The Big Think

December 7, 2010

Down and Out on $250,000 a Year

Filed under: Politics — jasony @ 1:53 pm

As educated professionals, they buy books, newspapers and magazines; they own computers and pay for Internet access. But the Joneses don’t take lavish vacations, don’t belong to a country club, don’t play golf, don’t drive luxury cars, don’t have a swimming pool, don’t buy designer clothes, don’t own or rent a second home, and don’t send their kids to private school. They don’t even shop for groceries at high-end markets. (They spend what the United States Department of Agriculture defines as a “moderate” amount on food for the average family of four.) In short, they’re not “wealthy,” even if they’re in the top 5 percent of earners.

“When most people think about taxes, they think first about federal income taxes, then maybe about sales taxes, but there are a lot of taxes out there,” says Mark Robyn, an economist with the Tax Foundation, a nonprofit tax research group in Washington, D.C. “It’s eye-opening to step back and take a look at the whole picture.”

The fiscal times takes a look at the raw numbers for a hypothetical, exactly run-of-the-mill “rich” American couple. Oh, by all means, let’s keep up this class warfare and tax these fatcats to make up for Washington’s irresponsible, short-sighted profligacy. Doesn’t seem like misdirection to me at all.The whole story is worth reading.

Oh, and my hometown of Plano gets a shout-out not once, but three times, as a good example of low-cost living. Plano shows that it’s possible to have a well laid out, clean, well-run town with great community services and an excellent educational system without going into debt. Why can’t we export the “Plano model” nationwide?

Anyway, the whole article is worth reading.

5 Comments »

  1. I call hogwash on this. Anecdotal hogwash, but hogwash nonetheless.

    Our family of six (plus the stray children who always show up in our kitchen around mealtimes) has never cleared more than $100,000/yr total income, but we live in an ample house in a nice neighborhood, and only carry the debt of our mortgage. (Though it did take us a number of years to work our way out of debt after we got married.) We save up for and pay cash for our cars, all of our kids are well-fed, and we even manage the occasional trip to Virginia, New Orleans, the beach, and even Europe. Some of this is due to my wife’s extraordinary knack for finding great stuff at garage sales and clearance racks, but I don’t think either that or the fact that we live in the south, rather than on a coast, can account for the difference between our experiences and those in the article.

    Comment by seanmctex — December 7, 2010 @ 3:23 pm

  2. Ha ha! I was hoping you’d chime in, Sean. I think you, with your familial army, probably have some very relevant input.

    I found myself reading the article and thinking “well, if they didn’t spend 5,000/year on medical expenses, they wouldn’t be in this situation”, or “that 5k/yr on childhood activities is discretionary. They could always cut it.” I think I managed to self-righteously whittle away twenty or thirty grand from their budget. But then I realized that this hypothetical family represents a national average. Some, like you, are in a far better debt position to not need the 250k/year to make ends meet, but others are undoubtedly in a far worse condition (whether through big medical bills, huge college loans, etc) and so would be in a worse position balance-sheet wise. Yes, they could move to another state and cut that state income tax and high mortgage down, but as the article indicates, they’d probably also have to leave the high paying job behind. There are always ways to cut the budget, but as you pointed out, this is a hypothetical family, which I think obviates the point. (as a side note, what struck me in the article was that this family of four was only managing to save slightly over 1% of their gross income toward retirement. That’s horrifying.)

    It comes down not to the argument of “how much can these people afford to pay” (a question which contains the implicit assumption that they should cut some of their discretionary spending in order to make room for a bigger tax responsibility toward society), but rather “how much should the government spend”? Are there natural limits? If so, what are they? If not, why not? In an era where the federal budget has increased by 60% in the last 8 years, with much of that increase in the last two alone, there is a strong argument to be made that the problem isn’t high income earners not paying enough, but that government is spending far too much of what it takes in. Far more, in fact. Articles like this don’t address the root problem.

    Comment by jasony — December 7, 2010 @ 4:06 pm

  3. Whoops, Realized you didn’t point out the hypotheticalness of the family. Rhetorical error on my part.

    Comment by jasony — December 7, 2010 @ 4:10 pm

  4. Your “government spending is outrageous” point is certainly well-taken. While I probably back the idea of the government being responsible for more stuff than you would, our budget would have been far more manageable without zillion dollar bailouts for private enterprise or wars of dubious value. (I’m not including all of them under that umbrella.)

    Comment by seanmctex — December 7, 2010 @ 4:43 pm

  5. I think I might be more open to the government being more active if I knew that they were going to A) keeping new agencies and funding ideas flexible, manageable, and immune to bureaucratic metastasis, and B) be held responsible for a lack of long-term thinking.

    This last one is, I believe, the key to the problem. If we had a culture that was able to project present decisions onto future results, and was willing to hold people accountable for those decisions at a later date, I think we’d have a much more adult world.

    I saw a great idea that it totally unworkable but nevertheless fun. Tie Congressional salaries to future results. They get more or less salary (and bonuses) depending on the long-term positive effects of their decisions on the health of the country. It’d spark a hellacious argument over definitions and it would force Congress to actually measure the impact of their decision with longer-term benefits in mind.

    Tons of problems with the idea, but I can dream.

    You and I aren’t as different as you might think. I just get more outwardly wadded-up when I see bad behavior. Your patience marks you as a parent of four. 🙂

    Comment by jasony — December 7, 2010 @ 5:18 pm

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