Who’s Really Rich, Ctd.
Pop quiz. Say you make a steady $250,001, every year. How many dollars of additional income tax will you pay if the Obama administration’s tax plan goes
Jul 31, 20207.6K Shares121.7K Views
Pop quiz. Say you make a steady $250,001, every year. How many dollars of additional income tax will you pay if the Obama administration’s tax plan goes through? A thousand dollars? A few thousand? Nope. Three cents.
Here’s how it works. Your taxes below $250,000 remain the same. And on that excess $1, your income tax rate increases from 33 percent to 36 percent. For most earners making between $250,000 and $500,000 a year, the Obama plan would increase income tax liability by just a few hundred dollars — an average of $600, according to the Center for Economic and Policy Research’s Dean Baker.
But those few hundred dollars proved the straw that broke the camel’s back for Todd Henderson, a professor at the University of Chicago. He and his wife, apparently a pediatric oncologist, pull inabout $400,000 a year — or, at least, somewhat more than $300,000, a sum that puts them comfortably in the top 2 percent of American wage earners. They are rich. But, Henderson writes, they aren’t *really *rich. They are “just getting by.”
“„The rhetoric in Washington about taxes is about millionaires and the super rich, but the relevant dividing line between millionaires and the middle class is pegged at family income of $250,000. (I’m not a math professor, but last time I checked $250,000 is less than $1 million.) That makes me super rich and subject to a big tax hike if the president has his way.
“„I’m the president’s neighbor in Chicago, but we’ve never met. I wish we could, because I would introduce him to my family and our lifestyle, one he believes is capable of financing the vast expansion of government he is planning. A quick look at our family budget, which I will happily share with the White House, will show him that like many Americans, we are just getting by despite seeming to be rich. We aren’t. …
“„[T]he president plans on raising my taxes. After all, we can afford it, and the world we are now living in has that familiar Marxian tone of those who need take and those who can afford it pay. The problem is, we can’t afford it. Here is why.
“„The biggest expense for us is financing government. Last year, my wife and I paid nearly $100,000 in federal and state taxes, not even including sales and other taxes. This amount is so high because we can’t afford fancy accountants and lawyers to help us evade taxes and we are penalized by the tax code because we choose to be married and we both work outside the home.
He then runs through his expenses: Income taxes, a mortgage on a million-dollar home, property taxes, private school for three kids, payments on a $250,000 education loan for his wife’s medical-school education, retirement savings in a 401K savings plan and the stock market, and then “insurance, doctors’ bills, utilities, two cars, daycare, groceries, gasoline, cell phones, and cable TV (no movie channels).” He says he and his wife have just a few hundred dollars left over after that.
Of course, this family’s taxes actually won’t increase by that much. As I wrote above, they can expect a tax hit of just a few hundred dollars — and if they hired an accountant (it is not that expensive), I am sure he or she would help the couple actually save more than that.
Nevertheless, Henderson still might not *feel *rich. And the Obama tax hike has nothing to do with it. Henderson does not conceive of himself as rich because his fixed costs are too high, meaning he has little leftover cash and little say over where his remaining few hundred dollars go. But Henderson’s *actual *richness means he has hundreds of decisions he could make to free up more money for leisure and random spending. Here’s a quick list I drew together:
- Put his children in public schools.
- Move his children into less-expensive private schools.
- Sell both of the family’s cars, and buy one cheaper car and take public transportation and cabs.
- Sell one of the family’s cars and buy a bicycle. Also cancel gym membership, since biking is great exercise.
- Seal his basement or garage and rent it out.
- Sell his and his wife’s wedding or engagement rings.
- Sell any artwork, decorative rugs, or useless, expensive wedding gifts collected.
- Cancel gym memberships and take up jogging or use exercise tapes.
- Demand a lower APR and higher interest rate from the family’s credit card and bank.
- Switch the family to a vegetarian diet.
- Draw down on the 401K.
- Save less.
- Teach an extra class.
- Sell three pieces of pricey furniture and replace them with cheaper furniture.
- Find a cheaper babysitter.
- Go through the closet and remove clothes the family does not wear. Consign them.
- Sell his house and move somewhere cheaper.
- Refinance the mortgage.
- Do his own lawn work — or, better yet, do no lawn work at all.
- Paint his roof white to cut down on heating and cooling costs.
Were Henderson *not *actually rich, this list would be much shorter. One way or another, $600 in taxes — $50 a month — is neither here nor there for determining this family’s wealth.
Rhyley Carney
Reviewer
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