The Taxman Cometh

Great Horned Owl taken 12-8 on Angela’s garage
The calm of a waiting predator, watching.

 

I am like a desert owl, like an owl among the ruins.

I lie awake; I have become like a bird alone on a roof.

Psalm 102: 6,7

“When you’re 50 you start thinking about things you haven’t thought about before.”  Eugene O’Neill

Still in our early twenties, we withheld some of our Federal income taxes for 1969, the year we lived in Boulder, to express our displeasure at the conduct of the war in Vietnam.  Woefully naïve on several counts, I wrote a note with our tax return clearing up in excruciating detail why we were doing so.  Martin Luther King and Bobby Kennedy were dead, and the world seemed bleak. Returning to Massachusetts with our infant daughter, we were living temporarily with my parents waiting for a cheap winter rental to open up on Mashnee Island off Cape Cod.

How they found us remains a mystery, but as I was coming home from work one evening driving my hand painted 1956, flathead six Chevy pickup truck, two tired looking gray men in rumpled suits pulled into my father’s driveway driving a dirty gray Ford Crown Vic.  Apparently, they had been waiting for me.  The younger of the two had a black band fedora; the older one had a close cropped fringe of salt and pepper hair with nothing on top.  I had a lot of hair and jeans stained from climbing trees.

The older one in charge, whose name has long receded, gave me his card and explained that they had no issue with our political views, which were our prerogative to hold, nor did they care to debate – very clear there would be no debate.  However, they had come to collect the taxes due plus penalties and interest.  It wasn’t a lot of money, but taxes were taxes after all and not an option.  He rattled off his bullet points unapologetically by rote without a smile or a threat or an alternative.  First they would attach and drain, if necessary, our checking and savings accounts.  If we had no such accounts, they would garnish my wages.  If I lacked a job, they would lien our house.  If we had no house, they would take our truck.  He looked over at the Chevy pointedly.  Which would I prefer?

 And so it goes.

Raushenberg’s “Canyon”

A story in this week’s WSJ reminded me of this incident for some reason.  Lifelong art dealer, Ileana Sonnabend, died in 2007 leaving her considerable collection to her heirs, Nina Sundell and Antonio Homem.  The heirs were forced to sell about $600 million dollars worth of their heritage to pay the $471 million in death taxes due on them.  ($600 million was more than was due, but of course, taxes were owed on the proceeds from selling them – capital gains taxes on the death taxes.)  Of course, there was a catch with one of the pieces: Robert Rauschenberg’s “Canyon”, created in 1959 and appraised at $15 million by the IRS.

The collage legally couldn’t be sold because it contained a stuffed bald eagle; selling it would violate the 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Treaty.  That Rauschenberg before his death filed a notarized letter in 1988, stating that the eagle had been killed and stuffed by one of Teddy Roosevelt’s Rough Riders long before the 1940 law was in effect, made no difference.  The art work could not be sold; the auction house said it was worth nothing as a sale item.  The family filed an affidavit claiming that due to the inability to sell it, there was no value, and therefore no taxes were due on the inheritance for it.  Aha, responded the IRS, since there was a “gross understatement” of its value by the owners, the IRS value had now been upped to $65 million, so the tax bill was $29.2 million plus $11.7 million in penalties for understating its value.   Plus interest.

After five years of expensive legal wrangling, the painting, which had been on permanent loan for display by the owner at the Metropolitan Museum, was donated to the Museum of Modern Art, also in New York.  The painting had been exempt from Wildlife Service penalties as long as it was on loan to the museum, so now it passed with the same waiver to the MOMA.

And so it goes.

The hang up on avoiding the fiscal cliff is the tax rate on the top 3% of earners, not the tax dollars paid, but the tax rate.  While President Obama has proven to be a poor to middling CEO in his role at governance, he is a near genius at politicking, perhaps learned through political infighting during his bureaucratic years as a community organizer.  The tax rate increase he has drawn as a line in the sand has little to do with revenue – the dollars that would be collected are a little spot of yellow in a great snow drift.  The tax rate increase has everything to do with driving a wedge and causing as much consternation as possible amongst his political enemies.

Bear with just a few numbers.  In 1958, the top 3% of earners paid marginal rates as high as 91%, a progressive erotic dream, but almost no one paid those rates because of the pages of loopholes and deductions available.  The total income of the top earners was 14.7% of all income earned, and they paid 29.2% of all federal income taxes.  Many of the loopholes have been closed or capped already, and in 2010 the elite 3% earned 27.2% of all income; their percent of all taxes paid rose to 51%.  Middle and lower income earners (the bottom two thirds) earned 41.3% of all income and paid 29% of all taxes in 1958.  In 2010, their share of earned income had fallen to 22.5%, but their share of taxes paid plummeted to 6.7% of all taxes.

So, indeed, the rich have gotten richer, and their relative tax burden reflects that proportionately, but almost 50% of the rest of us pay no federal income taxes whatsoever.   The compulsion of the progressive liberal is not about “fairness”, it is about redistribution, punitive measures against the successful and ideology.  But even more so, it is about casting chaos into the opposition and twisting the knife.

And so it goes.

“They’re trying to kill me,” Yossarian told him calmly

“No one’s trying to kill you,” Clevinger cried.

“Then why are they shooting at me?” Yossarian asked.

“They’re shooting at everyone,” Clevinger answered.  “They’re trying to kill everyone.”

“And what difference does that make?”

“That’s some catch, that catch-22,” he observed.

“It’s the best there is,” Doc Daneeka agreed.

Catch 22, Joseph Heller