Thomas Frank, a leftist scholar and editorial writer for the Wall Street Journal, has provided a very instructive guide to understanding the philosophy of socialism currently at play in the Obama administration.

In his book, What's the Matter with Kansas? How Conservatives Won the Heart of America (2004), he explains why free markets and individual freedoms are dangerous concepts if the end goal is socialism. The philosophy of socialism is based upon a goal of income and economic equality, which the Left defines as “fair,”

In order to achieve the goal of “fair,” the Left uses the tax and spending authority of the Government to redistribute wealth and incomes, primarily by taking wealth and income away from middle class small business owners and giving it to lower class citizens.

Frank’s theory is that the Republican Party is a front organization for multi-national corporations who use subterfuge and “populist” cultural values to trick ordinary Americans into voting for Republican candidates. Republicans, according to Frank, use concepts like individual freedoms, individual initiative, and rewards based upon merit to dupe citizens into voting for smaller government, less taxes and greater “states rights,” code language for the racist populist agenda.

In other words, his main argument is that most voters in Kansas are too stupid to understand that voting for Republicans means voting against their own “working class” interests. In the left’s vision of society, there can only be two economic classes: the working class and the wealthy elite.

Frank’s two class analysis tends to overlook the disastrous effect that laws and taxes imposed by the Democrats on the middle class small business owners have had on destroying the entire middle class. The class warfare of the socialists primarily targets middle class citizens who earn over $100,000 per year, the threshold value of “fair.”

In other words, the public relations boogey man for the Left is Big Business, but in practice their main victims are small business owners.

In their effort to achieve income equality, the Democrats have used the tax code to punish small business owners. The Democrats have routinely disallowed small business tax deductions for health insurance, imposed limits on SEP IRA contributions, and prohibited small business owners from converting an ordinary IRA to a Roth.

Applying Frank’s template of class analysis, it is easy to see that the Democrats are a front organization for socialism, and that they use cultural values and deceit to trick middle class voters into giving away their freedoms by voting for Democrats, who are really socialists, just like Obama.

The Taxpayer Relief Act of 1997 (Public Law 105-34) reduced income and capital gains federal taxes in the United States and subsequently unleashed a torrent of job creation. If the socialists running America had any economic sense, and a shred of compassion for ordinary unemployed working class Americans, they would re-enact the provisions of this law, which also contained the now-famous Roth IRA.

The 1997 Act reduced the top capital gains rate from 28% to 20%. The 15% bracket was lowered to 10%. Under the socialists, the capital gains taxes are going up beginning in January of 2011.

Starting in 1998, a $400 tax credit for each child under age 17 was introduced, which was increased to $500 in 1999. Under the socialists in 1997, this tax credit was phased out for small business owners.

The act exempted from taxation profits on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. Under the authority of the socialists, Fannie Mae and Freddie Mac have made sure that there are no profits on the sale of homes because the socialists have killed the real estate market.

The $600,000 estate tax exemption was to increase gradually to $1 million by the year 2006. Under the socialists, the death tax will be raised in 2011.

The 1997 Act also contained the new Roth IRA provisions. The sponsor of the legislation was William Victor "Bill" Roth, Jr. (July 22, 1921 – December 13, 2003).of New Castle County, Delaware. He was a veteran of World War II and a member of the Republican Party, who served as U.S. Representative and U.S. Senator from Delaware.

Roth does not fit Thomas Frank’s leftist template of the racists Republican, and consequently, Frank never mentions the Roth part of the Republican Party that favors individual freedoms and free markets.

 And, the provisions of the 1997 Act, which caused the economic boom do not fit the socialist dream of imposing their version of economic fairness on small business owners.

Prior to 2010, taxpayers could convert their traditional IRAs to a Roth IRA if their income was less than $100,000, the magic value of fair for the Left. In 2010, the $100,000 income limitation is removed and taxpayers, regardless of income level, can convert a traditional IRA to a Roth IRA for one year only.

Traditional IRAs are generally funded with pre-tax dollars and grow on an income tax deferred basis until distributions are made. Any individual with compensation-related income may annually contribute up to $5,000 ($6,000 in the case of an individual age 50 or over) to an IRA. In the case of married taxpayers with modified adjusted gross income (MAGI) in excess of $109,000 ($65,000 for unmarried taxpayers), the contribution is non-deductible for income tax purposes.

In other words, the Democrats punished small business owners by prohibiting small business owners from deductions on the ordinary IRA. In their vision of the perfect world, income over $100,000 is unfair.

Under the 1997 Act, all contributions to a Roth IRA are non-deductible. The maximum amount that may be contributed to a Roth IRA, like a traditional IRA, is $5,000 (or $6,000 in the case of a taxpayer age 50 or over). A married taxpayer whose MAGI exceeds $176,000 ($120,000 in the case of single taxpayers), however, is ineligible to make any contribution to a Roth IRA. The income limitations on Roth IRAs put them out of the reach of many high income individuals.

This discrimination against wealthy small business owners is an important part of the socialist agenda in America.

The income tax benefits of a Roth IRA are quite remarkable. Like a traditional IRA, the inside growth and earnings of a Roth IRA are income tax free. More importantly, however, distributions from a Roth IRA are completely income tax free.

According to research reported by Norb Vonnegut (June 22, 2010), only 9% of eligible tax payers are planning on converting their traditional IRA to a Roth IRA in 2010. This is the last, and only, year that the upper income limits on Roth IRA conversions are removed.

Worse, only 43% of American taxpayers are aware of the 2010 Roth IRA conversion opportunity.

Under President Clinton’s administration, the top marginal income tax rate was 39.6%. Under the Bush administration, the rate was 31%.

Under the socialists, the Bush tax rate will expire on December 31, 2010, and so will the Roth IRA conversion window of opportunity. Some proposals being floated by the socialists in Congress are calling for a top income tax rate of 70%.

At a 40% federal income tax bracket, a withdraw of $10,000 from a traditional IRA would generate a tax of $4,000 (40% of $10,000).

Generally, lefties and socialists do not make charitable contributions, preferring instead to let Government re-distribute income.

Most of the charitable contributions in America are made by small business owners. This year may be the last best chance to make a charitable contribution to a conservative foundation because one of the ploys of the left is to attack the non-profit status of conservative organizations.

Contributions to a tax-exempt charitable organization will generate an income tax charitable contribution deduction to the donor in the year in which he or she makes the gift to charity. A gift of cash or long-term capital gain property (property held for investment for more than one year) to a public charity, such as a church, school, museum, will generate the tax benefit.

A gift of cash to a public charity will give rise to an income tax deduction that is deductible by the donor in the year of the gift of up to 50% of the donor's adjusted gross income (AGI). A gift of appreciated long-term capital gain property (such as appreciated marketable securities) will give rise to an income tax deduction that is deductible by the donor in the year of the gift of up to 30% of the donor's AGI. Any portion that is not deductible in the current year may be carried forward for up to 5 years.

Thomas Frank often writes about the historical period commonly called the populist era. Like so many other Leftist scholars, he deliberately distorts populism in order to use it in a derogatory manner in his two-class analysis.

Populism started in North Carolina, under the leadership of Leonidas Lafayette Polk, as a protest by small business owners and farmers against the merchant bankers and lawyers who ran the Democratic Party in the state.

In Frank’s 2004 analysis of the Republican Party, he suggests that populism is simply a ploy by the Republicans to trick ordinary citizens into voting against their economic interests. He does not mention that populism was a “working class” citizen protest against the Democrats.

The farmers in North Carolina formed a political coalition with black people that was called “fusion,” by historians. The Democrats, then, had created a political system insulated from influence or accountability to ordinary citizens, just like the Democrats who crammed ObamCare down the throats of citizens, who were powerless to stop it.

One of the reforms enacted by the Republican-Populists was equal educational opportunity for public education for black children, a historical fact omitted by Frank and other leftists who disparage the traditions of populism in the country. In the apartheid political system created by the Democrats after the military coup d’etat in North Carolina, in November of 1898, black children were removed to an unequal and separate school system.

Leftist scholars also generally overlook the genesis of populism, which had much to do with the divisions between ordinary citizens who had no voice in government and the elite political class which ran the nation. For many citizens, today and in history, this division over citizen rights is more important than the class warfare division promoted by socialists.

It will either be one thing or the other, and protecting your wealth, until this division can be permanently settled, means keeping your powder dry during this sad era of socialism in America.

About Thomas Vass: Vass is both an economist and a registered investment advisor. He provides comprehensive advice on Roth IRA conversions and on investment management of retirement assets. He is an advocate of free competitive markets, small business and economic growth from technology innovation and increased capital investments in the private sector.