Entrepreneurs
at the Government Trough
As the spat between Hilary Clinton and Donald Trump revealed,
neither is willing to admit what’s really going on when one declares
bankruptcy. Clinton and her speech-writers deserve credit for the clever line
that Trump’s books always end in Chapter Eleven, a nod to the Internal Revenue
Service’s code that lets both individuals and corporations ask for the legal
protection of the courts to reorganize their debts and see to what extent they
can repay any of them.
What neither presidential candidates disclose is the tax
benefits accrued by bankruptcies or any kind of declaration of losses from legal
investments. When regular citizens—the 99%--lend money to uncle Vinny’s latest get-rich
scheme, they are just out of luck (unless all the proper investment documents
have been set in place). The best they can hope for is that Vinny will buy them
a drink at some point or put a good word for them with the local boss or the friendly
neighbor. Besides that, they have no prayer.
But the legitimate investor as an individual or through a
Limited Liability Company who puts money in a losing proposition is aided by
the government and given full deduction of the amount invested against present
and future good and profitable investments (thereby reducing the tax liability).
Perhaps this is the way the government would like us to increase our
“propensity to invest,” take risks, and maybe fund a great innovation; perhaps
it’s also an indirect a sanction for greedy behavior that may or may not
contribute to the growth of the economy.
We value entrepreneurs; we lionize them in books and films
as courageous heroes and heroines whose visionary zest makes us all proud to be
Americans. It’s these brave investors who take advantage of new technological
innovations by way of underwriting the ideas of their ingenious inventors. We
are led to believe that they are, after all, the engines that feed the entire
economy. But should their poor or unfortunate decisions be underwritten by the
rest of us, the run of the mill workers and consumers who live paycheck to
paycheck?
So, the government isn’t only incentivizing entrepreneurs
to invest in new or old ideas and industries, make them more efficient or bring
their ideas to fruition, but it also gives them all a pass—another
incentive—when they simply make mistakes or are just plain foolish. Could this
lead to reckless investment behavior? Are we encouraged to take greater risks
because the actual costs (after deductions) is mitigated? Would it do the same
for those driving too fast and surviving a dangerous ride?
When American capitalists, like Trump himself and all those
millionaires funding Clinton, smugly explain to the rest of the country why
they are better than the rest of us, why they deserve a bigger piece of the
pie, they forget to acknowledge that they too are the beneficiaries of
government largesse, that they have their own privileged welfare safety nets.
This is not to say that there is a big difference between the government coming
in and bailing out a losing investment (or the large banks a few years ago) and
having business protections in place to allow for the orderly unraveling that
does not place big creditors above small creditors. Is your investment secured?
Will it meet the legal criteria for protection?
Admittedly, these safety nets don’t come in the form of
food stamps or any such embarrassing forms of financial support, but in point
of fact are they that different? If you are rich and can afford to invest in a
scheme or a new invention, do it on your own! Why do you expect the government
to clean up the mess and allow you to fully deduct your mistake?
Some would
argue that the mistake merely reduces their net income and taxable base…it is
merely a deduction like the cost of steaks for a restaurant, and depending on
the tax bracket that is the amount they deduct.
Perhaps it’s the same screwed up logic that lets property
owners deduct the interest on their mortgages but doesn’t allow renters to
deduct their rents: owners of private property deserve government subsidies,
while those renters, even if they need it more, are left by the tax code to
fend for themselves. This is probably why the incredible two-home deduction is
in place as well, benefitting the very few who own two homes, probably
applicable primarily to congressional representatives who have to live in D.C.
part of their time (and write these laws) and all their wealthy donors.
Next time we hear politicians quibble over the size of the
government and its role, we should remind the disputants that they should start
by eliminating all unfair subsidies that benefit the already rich at the expense
of those who remain poor no matter how hard they work. And speaking of work,
has either presidential candidate really worked the way their potential
constituents have been for years? Receiving $250,000 for a speech to Wall
Street is hardly “work” when compared to the minimum annual wage of around
$15,000; the same goes for licensing agreements from one’s brand in comparison to
those who actually clean and serve in all those hotel and resort properties.
Americans are generous in overlooking this duo of
free-loaders; maybe they believe they can be like them one day. But the rate
and gap of wealth and income inequality is getting bigger, not smaller as time
goes by. And the opportunity to climb up the ladder is getting slimmer every
year. Inequality.org reminds us that “America’s top 10 percent now average
nearly nine times as much income as the bottom 90 percent.” Similarly,
“America’s top 1 percent, for instance, holds nearly half the national wealth
invested in stocks and mutual funds.” This is where Occupy Wall Street
(remember them?) and the Tea Party (still in full force in the House of
Representatives) are in agreement: between big banks and big government bailing
them out, what is left to the average American worker?
So, when the two candidates tell us they hear us, that they
care about the plight of the working men and women of this country, let us ask
them to describe the hardship of the working poor of America, the Walmart
employees who still need food stamps and Medicaid to finish the month. Instead
of ignoring them or simply using them as a rhetorical tool, let’s ask them to start
their speeches by pointing out the hypocrisy of the rich and their callous use
of government welfare. Let them begin with a confessional moment before they
promise the rest of us a better future.
