CLIMBING K-1

     In his vice-presidential stump speech, John Edwards used to say that there were "Two Americas", one that "did the work, another that reaps the reward." He asserted that that "working America" paid the taxes and was struggling to get by, while the other America got the tax breaks and could buy anything it wanted.   

     I'm not sure exactly where Mr. Edwards drew the line between his Two Americas in 2004, but I would argue that it's probably obsolete now that both Americas are struggling and neither seems to able to buy much of anything. But it does seem that Mr. Edwards was correct about America being divided. The question is, what establishes the fault line?

     Race used to be a convenient marker, but now we have a black president and it looks very  possible that we will have a black candidate opposing him from the opposition in the next election. Another formerly reliable line to draw was the relationship between big business and employee. But now the government is just as likely to bail out GM as it is the UAW, so that delineation is not nearly so bright as it used to be. How about geography? Does that matter anymore? This is anecdotal, but you can't swing a dead cat in Charlotte without hitting a guy from Buffalo or Cleveland. 

     So, are there in fact Two Americas if the old fault lines have faded so much? I believe there are, and that there is a new line of demarcation that is emerging. It is not drawn along race, class or geography but along the way Americans make a living and are taxed for their efforts. On one side are the Americans who draw a paycheck and submit a W-2 to Uncle Sam. On the other are Americans who work for themselves and are taxed off of a Schedule K-1, which reports the losses, income and dividends from a partnership or shareholder in an S-Corp. 

     There are three essential differences between the denizens of K-1 America and W-2 America that run far deeper than the differences with which John Edwards was consumed. First, K-1 Americans do not have their income tax deducted seamlessly from their paycheck every week and partially returned to them as a "favor" at the end of the year.  In K-1 America, you estimate your income for the year and write a check to Uncle Sam yourself every quarter. That check leaves a mark, and makes the drawer intensely aware of how the government is using his hard-earned cash. Second, there are no employment benefits in K-1 America. If you want health insurance, that's something for you to chase down and pay for yourself. If you don't have enough cash to pay for it (perhaps because of the check you just wrote to Uncle Sam), there is nobody to whom to log a protest except yourself, and that protest will probably be little more than "you better work harder if you want to eat." Third, the citizens  of K-1 America do not have an HR department to turn to if they don't get a paycheck or the boss fires them. They don't have bosses, they have customers and clients who may "fire" them tomorrow for reasons that would get them sued in W-2 America but are irrelevant in K-1 America. In K-1 America, you better keep those customers happy or you'll be looking for a job in W-2 America before you know it. 

     Given all that, one would expect K-1 America to be small and filled with lunatics. But it's neither. While it's by no means the majority, it's big. And its citizens are not crazy. They are people who recognize K-1 America as the place where one is still free to reap the reward of the work they are willing to do and the risk they are willing to take, without constant interference from a government that offers a dubious security blanket in exchange for their freedom to succeed and fail in proportion to their God-given talents and self-driven efforts to exploit them.

     In a sense, K-1 America is like a hard-to-reach mountaintop. While life on that peak may be harder than life in the W-2 flatlands, those who choose to dwell there have a common sense of individuality and purpose that transcends the traditional boundaries of race, class and wealth.   They are people unwilling to trade a difficult day of freedom outside the wire for a lifetime guarantee of three hots and a cot. The harder these people climb K-1, the farther away from the W-2 flatlands they find themselves. I contend that this distance, which is increasing daily, is the border that divides today's Two Americas.