Democrats hail the “middle class.” The interests of these two are fairly compatible. After all where did the figurative “Mom and Pop” come from? The problem lies in the definitions.

The division comes into sharp focus in the debate on extending Bush tax cuts, in which numbers are needed to define broad terms like small business and middle class. Democrats favor extension, but only on lower incomes, couples earning less than $250 thousand and individuals under $200 thousand. Republicans want to keep tax cuts on higher incomes as well.

The GOP argument raises questions about the line between small and big business. In the case of Mom and Pop we’re talking about businesses earning $250 thousand or more in taxable income which, with the help of deductibles, leaves room for a bit of mad money. To help make the GOP case let’s give our couple a healthy 10% return making their total investment $2.5 million. If the return were only 5%, that would make the value $5 million.

Granted, by some standards this might be considered small business, although in that case I’d be curious where a business becomes “big.” The claim made by the GOP that a marginal increase of 5% would discourage further investment is open to question. Putting in another half mil would produce another$50 thousand income which would increase taxes by a meager $2,500 only on income from the additional fifty Gs. If I was Pop, Mom would be getting a lot of pressure to go for it.

Democrats are correct in claiming that their plan would help the middle class. But they seriously understate the case. On one end it might be hard to think of $250 thousand annual income as middle class. Members of Congress are paid $175 thousand. But the other end is where the requisite deception begins. After deductions all incomes are taxed, albeit at lower rates. This includes people with incomes below the poverty level which covers, dare I say it, the poor. If there’s one thing the “vast” middle class resents it’s the thought that their taxes may be used to help the poor. This harp was played with virtuosity by Republicans in sweeping both Houses in l994 so the word has been scrupulously avoided by Democrats since. “Middle class” will do nicely.

Shocked as I am it is evident that both political parties are lying, one of them through their teeth.