A tale of two citizens: Angie, a Paris Hilton wannabe, is the lucky beneficiary of a large trust fund established by her parents. In 2005, she received her annual distribution of $520,833. The trustee attributed 18 percent of that figure to municipal interest, 29 percent to qualified dividends, 40 percent to long-term capital gains and 13 percent to return of principal. She had no other income and claimed a standard deduction. Dr. Peter London, a hard-working physician, had net business income of $520,833 for 2005. He had no other income and claimed a standard deduction.

Party animal Angie owed a total of $81,174 to our tax friends in Washington and Des Moines. Peter, our dedicated doctor, had to pay $225,665.

Either lazy party animals have one heckuva lobbyist hard at work, or I slept through the public tax policy decision to penalize hard work and long hours. Peter’s state of Iowa taxes are about 1.4 times greater than Angie’s, but his federal tax bill is a whopping 3.6 times more. Congressional tax reduction efforts so far in 2006 largely assist Angie, not Dr. London. (To be continued in the Dickensian serial tradition.)

●

United States I-Bonds

Many senior savers got excited when the Treasury Department announced last year that I-Bonds would be paying 6.72 percent through April 2006. I-Bond buyers weren’t troubled that redemption was not permitted in the first year or that a three-month interest penalty would be applied for withdrawals in the next four years. When the Treasury Department announced that the rate would be only 2.41 percent from May through October of this year, they got troubled in a hurry. Having your interest rate cut by 64 percent gets a saver’s attention. Particularly when money market rates are approaching 5 percent. The rate being paid should climb again in October if Federal Reserve Chairman Ben Bernanke’s inflation projection is correct, but this episode is a reminder that the fine print does matter.

●

Toy Firetrucks

Our local fire department recently acquired a robotic toy fire truck featuring Sparky, the trademarked mascot of the National Fire Protection Association. The firefighters will be using it as an audio-visual aid when making fire safety presentations to grade school children. It’s cute and the kids will probably get a kick out of it. It cost about $10,000. Cuteness aside, it may be reasonably asked if this is a necessary and appropriate expenditure of taxpayer money.

I can assure you that the city council would not have approved this purchase out of the local budget unless a majority of the members were caught photographically in compromising positions and threatened with exposure. So how was it paid for? The Department of Homeland Security provided the money.

Local governmental units know that federal grant applications make it possible to obtain funds they could never get locally. Local leaders are likely to perceive any expenditures as coming out of their own wallets. Washington, on the other hand, does not. Tax receipts (or borrowed funds) become Monopoly money happily sent away in exchange for constituent smiles and votes. These are real dollars taken from us under threat of criminal prosecution, and there had better be a darn good reason to extract and spend them. The toy fire truck is not as outrageous as former California Congressman Randy “Duke” Cunningham getting $64,000 in annual federal pension benefits despite going to prison for selling his office, but it is emblematic of Washington’s mindset.

Mike Nelson is a senior vice president at Iowa Savings Bank in Carroll. E-mail: mnelson@iowasavingsbank.com.