The Match Is in the Trust. My Son Inherits It.

Boyd is a tech on the truck I sent him out in at 5:14 this morning, parked in the dispatch yard outside Plant City, Florida, with 8,200 pounds of refrigerant, a coil cleaner, and a 1099 in his glovebox he has never asked me to explain. He is 51. He has driven for me for 13 years. The truck is a 2019 Ford F-250 with a crane body and 612,000 miles on the odometer. The crane is mine. The fuel card is mine. The service contract on the crane body is in my LLC. Boyd owns the ratchet, the flashlight, and the half-inch line wrench his father gave him. The refrigerant in the cab is for a condenser unit that will be installed in your neighbor’s house in Lakeland by Friday. When you call a 24-hour HVAC line at 11 p.m. on a Tuesday because the condensate pan is overflowing, the dispatcher pages the on-call tech, and the on-call tech is one of mine. Sometimes it is Boyd. The Lord made the ratchet. I made the rest of what it does.

I keep the match. The match is the employer-side payroll tax the Internal Revenue Code has named 7.65%, which I owe on every dollar Boyd earns and which I do not pay because Boyd is on a 1099. I keep it across 240 trucks. 310 technicians. 14 service territories from Ocala to Naples. A holding trust in Delaware. An estate-planning boutique I bought in 2022 for $4,100,000 that handles succession for the operators exactly like the plumber Jenkin described. On Boyd’s gross of $79,400 last year, the match is $6,074. The match is $8.10 a service call — less than I tip the valet at the country club. Across the 310 techs, the match last year was $1,884,000. I did not write that number on a 941. The boutique writes it on a K-1.

Boyd pays both halves of his FICA. $12,148 in 2023. He pays it from the top of his $79,400, before the rent, before the truck payment, before the $1,400 a month his daughter owes on the Pell grant she took out for a respiratory-therapy degree she did not finish. He pays 15.3% because there is no employer to match him. Over $1,000 a month. To a tax that, if he were an employee, would vanish entirely. The boutique tells me the arrangement is “industry standard.” The boutique charges $14,500 an hour to tell operators how to keep the arrangement standard. The boutique is correct on the rate.

The 7.65% sits in the Delaware trust. The trust is worth millions in accumulated FICA savings alone. The trust buys the businesses.

Ted Jenkin wrote at Fox News this week that El-Sayed’s plan to tax capital gains above $1,000,000 at ordinary rates — 37% instead of 23.8% — would not touch the billionaire on the yacht. It would touch the plumber who started with one truck and sold his business at 65. He’s correct. The plumber paid 23.8% on the gain. Under El-Sayed’s bracket he pays 37.

Here is the question Jenkin didn’t ask. What happens to the truck?

I buy it. I buy the trucks at $0.19 on the dollar. The auction comes in May, when the bracket has been read three times and the loan covenants on the business have been re-papered. 9 trucks. 200,000 miles each. I get them for $4,700 apiece. I retitle them as fleet vehicles in my LLC. I move them to my plant in Storm Lake, my plant in Cherokee, my plant in Ida Grove. The drivers on them are now my drivers. They were the plumber’s drivers. Now they unload the dock at $17.40 an hour, no health, no 401(k), no sick days. I’ve done this twice already this calendar year, on the prospect of the bracket alone, before the votes have been counted. The pipeline is sufficient through the second El-Sayed term.

Now — the inheritance. This is where it closes.

When the stepped-up basis dies, the children inherit the business. They pay ordinary income on the gain from the original cost. The marina was appraised at $1.1 million. The progressive trust tax adds $14,800 a year to the carrying cost. The dock-association dues are $4,200. The marina loses them. The dock falls in. The marina is listed at $260,000. My trust buys it at $0.22 on the dollar. The trust advisory vertical I own in Delaware handles exactly this — succession for the operators Jenkin wrote the column for. I am the man the clients call when the column’s policy becomes law. The boutique charges $14,500 an hour to tell them how to keep the arrangement “industry standard.” The boutique is correct on the rate. I am also correct on the rate.

The men Jenkin wrote the column for are my pipeline. The boutique’s clients are the men who built the business, held it for 30 years, and are now being told the bracket will tax them at 37% instead of 23.8%. I am the man who buys the business when the bracket forces the sale. I am also the man who bought the estate-planning boutique that handles the succession. The pipeline is self-feeding. The trust makes the money. The money buys the businesses. The businesses feed the trust. The trust inherits the match.

“Woe unto them that join house to house, and lay field to field, till there be no place, that they may be placed alone in the midst of the earth!” — Isaiah 5:8.

Isaiah wrote it for the men of Judah 2,700 years ago. They’d consolidated the hill country. They’d pushed the small landowner off the registers. The verse was a charge. The charge was about what consolidation does. The consolidation continued. The verse is still quoted. The bracket was built to protect the yeoman — the plumber, the bridal-shop lady, the franchisee in the strip mall. Ted Jenkin called them the American Dream. He was right. They were the American Dream. They were the small-cap owners. They were the class that the bracket was built to protect.

The bracket is built to dissolve them.

I’m not new. I’m the oldest arrangement there is, wearing this decade’s vocabulary. Regulation was the brief, expensive interruption. It’s ending.

The plumber’s daughter is named Loretta. She’s 34. She has a bachelor’s in hospitality. She’s been running the marina at Grand Lake St. Marys since her father had his stroke. By April the marina is sold. By May she is on Vivian’s dock at my rendering plant outside Storm Lake, Iowa, at $17.40 an hour. She doesn’t have health insurance for the first 90 days. She loans me $0.13 on every dollar of net pay she can’t afford to spend on the COBRA she doesn’t elect.

Same pipeline. Same 7.65%. Same arrangement.

Vivian is a loader on the same dock. 10 hours a day, 5 days a week. Her hands are red down to the second knuckle. The tallow she lifts off the trailer ends up in the candle on your dinner table. The soap in your bathroom. She doesn’t eat the rendered protein. I haven’t offered.

I’m not unusual. I’m a curriculum.

I’ve taught this arithmetic for 30 years. Two of the men I trained sit in the offices I now point clients toward in Tampa and Boca. One of them drafted the trust indenture that is on my desk this morning. He charges $1,400 an hour. He is, frankly, faster at the subtraction than I am — faster at the GRAT, faster at the SLAT, faster at the non-grantor structure I am moving my Delaware trust into in anticipation of El-Sayed’s bill clearing committee. I am proud of him. The seminar still runs on Wednesday nights at the country club. The textbook I assigned is still in print. The textbook has, by my count, graduated 4,200 operators who are now sitting in the firms that set your plumber’s wage, your lawyer’s wage, and the wage of the man who picks up your condensate pan at 11:40 p.m. on a Tuesday. One of them priced your job. You haven’t met him. He has not introduced himself.

“Read the next sentence twice.” For even when we were with you, this we commanded you, that if any would not work, neither should he eat.” — 2 Thessalonians 3:10.

The Apostle had the arithmetic early. The verse is clear: in the sweat, in the labor, in the hand on the wrench. The verse does not say who collects the FICA.

I have not modeled what El-Sayed’s proposal does to Boyd’s take-home. I am told the proposal has a problem in the Senate. I haven’t traced the problem. The 7.65% I keep from Boyd’s wages becomes the principal my son inherits. I haven’t traced what the proposal does to the principal. I have not priced what a $40,000,000 estate does when the stepped-up basis dies and the gain is taxed at 37%. The boutique is pricing it. The boutique bills by the hour. The hourly rate is the dream.

Boyd is on the truck. The refrigerant is in the cab. The wrench is his. The 7.65% is the inheritance. The math is the arithmetic. The arithmetic is older than El-Sayed. The arithmetic is older than the LLC. The arithmetic is older than the boutique.

The obituary will run on page 4 of the Storm Lake Times. The auction is on page 7. I haven’t decided which page I’ll read on Tuesday.

Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.