Commentary: Stuck in the middle | St. Louis Public Radio

Commentary: Stuck in the middle

Sep 10, 2008

This article first appeared in the St. Louis Beacon: September 10, 2008 - Benjamin Franklin once commented on the universal inevitability of death and taxes. Leona Helmsley later dissented, remarking; “Only the little people pay taxes.” While her death last year would tend to confirm the first part of Franklin’s observation, there is increasing evidence that Leona may have been on to something when it comes to taxes.

This being an election year, the tax plight of the middle class has again surfaced as a centerpiece of public debate. Each presidential candidate is concerned that his opponent intends to bankrupt we beleaguered wage-earners. McCain warns that Obama is a tax-and-spend liberal who would raise taxes on everybody who earns $42,000 a year and above. Obama contends that McCain would continue to feather the beds of the wealthiest Americans, thus running up reckless deficits that imperil governmental services to ordinary citizens. In terms of their respective personal incomes, both men fall into the “squattin’ in tall cotton” category when judged by middle class standards.

The last time this issue came up, George W. Bush pledged to enact tax cuts to stimulate the “sluggish” economy he inherited from Bill Clinton. The Bush stimulus worked so well that he was able to convert a $300+ billion surplus into a $450+ billion deficit and double the public debt to some $10 trillion.

To give you a rough idea of the magnitude of the latter figure, if we began to repay it at the rate of $1 a second, 24/7 non-stop, it would take more than 315 centuries to reduce it by one-tenth. And that assumes that we stop borrowing immediately and no further interest accrues on the unpaid balance.

So how did the tax cuts work out for the middle class? Though the economy is currently in the tank, the jobless rate is at a 16-year high and “wage stagnation” has become a household catch phrase, my net pay did increase because of the cuts — by $9.50 a week. Every little bit helps, but I suspect somebody made out better on this deal than I did.

Indeed, when it comes to governmental assistance, it often takes money to make money. An insightful article by Lisa Brown in the Aug. 22 St. Louis Business Journal demonstrates the principle.

In 1998, Missouri began to issue tax credits to encourage property owners to preserve and renovate historic buildings. Most of the major commercial rehab projects in downtown St. Louis were funded in part through this mechanism. A lesser known component of the program provided for funding for private residences located within selected historic districts.

A tax credit is far more valuable than a deduction because it is deducted directly from the tax owed rather than from adjusted gross income. For instance, a taxpayer who owes 10 percent on an income of $10,000 has a tax liability of $1,000. A $1,000 deduction would reduce his income to $9,000 and his tax burden to $900. But if he received a $1,000 tax credit, he would owe no taxes whatsoever. Further, these credits are commodities that can be carried forward for 10 years, applied retroactively for three years, or sold outright.

The only thing keeping you from cashing in on this lucrative offer is ownership of a qualifying house — and that can be hard to come by. One deserving property, for instance, is a 21-room home in Clayton valued at $3.3 million. Last year, the owner received $624,705 in public assistance to spruce the place up.

Five of the top 25 historic tax credits for single-family, owner-occupied structures were awarded to homes located on Portland Place, a two-block long, private street in the Central West End. With 20 percent of the biggest handouts in the state going to two blocks in St. Louis, you’d figure the area must be in dire straits. The accuracy of that assessment depends on your definition of dire.

According to the on-line real estate appraisal site, Zillow, homes on Portland Place range from $857,000 to $1.99 million. When it costs $857,000 to live on the wrong side of the tracks, the neighborhood would appear to be stable. Yet, renovations on five houses in this silken ghetto cost taxpayers $1,102,934.

The remarkable part of all of this is that these are private residences. The fruits of these publicly supported home improvement projects are enjoyed solely by the property owners and their invited guests. In fact, locked iron gates on either end of Portland Place suggest that sight-seeing by the great unwashed is not actively encouraged there.

While the poor pay no taxes because they can't afford to, the rich avail themselves of exotic legal gratuities to minimize their obligations. That leaves you and me, dear reader, to pay the bills.

As the song says, "I'm stuck in the middle with you. And I'm wondering what it is I should do..."

M.W. Guzy is a retired St. Louis cop who currently works for the city Sheriff's Department. His column appears weekly in the Beacon.