IPFS Menckens Ghost

More About: TAXES: State

The IRS takes a pound of flesh plus the tax on $15.01

By Mencken’s Ghost
January 30, 2013

It’s the merry season of 1099s, a season that lasts until the tax return deadline of April 15.

A very large percentage of Americans won’t know what the hell I’m talking about, as they don’t have savings and investment income.  Many of them have spent every nickel they’ve ever earned on big TVs, big trucks, Big Macs, Big Gulps, big bags of Cheetos, big smartphone bills, big credit-card balances, and big boxes of pills for big erections and big belly fat. 

They are counting on a big tax refund or have already taken out a loan at exorbitant interest, using the expected refund as collateral.  Once again, as they have done throughout their lives, they are spending money before they even have it. 

They have been convinced by the intelligentsia that the system is unfair to little (but big) people like them; therefore, their fellow Americans with money should be taxed to death.

Americans like my Mom.

Mom was orphaned as an infant and raised by an immigrant aunt and uncle, who lived on a waiter’s pay in a rented upstairs flat and couldn’t even afford a car.  She attended Catholic elementary school and high school at great sacrifice to her aunt and uncle.  It helped that taxes back then were a third of today’s confiscatory levels, including taxes for public schools.

Her aunt and uncle pinched pennies and bought blue-chip stock.  She married a working-class guy and stayed married to him through thick and thin for 60 years.  He worked as a tile setter and as a warehouse worker.  She worked as a clerk.  They pinched pennies, bought blue-chip stock, lived in a 900 sq. ft. fixer-upper bungalow, and drove cars with rusted-out floorboards. 

Mom is now 92, has advanced dementia, and lives in a semi-private room in the nursing center of retirement home.  The considerable cost of her care comes out of her savings and not from the government (aka her fellow citizens).  It comes from pinching pennies all of her life and doing without the latest gadgets and gizmos.

So how do society and the government thank her for doing the right thing?   Well, in addition to all the other taxes she has to pay on the investment income from her savings (money that was taxed when it was earned and then was taxed again and again and again), she has to pay a tax on her life insurance policy.

She got a 1099 from the John Hancock Life Insurance Company, showing a “taxable amount” of $15.01.  Attached was this note:

We have been making improvements in identifying taxable events.  [Well, thank you very much.]  The IRS considers dividends paid on a life insurance policy to be a return on premium.  Dividends become taxable once the total dividends your policy receives exceeds the total net premiums paid into your policy.  Total net premiums paid is defined as the total premiums paid reduced by other amounts you have received, such as partial withdrawals.

The 2012 dividend paid on your policy exceeded the policy’s total net premiums therefore and IRS form 1099-R is required.


Let me translate this atrocious grammar and punctuation learned in government schools at great expense:  Not only is the government plundering a 92-year-old defenseless woman, but it is engaging in a scam that virtually no one in the media, in politics or in academia talks about:  It is taxing inflation caused by the government.

Let me try to explain:  The premiums that my Mom paid long ago were in dollars that were worth a lot more than today’s dollars.  However, the dividends that accrued to her policy were in dollars that were worth a lot less than yesteryears’ dollars, thanks to the Federal Reserve debasing the dollar through inflation.  The government treats the inflated value of the dividends as income, when it is actually no such thing. 

If that’s not clear, then take this example:  If you invest $1,000 and then sell the investment years later for $2,000, you will have to pay a capital gains tax on the $1,000 gain.  But if government monetary policy caused inflation to double during the years you owned the investment, your investment is really worth $1,000 in purchasing power, not $2,000.  Yet the government will tax you as if you are $1,000 richer.

It’s no mystery to me why such a government wants to ban guns.  It’s for the same reason that mobsters don’t want the victims of their pillaging to be armed.

My Dad is buried in a Veterans cemetery.  If he knew what the government was doing to Mom, he would hate what the nation has become.

I share the sentiment.



Mencken’s Ghost is the nom de plume of an Arizona writer who can be reached at ccan2@aol.com.