An American Editor

December 11, 2017

On Politics: Welcome to the Screwed-By-a-Republican Club

Lots of voters had lots of reasons — real and imagined — for voting Republican (or not for a Democrat) for president and congress. A good number of independent editors were among those voters. Now I can welcome them to America’s fastest growing group, the Screwed-By-a-Republican Club.

The attacks on the Affordable Care Act (Obamacare) weren’t sufficient to open many eyes. Republican-voting colleagues have expressed frustration that Obamacare hasn’t been wholly repealed, again giving a variety of reasons, some valid and some quite suspect (eg, “I never get sick and when I do I can just go to the emergency room,” which begs the question of how the emergency room gets paid when a service recipient doesn’t/can’t pay).

These same colleagues also believe that the Republican “tax reform” legislation will benefit them; that the Republicans aren’t lying when they claim the wealthy will pay more and the middle- and lower-income classes will pay less; that trickle-down economics, which has never worked before, will work this time and as a result there will be more money to be made by editors from publishers and authors who will suddenly find American editors to be price competitive or, if not price competitive, will gladly pay the price for an American editor and so help spread the wealth.

President Trump repeatedly says that he will pay more in taxes under the Republican legislation. Whatever happened to the Republican challenges, “put up or shut up” and “prove it”? Why doesn’t Trump set America’s mind at ease by releasing his tax returns so we can see that instead of saving himself and his children as much as $1 billion in taxes, he (and they) will actually pay taxes. (I find it interesting that the mortgage deduction has been gutted except for golf course owners.) It is worth noting that nearly every tax analyst says the president and his family and many of his cabinet members will actually pay less taxes. (It is also interesting that Secretary of the Treasury Steve Mnuchin has failed to release an analysis of the tax legislation, which failure is now under investigation by the Inspector General.)

Fortunately, I am already retired. My Social Security is pretty well set, my retirement investments already are required by law to be drawn upon and taxes paid, and my Medicare is unlikely to be affected — at least that is what the Republicans are saying today as regards the benefits for those already 65 and older. But for those of you not yet able to retire, the Republicans have announced that to pay for the $1 trillion (yes, trillion, not billion) debt increase that will result even if Republican economic projections prove correct, it will be necessary to reduce your Social Security and Medicare benefits.

Currently, Social Security pays an established amount each month from the U.S. treasury, regardless of whether the stock market is up or down or there is a prolonged economic downturn. In the market downturn of 2009, I watched my retirement investments lose up to 40% of value. When the market began to turn around, I began to regain some of that lost value, and it took years before I regained it all. Social Security, however, remained not only steady, but grew by the rate of inflation (which was quite nominal, about 2% each year).

The point is that Social Security was and is a safety net that ensures we can put food on the table in our old age. The stock market cannot and does not provide such assurance. The stock market is great in boon (bull) years and merciless in bust (bear) years, yet Republicans want to privatize the Social security safety net so as to reduce its drag on the national debt, which was largely created and enhanced by Republican “tax reform”. And this will be an imperative when this new Republican “tax reform” becomes a reality.

Medicare is in a similar situation. The current Republican plan being floated is to give every Medicare participant a set amount of money to buy private-market insurance. The last publicized number was 60% of the annual premium for a Medicare-equivalent health plan. Where, exactly, do Republicans think most retirees will find the other 40%?

Okay, you can see some of the ways in which independent editors are becoming members of the Screwed-By-a-Republican Club. But Social Security and Medicare are not the only ways and for a lot of editors, those are safety net benefits that are a ways down the road and not of immediate concern. Of greater concern is income taxes (and Social Security taxes, of which freelancers, unlike employees, pay 100%).

I grant that the absolute final bill has not been enacted and there could be changes still to come, and I grant that my personal economic situation is different than yours. But I decided to give it a try and see how the legislation might have impacted me if I used my income and expenses from my last year of full-time freelancing.

Unlike many of my colleagues, I would be eligible for the pass-through rate given to small businesses. To get that rate, you need to be, broadly speaking, either a corporation or a partnership, not just an independent contractor; that is, there has to be a formal, recognized business entity through which the income passes to you. In my case, I have a partnership and a couple of subchapter S corporations. Even with the lower pass-through rate, I would have paid approximately $3500 more in federal taxes alone (and my accountant thinks the amount may be higher than that).

Something else needs to be noted. When discussing paying taxes, the tendency is to focus on the federal income tax. But that’s too narrow. You need to focus on all the taxes paid to all levels of government. There is nothing beneficial about paying lower federal taxes if as a result I need to pay significantly higher state and local taxes. Switching pockets doesn’t suddenly make things better.

Analyses by Congress’ own bipartisan budget analysis committee say that most middle- and lower-income taxpayers will see tax increases, and corporations and the top 1% in terms of income will be the only groups to see real decreases. I don’t know any editors in the top 1%, so I am unlikely to know anyone who will actually see a permanent decrease.

In addition, all of the nonpartisan analyses agree that any decrease seen by any middle-income taxpayer will evaporate and change to tax increases after a few years (only the corporate provisions are permanent; individual-oriented provisions expire). Finally, the Republican tax-reform-will-result-in-lower-taxes declaration is premised on an already booming economy becoming suddenly boomier, something more than 95% of economists — liberal, nonpartisan, and conservative — agree is nearly impossible. They also agree that most companies will use any tax savings to boost stockholder dividends, salaries for the highest level of management, and stock buybacks — not to increase wages. (Interestingly, one company indicated that with the tax savings it expects, it plans to invest in automation and reduction of the human workforce, just the opposite of what Republicans are promising.)

Even if the naysayers are wrong and companies do boost wages for low-level employees, we need to remember that we are not employees — we are independent vendors, the ones that companies squeeze for lower costs.

The point of this essay is to remind colleagues that you need to think less narrowly and more broadly about the effects of politics on things that may not matter immediately but could matter down the road. If you recall, in my essay A Continuing Frustration — The “Going Rate”, I wrote:

With a new year arriving soon, it is time to become more of a businessperson and focus more on the business aspects of being independent editors.

That is true not only about the issue of what to charge to be profitable, but for all aspects of your editorial business. When you decide for whom to vote, you need to look farther in the future than to just tomorrow or yesterday. I try to ask and answer the question, “If I vote for the Republican/Democrat candidate and the Republican/Democrat party implements ____, will I be better or worse off than if I vote for the other candidate?” I then try to add up the pluses and minuses and weigh them. For example, when I turned 50 years of age, Social Security became a much more important issue to me than it was when I was 25 years of age. Similarly, doing away with the mortgage interest deduction was more important to me when I still had years of mortgage payments to make.

If you haven’t yet taken the time to look at the “tax reform” and attempted to see how it will impact you and your business, you should do so now. And when you next vote, you should be sure to vote for your future, not just for tomorrow.

Richard Adin, An American Editor

 

5 Comments »

  1. I am part of that club, too — a club that is not very exclusive and that nobody wants to be in. We got inducted into this club when the GOP got majorities in the legislative branch and “won” the presidency. For a party that supposedly wants to promote small business and entrepreneurship, it’s doing a really lousy job for the small businesses like ours and people in our income bracket — i.e., the lower 98% of the population.

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    Comment by Teresa Nolan Barensfeld — December 11, 2017 @ 9:55 am | Reply

  2. Richard, “An American Editor” is supposed to be about freelance editing, not politics. You should stick to your area of expertise.

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    Comment by kccarver — December 11, 2017 @ 9:57 am | Reply

    • (1) AAE is my blog and I will publish on it whatever I want to publish on it. You do not pay to read it nor offer any financial support. (2) I clearly mark political essays with the label “On Politics”. You do not have to read those essays. (3) You do not have to read AAE or subscribe to AAE. (4) Contrary to your statement, AAE is a blog about whatever I want it to be about — editorial or noneditorial. (5) If you do not think the GOP “tax reform” is relevant to you, then you are mistaken. (6) The topic is very relevant to the business of editing, especially as it is likely to throw a monkey wrench into the smart editor’s financial planning.

      Like

      Comment by americaneditor — December 11, 2017 @ 10:06 am | Reply

      • I agree with everything you wrote in your reply. Now, go take your blood pressure medicine and calm down. And keep on blogging! I’m a long time subscriber.

        Like

        Comment by kccarver — December 11, 2017 @ 10:21 am | Reply

  3. Thanks for this thorough look at the tax reform implications, Richard. It’s an important topic that affects all of us wherever we are in our lives—freelance editors or not—and it’s well worth exploring. Yes, it’s political. That doesn’t mean the discussion isn’t relevant or should be ignored. Keep up the good work!

    Like

    Comment by Amy Heininger Spungen — December 12, 2017 @ 5:19 pm | Reply


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