How fair is it to tax the "super rich"? Not very, if you ask some of those who
qualify for this category. A recent blog post by a University of
Chicago law professor kicked off this discussion. Those on the lower
end of the "super rich" bracket really aren't making that much, he
insists. The cost of living is high, and even people making over
$250,000 a year aren't necessarily rolling in money. He uses himself as
an example, explaining how the cost of schools, mortgage, property taxes, and student loans leaves him with little money on hand. But this is a risky argument: with median U.S. household
income at $50,000, does anyone want to hear from someone making at
least five times that while complaining that he's not really that well-off?
- 'We Are the Super Rich' Todd Henderson at Truth on the Market kicks the discussion off by talking about his and his wife's tax situation. Though "the rhetoric in Washington about taxes is about millionaires and the super rich," he explains, "the relevant dividing line ... is pegged at family income of $250,00." He and his wife, as a law professor and a doctor, respectively, qualify. The problem, he says, is that they are not "super rich." They have, "like most people," a mortgage, pay a hefty $15,000 in property taxes, "about half of which goes to fund public education in Chicago. Since we," continues Henderson, "care the education of our three children, this means we also have to pay to send them to private school." Toss in insurance, utilities, two cars, groceries, and student loans from law and medical school, and the Hendersons actually "have less than a few hundred dollars per month of discretionary income"--enough to "eat out with a baby sitter" every once in a while, but that's it. A tax hike for the "super rich" would, in fact, says Henderson, entail some real cutbacks for his family. Why? Because they "aren't rich enough" to hire people to help them evade taxes, as the truly-rich can. Also, they insist on staying married:
If my wife and I divorced or were never married, the government would write us a check for tens of thousands of dollars. Talk about perverse incentives.
- Believe Me: I Weep for You Michael O'Hare
does some quick calculations based on Henderson's admission that he
pays "'nearly $100,000' in state and federal taxes, not including
sales tax." Estimates O'Hare: "we're pretty close to $400K gross
income, and on top of that their employers are surely putting money
into their retirement funds." Here's a bit of O'Hare's riff on these
numbers before he argues that Henderson's taxes would actually go
down under Obama's plan:
This leaves about $90,000, a lousy $245 a day, for food, clothes, vacations, cable TV, and like that. You can walk into Nordstrom's on Upper Michigan and spend that in a minute, and for stuff you really need. Really, I don't know how these people get by; their adaptive skills, economical habits, and modest living style is an inspiration to all of us. Perhaps they are careful to tip no more than 15% at the Sizzler when they splurge.
- All About Perspective Economist Brad DeLong
also enters the debate. Among his points: there's a big gap between the
upper-class and the stratospherically wealthy, these days. Though "the
Hendersons are solidly in the top 1% of American households," given
that "the median household income in the United States today is
$50,000," they don't feel rich. DeLong sympathizes, being in the same
boat himself, but thinks it's time for a reality check:
Professor Henderson's problem is that he thinks that he ought to be able to pay off student loans, contribute to retirement savings vehicles, build equity, drive new cars, live in a big expensive house, send his children to private school, and still have plenty of cash at the end of the month for the $200 restaurant meals, the $1000 a night resort hotel rooms, and the $75,000 automobiles. And even half a million dollars a year cannot be you all of that.
- Self-Pity and Tom Wolfe The Atlantic's James Fallows
ponders DeLong's explanation of "how the ever-polarizing distribution
of wealth and income in the U.S. makes it easier for everyone to feel
deprived." Henderson's "original unwise confession," Fallows says,
reminds him of a Tom Wolfe short story about "a stylish and popular and
liberal-chic writer going through his checkbook and revealing his life
through the deposits and the canceled checks." He tosses in an excerpt.
"Self-pity is the great vice," he comments.
- Hijacking the Political Agenda "Self-pity among the privileged has become acceptable, even fashionable," is Paul Krugman's take at The New York Times, though he does not refer to this specific debate involving Henderson. He's incensed by recent rage among the wealthy at the prospect of tax hikes. The problem is that "when the rich face the prospect of paying an extra 3 or 4 percent of their income in taxes, politicians feel their pain," he adds.