The New Math: The effect of Oprahnomics
Today's Financial News - Posted February 13, 2009
Oprahnomics make for touching daytime television. They may even elect a president. But the wholesome goodness of top-down largesse typically has fiscal consequences that the neither the giver nor the recipient understand fully.
by J. Christoph Amberger
Baltimore—TFN: A few years ago, talk show diva Oprah Winfrey gave away 276 brand-new Pontiac G-Sixes to her live audience. Those gifted were beamed into the nation’s living rooms as they were jumping, hugging, crying, laughing in the throes of telegenic hysteria.
The sticker price per car added up to $28,500. Truly, a gift fit for a king! Let’s be honest… who’d turn up their noses at a free new car.
Not I!
Then again, only death is truly free. At least to the deceased.
Because the $28,500 needed to be claimed as income on the recipients’ taxes. Depending on the individuals’ tax brackets, the federal income tax on this gift was as high as $7,000—and that after Pontiac agreed to pay most of the local charges, state sales tax and licensing fees. (Which really also would have qualified as “income”, if you really think about it.)
To the typical daytime watcher, $7,000 may not have made much of a difference on their tax bill: If Judge Judy and Oprah make up most of your afternoon company, chances are you don’t have much income to be taxed in the first place. Those with a modest income, however, suddenly didn’t just see themselves owing up to $7k in federal income taxes they hadn’t counted on. But suddenly were in a higher tax bracket.
And since the car didn’t really contribute much cash flow to pay the mortgage or utility bill, actual discretionary income for that year was reduced considerably.
Their choice: Keep the car and pay the tax, sell the car and pay the tax with the profits —or forfeit the car.
Oprahnomics make for touching daytime television. They may even elect a president. But the wholesome goodness of top-down largesse typically has fiscal consequences that the neither the giver nor the recipient understand fully.
The tax cost of a $30,000 gift car is one thing. I bet even Treasury’s Tim Geithner could have figured that out on TurboTax. But I have my doubts that anyone involved in the frantic rush of the trillion-dollar “stimulus” has thought past the obvious. In fact, press reports indicated that the number of senators and congressmen who’ve actually read the 1,000-plus-page document may actually be smaller than the number of those who still can recite Beowulf in Old English.
“Hwaet we gardena, in yeardagum theodkyninga thrym yefrunon…”
A trillion dollars in porkbarrel spending—orchestrated before live daytime audiences, with protagonists talking in the clipped urgency of Bruce Willis about to single-handedly divert an asteroid on a collision course with Earth—are the largest and most unwieldy experiment in Oprahnomics, ever!
And like the 276 Pontiacs, they have only one purpose: They are a publicity stunt of the new Administration.
At least Oprah had the decency to titillate her audiences on her own nickel.
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