Oh, there's much fun going on in the blogosphere. (I can't believe I'm two days late on this one.)
Todd Henderson, a law professor at Univ. of Chicago, explains that even though he and his doctor wife make $400,000, they are still dirt poor and can't afford a tax hike. That blog post has since been deleted, but Brad deLong saves it and responds. So has Paul Krugman, Fallows and Lemieux. The Huff Post reports that Henderson is devastated.
Doesn't Bobos in Paradise have a whole chapter on how the Univ. of Chicago professor who makes 6 figures feels poor?
I recommend reading the comments on the Krugman article.
Apt. 11d 
“Doesn’t Bobos in Paradise have a whole chapter on how the Univ. of Chicago professor who makes 6 figures feels poor?”
I’m vaguely remembering a chapter about $200,000 a year broke people in media and such professions, the problem being that they rub shoulders with much wealthier people and can see the promised land from where they are, but can’t reach it.
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I totally understand how this guy can feel poor. What I don’t understand is how he can be clueless enough to assert that he actually is poor. Alternatively one could imagine the piece to be a purposeful political piece, but then, it should have been written with some clue about how it would be received.
I’m glad I got a chance to read that and think twice about how one talks about money.
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I really enjoyed the commentary from Obsidian Wings on how to be rich and miserable:
Accumulate really a very large amount of debt.Decide to care deeply about what people who are a lot richer than you think of you.Spend all of your money and then some trying to keep up with them.
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Oh, Ben, that is brilliant. Thanks for sharing.
I’ve never felt richer in my life, and we make less than $200,000. A lot of that has to do with having less and less debt.
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Of course, the Obamas were in the same neighborhood and income bracket, and Michelle whined pretty continually about how hard her life was. Maybe it is less accepted coming from a man.
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Michelle Obama whined about being poor? Really?
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Oh, Ben, that is brilliant.
Except for the lack of an end-italics tag.
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bj: Check out the March 10, 2008 New Yorker, with Michelle Obama whining about the burden of her student loans. I think that qualifies as whining about money. She also complains about the difficulty of work-family balance, which of course is considerably alleviated when you have a full-time housekeeper. She should try being a physician’s assistant with three children and no household help, like my cousin Toni.
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bj: Check out the March 10, 2008 New Yorker, with Michelle Obama complaining about the burden of her student loans. I think that qualifies as whining about money. She also complains about the difficulty of work-family balance, although, as the article notes, that difficult is powerfully ameliorated when you employ a full-time housekeeper.
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“Michelle Obama whined about being poor? Really?”
Not “poor” per se, but there are lots of quotes from the Obamas about how hard life was for them when they were making six figures, how long it took them to pay off their student loans, how tough it was to be dropping $10k for extracurriculars, etc. (I’m happy to dig up quotes later for anybody who doesn’t believe me and y81.) Michelle Obama also pooh-poohed a Bush-era stimulus check (or something like that), saying that it was only enough to buy earrings. I’m just imagining what the press would have done with a Republican First Lady (like Nancy Reagan) who said that or wore $500 sneakers to serve in a soup kitchen. A Republican First Lady would have been burnt at the stake for this stuff. There’s also the issue of the Obama’s charitable giving, which up until the past few years, was not very impressive. (That’s another consideration. Although there is a charitable tax deduction, anybody who does serious charitable giving is going to feel much more pinched than a counterpart with the same income who doesn’t.)
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Yeah, dig them up. I’d like to see if the match the clulessness of the uc law professor who doesn’t want to give up 8K of his 400K and doesn’t seem to understand how that can’t be defended on any other grounds than “it’s my money and I want to keep it.” (incidentally — that’s a perfectly rational position — even if some would consider it amoral).
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Although there is a charitable tax deduction, anybody who does serious charitable giving is going to feel much more pinched than a counterpart with the same income who doesn’t.
Are you sure of that, given that we’re talking about feelings rather than top-line/bottom-line numbers? We rarely feel richer than the years when we’re approaching our giving goal.
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I think Ben’s comment is one of the reasons we just shouldn’t use the word rich. Of course tax increase proponents do it on purpose. They want to argue that they’re charging the rich, not you. But rich means so much more than “earning a lot of money in one year” and there are lots of reasons why people who make a lot of money don’t feel rich and even some reasons why they shouldn’t always be considered rich.
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I didn’t troll through anti-Obama websites during the 2008 campaign, but I do think I followed the news pretty closely, even the “personality news,” during that time, and I don’t remember reading a single word that resembles what Amy P and y81 are talking about. You can’t read everything, so I suppose I just missed it, but seriously: please, do look up those quotes of Michelle Obama whining about earrings. I’d like to read them.
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Here’s Michelle Obama:
“I know we’re spending — I added it up for the first time — we spend between the two kids, on extracurriculars outside the classroom, we’re spending about $10,000 a year on piano and dance and sports supplements and so on and so forth,” Mrs. Obama tells the women. “And summer programs. That’s the other huge cost. Barack is saying, ‘Whyyyyyy are we spending that?’ And I’m saying, ‘Do you know what summer camp costs?’”
http://www.nationalreview.com/articles/223808/michelles-struggle/byron-york
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I don’t bring in an income, but my husband is in academic medicine and so will bring home a decent six-figure income in a few years—I imagine we may pass 250K at some point.
In our plans for the future, we always think of expensive home and private school as mutually exclusive options—in other words, we would choose the expensive home only *because* it bought us the good public school, or alternatively we would buy the inexpensive home in order to afford the private tuition (the former is our preference). And most of our siblings in similar positions think this way too.
I wonder how common it is for folks like Henderson, on that SES cusp, to shell out for both the school and the home.
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That Obama quote is not at all notable or comparable — if anything it brings up the complaints about Michelle complaining about Obama, and their general unwillingness to spend money on the perks of elite Hyde park life.
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Mrs. Ewer,
Okay, that’s interesting. So, the Obamas were (and still are, I presume) rich people, who spent a lot of money on summer camps and such for their kids, and Michelle grouched about the student loans they had to pay off, and she thinks that the only reason they were able to make their budget was because Barack wrote a couple of bestselling books. So, clearly, she’s a product of her elite, upper-class, meritocratic bubble. Still, I’m not seeing any whining about taxes or complaints that they’re not getting the help they need to make it through the day. So…another source, perhaps?
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“We rarely feel richer than the years when we’re approaching our giving goal.”
I’m not sure I understand this “approaching” and “giving goal” business, although I suppose it may be one of those facts of life we learn about when we buy a house and start itemizing.
Here’s the earrings article:
“PONTIAC, Mich — In response to a question about the economic stimulus checks administered by the U.S. government earlier this year, Michelle Obama said her husband believes that short-term fixes don’t solve economic problems.
“You’re getting $600,” she told an audience of mostly African-American women here. “What can you do with that? Not to be ungrateful or anything. But maybe it pays down a bill, but it doesn’t pay down every bill every month.”
“Barack’s approach is that the short-term quick fix kinda stuff sounds good,” she continued. “And it may even feel good that first month when you get that check. And then you go out and you buy a pair of earrings,” she joked.”
http://firstread.msnbc.msn.com/_news/2008/07/09/4429416-michelle-obama-decries-short-term-fixes
It’s not quite as bad as I remembered it, but I would personally never make light of $600 (our family got the full $1800 stimulus in 2008–thank you bj and y81!).
I would have liked to come up quickly with some quotes about how the Obamas toiled to pay off their student loans, but unfortunately, those stories are swamped under stories about federal student loan reform. Maybe later.
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So she never actually says that $600 is only good for buying some earrings. She says that you get to pay down a bill you couldn’t have paid off, and you feel better that month, good enough to celebrate by buying some earrings. But next month, there’s no new check and you don’t have any extra money to help pay off THAT month’s bills.
That all seems pretty true to me. Most people live on more than $600/month. (For that matter, not that it’s relevant to her quote, most people live on more than $1800/month. Though when my husband and I got our checks, it made a big difference to us; I was a grad student, and he was cobbling together multiple part-time jobs until he could get full-time work.)
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This reminds me that the Millionaire Next Door really did nail the difference between income and wealth.
We make just barely 6 figures and certainly don’t feel rich but we don’t feel totally poor either, except for the daycare bill.
Sort of just-barely on topic but making my own risotto always makes me feel rich. It’s not particularly hard and not expensive, even with a handful of good quality grana paderno, and it tastes like expensive restaurant food.
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Michelle complained about their struggle as a “young couple” and how they needed some help from the government. Others may disagree, but I see a very similar tone to the one Henderson used. But she seemed to want the government to help by taxing more and giving something back, whereas Henderson prefers to keep his money in the first place.
The Obama’s salary, after her employer bumped her compensation up when her husband was elected to the Senate, was in the neighborhood of $450,000. Here’s The New Yorker:
“We have become a nation of struggling folks who are barely making it every day,” she said, as heads bobbed in the pews. . . .
From these bleak generalities, Obama moves into specific complaints. Used to be, she will say, that you could count on a decent education in the neighborhood. But now there are all these charter schools and magnet schools that you have to “finagle” to get into. (Obama herself attended a magnet school, but never mind.) Health care is out of reach (“Let me tell you, don’t get sick in America”), pensions are disappearing, college is too expensive, and even if you can figure out a way to go to college you won’t be able to recoup the cost of the degree in many of the professions for which you needed it in the first place. “You’re looking at a young couple that’s just a few years out of debt,” Obama said. “See, because, we went to those good schools, and we didn’t have trust funds. I’m still waiting for Barack’s trust fund. Especially after I heard that Dick Cheney was s’posed to be a relative or something. Give us something here!”
http://www.newyorker.com/reporting/2008/03/10/080310fa_fact_collins?currentPage=all
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Rose, again, what I’m seeing here is proof that Michelle Obama, like her husband–and yes, I suppose, just like Professor Henderson–is capable of being a tone-deaf elite resident of an upper-class bubble. The fact that she combines it with liberal concern/guilt may strike some people as even more annoying than Henderson’s self-centered petulance–I wouldn’t know, your mileage may vary. But I’m still not seeing a complaint about not getting back what they “deserve.” Maybe she’s foolishly employing her own and Barack’s experiences to exemplify the (actually self-accusing, though she probably doesn’t see it that way) point she’s making about how aspiring families today can quickly buy themselves into debt, but isn’t her parting comment about trust funds and being a relative of Dick Cheney pretty obviously a joke? Whereas Henderson seems to honestly believe every strange claim he makes.
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“Rose, again, what I’m seeing here is proof that Michelle Obama, like her husband–and yes, I suppose, just like Professor Henderson–is capable of being a tone-deaf elite resident of an upper-class bubble.”
Geraghty has a bunch more here, culled from a New Yorker profile:
http://www.nationalreview.com/campaign-spot/10165/target-rich-profile-michelle-obama
My problem with a lot of this “rich people” discussion is that it almost invariably turns out that “rich people” are people who are the next tier up from the speaker, so if you’re talking to a median income person, a rich person is a person who makes a $100k, and if you’re talking to somebody who makes $100k, rich is the next rung up.
Another important issue is that this is about more than taxes. If you are a high-earner, you have to pay for everybody else’s party, as well as figuring out how to take care of yourself, family, and dependents. You pay high taxes and then get to send your kids to college with no financial aid. Also, it’s a good idea to make sure you have enough to retire on, because MH wants to take away the social security you’ve been paying into all these years.
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because MH wants to take away the social security you’ve been paying into all these years.
And your shoes, if they look stupid and cost more than $100.
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How does someone earning $400,000 feel poor? Schools and nannies.
Steve did really well last year. We’re well off and feel well off. We’re saving quite a bit. But we live in a town with a questionable school system. If we moved to a town with a better school system, our mortgage payments would double. We would have to move to a much smaller house, and that would make us feel poor.
If I went back to work, let’s say I took a foundation job in NYC, I would bring in a tidy salary. Our combined income would be in the range of this Henderson dude. But we would definitely have to move to the richer town, because I wouldn’t be home to supplement after school. We would have to hire a nanny who could drive, cook, and had ABA training. Actually, I would have to hire someone just to help Ian with his homework after school.
Our lawn would be larger, so I would definitely have to hire a mow and blow guy. A more regular housekeeper. My kids would be socializing with kids who went on fancy vacations, and they would pressure me to take fancy vacations. We would have to buy a second car. Better clothes. By being home, I’m saving our family $75,000 per year.
What I’m taking away from this discussion is that most public schools aren’t working. When someone has the opportunity, they move to a rich town or send their kids to private school. They impoverish themselves to avoid a regular education. If the schools in this country are not good enough for rich people, they aren’t good enough for anybody.
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because MH wants to take away the social security you’ve been paying into all these years.
And your shoes, if they are stupid looking and cost more than $100.
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“If the schools in this country are not good enough for rich people, they aren’t good enough for anybody.”
Agreed, and I think this has been a huge change from a few generations ago. Tutoring is a thriving business.
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Great post and links!
What makes people rich, in my opinion, is choice. Sometimes the public schools aren’t very good, but if you have the option to even think about private school or moving to a better public schools, you’re rich. While Henderson wouldn’t ever consider it, he does have the choice to stay home and be the “nanny,” clean the house, and do the lawn himself. He just doesn’t want to.
How can someone become a law professor without understanding the basic tenants of choice, social class, and privilege? I feel sorry for his students.
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“How does someone earning $400,000 feel poor? Schools and nannies.”
Right. In much of the coastal US, the fight for survival and the struggle to afford schools is as brutal as a nature documentary (hence The Two-Income Trap). Also, as I discovered when we lived in DC, the secret behind high-powered double-income families is that they have a behind-the-scenes cast making the magic happen.
I don’t know how good the Millionaire Next Door numbers are, but I believe the authors assert that their millionaires are predominantly moderate rather than high earners, largely because the high-earners (doctors, lawyers) get sucked into a standard of living that they can’t afford even on a high income.
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I do understand that its very easy to get trapped in the elite bubble where the choices you’ve made are the choices you think everyone else has,too.
My insight came when I realized that I was patting myself on the back about being vehemently opposed to vouchers (which would be a big bonus in our pockets), because I had already discounted the cost for public + private education. But, I could do so because we could afford to do so. I’ve just looked at how the different tax plans being considered at the federal and state level would affect us personally and forced myself to think about what consumption they would force us to give up.
It doesn’t change my political support of the taxes, but its an important exercise to know what personal goods I’m giving up in order to pay for the general services I and my neighbors receive.
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So if I understand, Prof. Fox has conceded, in his usual ungracious way, that Michelle Obama is just as tone-deaf and clueless as Prof. Henderson. Or does he continue to assert that there is some vast moral difference between whining about having to pay back your student loans out of your $400,000 income and whining about having to pay taxes on your $400,000 income?
BTW, Dick Cheney’s father was a government employee. I doubt that he had a trust fund. I know that Prof. Fox hates him anyway.
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If the schools in this country are not good enough for rich people, they aren’t good enough for anybody.
Bingo! This may not unlock all the class resentment and anger and frustration out there, but if you’re looking at something that drives your average, not-especially-political suburban American into becoming either an angry Tea Partier (my child’s fate depends upon being able to hold onto enough of my money so as to afford tutoring/private schools/a move to a more expensive school district!) or some kind of perpetually disappointed and desperate progressive or socialist (I give up–why doesn’t the federal government just take over the whole damn thing?!?), it’s probably this. Nothing, I think, drives America’s middle- and upper-class (mostly, but not entirely, white) population batty faster than the costs of education in a meritocratic society like our own. I think even health care pales beside education as a driving concern for most Americans.
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I have felt rich since I started earning $35k as an assistant professor. Since that very day I have been dismayed by how little gets taken out of my paycheck by the government, and how much I get back when I file my taxes. Now that I didn’t think I was earning too much, just that too little was taken away. Now I earn a great deal more than that, and have various other bits of income that seem to come to me unbidden. (My wife earns 1/3rd of my salary is the public schools, though if she worked as hard and as well as she does in the private sector she’d earn 3 times what I do. At least). I pay my taxes and smile, and then contribute to Oxfam less than I think I should. My 9 year old has proposed that about 60% is the right amount for people like us to be paying.
But we pay for all those Obama extras too. I’ll just say that the Michelle quotes above are interpretable in a slightly different way than even Russell has done. Maybe I’m reading my own prejudices into her words, but I seem to detect a note of (self)-disgust. Maybe I’m being too generous.
As for the professor in question…well, when you are among the 0.01% richest people in the history of the world, if you write what he did, you deserve to be consigned to the deepest pits of hell.
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I’m not sure I understand this “approaching” and “giving goal” business, although I suppose it may be one of those facts of life we learn about when we buy a house and start itemizing.
Nope — nothing to do with taxes. As a household, we attempt something like tithing with our charitable contributions. Generally we fail to hit the 10% goal, but the years in which we’re within a point or two are ones in which we have our act together and are feeling fortunate/blessed, not pinched. Maybe the causation works in the opposite way, but I suspect that there’s something about “serious charitable giving” that forces you to prioritize your expenses and avoid the pinching sensation you mooted.
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The WSJ offers financial planning tips for the rich.
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“I have felt rich since I started earning $35k as an assistant professor.”
I grew up with practically nothing and a very sporadically employed father. I felt rich selling t-shirts. I felt rich as a Peace Corps volunteer making $400 a month. I felt rich as a TA making $10,000 a year and felt even richer when I married another graduate student making a bit more. I felt very rich when my husband got his first tenure track job at something like $47k a year and we moved to DC and quickly started a family. However, wisdom for me began to arrive when I realized that:
1) This is as good as it gets. There’s no rosy future where we have a significantly higher income. We need to spend less than we make right now and keep doing that for the next 30-40 years.
2. We need to save at least $2 million for retirement. I’m not sure exactly how, but it’s going to happen.
3. We need to be ready for the kids’ college, which will run something like $20,000 each a year at UT. (I will expect the darlings to cover some share of living expenses, though.)
4. We need to buy a modestly priced house in a safe-ish neighborhood and pay it off as soon as retirement and college savings permit.
5. We may well have disabled dependents that we will need to support at least partially for the rest of their lives (the current list includes a brain-damaged young woman with short-term memory loss and ADD and a schizophrenic middle aged lady).
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Generally we fail to hit the 10% goal
I was told that Catholic school tuition counts, so that makes it easier.
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“If the schools in this country are not good enough for rich people, they aren’t good enough for anybody.”
I fundamentally disagree with this, and I’ve said so before. The rich might choose to hire a coterie of private tutors for their children (in soccer, and piano, and math, and English, and . . . .). They used to. If the majority of them still chose to do so, that wouldn’t mean that we should provide that for every child in America. Demanding that we do so would collapse the system, and leave us with nothing.
(and, I do not, for a moment, concede that Michelle Obama’s statements in anyway resemble Henderson’s whine about his taxes. I suspect that Fox is making a much more specific statement than y81’s re-statement. )
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Is my way “usually ungracious,” y81? I wasn’t sure I commented enough around here any more to have a “usual” anything. Huh. Well, thank you for remembering me well enough to have formed an opinion about my way. It’s always nice to have a reputation.
As for your question, do I think that there is a “vast moral difference” between a rich person who bitches about paying taxes, and one who bitches about paying back student loans? No, I don’t. But in the context of this argument–which is, remember, about a wealthy man stating that it’s simply impossible for him to pay a higher tax rate than the Bush tax cuts allowed to do without going into the poor house–I would argue there is more than a merely trivial moral difference between them.
Harry, when I read the quotes of Michelle Obama in the links sent in, I considered that you could read them as expressing a laughing, regretful self-awareness as well. That’s why I noted that her comments could be read as “actually self-accusing,” if one so chose. So maybe your reading is the better one. But ultimately, I think that’s just a little too generous to her. Yes, maybe she is aware of the ridiculousness of her own bitching. I hope she is. But that upper-class bubble is a damn solid one; in my experience as an observer (and as someone yet to make more than 56K a year), it seems like most of the folks within it just end up hearing themselves, and we should probably assume–unless someone has personal knowledge of the Obamas home life and can testify otherwise–that such a reality holds for them as well as Professor Henderson.
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Obama is talking about a change in marginal tax rates from 36% to 39%, no? I’m too lazy to do the math, but for a couple making over $250000K, that 3% on the margin does not seem terribly onerous to me, and nothing that Henderson wrote changes my mind.
People may be inclined to look up instead of down when measuring their own status, but they’re capable of humility and self-control, too. I don’t have to drive half a mile to see kids whose entire trailer-park homes would fit in our attic, which helps remind me that we are RICH BEYOND MEASURE when I’m dropping the kids off for playdates at the million-dollar homes a mile in the other direction.
I know a fair number of folks in the Midwest and Mountain West who are perfectly happy with their public schools and who don’t feel that they’ve had to bankrupt themselves to pay their mortgages. Now college is a different story, but public schools? I’m not sure the differences from suburb to suburb in Minnesota at least are as stark as the ones you’re dealing with, Laura.
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“My 9 year old has proposed that about 60% is the right amount for people like us to be paying.”
I suggest setting up exactly that plan for your 9-year-old’s income as it comes in, but I’m evil like that.
To clarify my #5, the two potential dependents I’m thinking of don’t live in the US, so any increase in US social spending would 1) make us poorer and 2) still leave us responsible for their upkeep. We will eventually be their closest living relatives. I’m hoping that the young woman with brain damage eventually gets on her feet, but as they say, hope is not a plan.
We give exactly 10% of net income (split between parish, Caritas, the school building fund, the catastrophe du jour and whatever crises come up in our personal circle), but will hopefully go to 10% of gross income after we start itemizing. I also enforce the kids’ giving 10% of their earned income, which may or may not warp their delicate little psyches.
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I’m not sure where that K came from there. I certainly HOPE we don’t get a litany of complaints from the folks making 250 million.
We’ve had a consensus these past few decades that there should be relatively few tax brackets, no? If 250K strikes people as too low to manage a tax increase, would 400K work better?
If you take a look at the budget, there’s no way we’re going to tackle that deficit with spending cuts alone. We could eliminate every liberal social program in government and still be screwed. Eventually, everyone’s taxes are going to have to go up. In the meantime, raising rates for folks making over $250K — never mind whether they’re rich or not — is a smart first step to fiscal prudence at the tail end of a long recession.
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You can check out the math at http://www.mytaxburden.org (if you don’t want to do it yourself). It compares the plans currently floated at the federal level and the effects on people’s taxes (with some assumptions and caveats). Henderson would pay something like 8K more in taxes (making assumptions).
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One thing that nobody’s remarked upon is that the two big expenses Henderson is bothered by (day care, private schools) are very labour intensive, and he is competing with other rich people to purchase that labour. Reduce the incomes of all the rich people (by taxing them) and you reduce the demand for that labour, which will, likely, reduce the price (maybe not by as much as you’ve reduced their income, but still some). Henderson, being a law professor at the university of chicago is either aware of this, or does not bother to talk to any of his colleagues.
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So, harryb, you are saying that Obama’s plan will reduce the income of private schoolteachers and domestic workers (mostly low-paid immigrants, in my experience)? Wonderful.
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…or does not bother to talk to any of his colleagues.
Would you talk to law professors?
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“But we would definitely have to move to the richer town…
Our lawn would be larger, so I would definitely have to hire a mow and blow guy. A more regular housekeeper. My kids would be socializing with kids who went on fancy vacations, and they would pressure me to take fancy vacations. We would have to buy a second car. Better clothes.”
Didn’t you read Ben’s comment? No, you don’t have to do any of these things. Especially the fancy vacation thing.
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I hadn’t realized that our hostess was within striking distance of $400,000. She should move to Manhattan and be like us! Assuming she could scrape up $250,000 for a downpayment, she could get a small apartment for $1 million. As I compute it, we now have $400,000 gross, $300,000 after-tax, $75,000 mortgage and maintenance, $60,000 two private school tuitions, $40,000 daycare, tutors and housekeepers, $50,000 savings, $30,000 charity, $45,000 everything else. (The children will be envious of their schoolmates’ fancy vacations, but so be it.)
And you’re in the center of the world. And every single elected representative is a Democrat (doesn’t do much for me, but my neighbors like it). Who could ask for more?
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y81,
I don’t think Laura’s anywhere near $400,000.
You’re one of our few live specimens of the mid-six figure earner, so please share. How much will higher taxes affect you? Do you think evasive (legal) action will be effective? If not, what would you cut back on?
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Ack! No, we’re not near $400,000. I was saying that I could envision making that kind of money if I worked a top flight job in the city and combined it with Steve’s income. I was trying to put myself in Henderson’s shoes for a minute to better understand why he wrote that post.
Even I made that money, I couldn’t see paying for a 1 million apartment. I would get a two bedroom in Washington Heights in the city or buy a house in a fancier suburb. Actually, I probably couldn’t move to the city at all, because I would have to pay for tuition for Ian at a special private school. I heard that the tuition is nearly $90,000. There are ways to be rich, and still feel rich, in the metropolitan areas. It’s called a bus pass from the suburbs. Bridge and tunnel, baby! And why doesn’t Henderson just send his kids to the Lab School?
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(wrote a long comment that somehow got eaten. much shorter…)
We don’t make $400,000. If I worked a high powered job in the city and combined it with Steve’s income, we would be doing pretty well on paper at least. I was just trying to put myself in Henderson’s shoes to better understand why he wrote that post.
You can make $400,000 and still feel rich if you don’t buy new cars and you don’t live in a million dollar apartment in the city. Bridge and tunnel, baby!
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we plan not to buy the second home with low bank waterfront on an island, the lack of which is what keeps me from feeling rich.
that’s a sacrifice I’m willing to live with.
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bj,
Who knows what might turn up as a foreclosure these days.
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Typepad ate my comments twice last night. Grrr.
We don’t make $400,000. If I had a top flight job in NYC and combined it with Steve’s income, then we would be doing very well on paper. I was just trying to put myself in Henderson’s shoes to better understand why he wrote that post.
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Amy P: Maybe I misunderstood our hostess: I thought she was saying that if she got a foundation job or some such (what my wife would call a “jobette”), their family income would be in the Todd Henderson range.
I don’t know of much opportunity for individual tax planning for people like Steve, my wife, and me, salaried professionals with incomes in the one to five hundred range. What I think you see for such people is that if tax rates go up, employers revamp compensation arrangements (e.g., more deferred comp, more tax-free benefits). (For Todd Henderson, perhaps university-sponsored housing and schools.) Individualized tax planning is probably more a feature for people with seven figure salaries, who have individually negotiated and structured compensation packages, or for the self-employed.
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test. Ack. Typepad keeps eating my comments. I might have blocked myself accidentally. Quickly. We don’t make $400,000 per year. I was just trying to put myself in Henderson’s shoes to better understand his post.
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typepad keeps eating my comments…
We don’t make $400,000. If I worked a high powered job in NYC and combined it with Steve’s income, we could be in the vicinity of that $$$. Foundations jobs do pay well. I was just trying put myself in Henderson’s shoes to better understand why he wrote that post.
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y81, I’m not exactly crying for you because you save $50K a year which is 2/3 of our yearly household income. Nannies? Housekeepers? Hell, I’d give a kidney to even have a family member to help out around here. I’m just lucky I have a somewhat flexible job with wonderful (female) bosses and my husband has a wonderful (male) boss.
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I don’t think $400,000 a year counts as “super rich.” Try: http://www.newyorksocialdiary.com/node/70923.
Also: http://www.newyorksocialdiary.com/node/282224.
Just for fun: http://www.newyorksocialdiary.com/node/126604.
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“Amy P: Maybe I misunderstood our hostess: I thought she was saying that if she got a foundation job or some such (what my wife would call a “jobette”), their family income would be in the Todd Henderson range.”
I missed that–I thought you meant now.
Wendy,
How much would your current lifestyle cost in NYC (house square footage, quality of school for kids, etc.)?
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Cranberry — those links are delightful. I have a firm belief (which I’ve often expressed) that we need to talk more about money, everyone.
The same for time, actually. There’s always this perpetual belief out there that someone else has it better than you (in carpool duty or taxes), that even if you believe that you should pay your fair share, that you’re paying more than that. Knowing how all the shares are distributed lets us talk with the facts rather than myths.
One myth I see is the assumption that people who make 1M a year are able to manipulate their income in order to avoid paying taxes. The “Smithers” in Cranberry’s link are an example. They pay a good 1/3 of their income in taxes, and their tax “shelter” is charitable donations. I think that myth is based on the shelters that developed during the period of 70%+ tax rates of the 70’s, and has persisted even though those shelters are gone.
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“I think that myth is based on the shelters that developed during the period of 70%+ tax rates of the 70’s, and has persisted even though those shelters are gone.”
One thing I’ve noticed is that there is a sort of financial folklore that hangs around long after the facts have changed (buy as much house as you can, etc.). For instance, there’s a large class of Americans whose minds immediately turn to bankruptcy whenever they get into a bind and it seems to be part of their financial folk culture, despite the fact that the laws have changed and bankruptcy isn’t nearly as fun as it used to be. (And it never was that much fun.)
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Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
Charles Dickens, David Copperfield, 1849
http://www.quotationspage.com/quote/2025.html
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Wendy, I didn’t ask you to cry for me. Please don’t. We are very fortunate.
Please note that my quick and dirty budget for life on $400,000 is not my own family budget, though it is informed by my own experience of life in upper middle class Manhattan. The $400,000 amount comes from the title of the original post.
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Just a reminder (mostly to myself) that we’ve wandered far from Henderson’s assertion that the economy would benefit more if he spent that extra 1.5-3% in marginal tax above 250K than if the government did. What’s frustrating/despair-inducing about our current political landscape is that people are pretty evenly divided on the answer, and each side is pretty firmly entrenched in its own facts. I could cite peer-reviewed economic studies that suggest that the economy in aggregate would benefit more from slightly higher tax rates on those making more than 250K (and other studies that examine at precisely what marginal rate it becomes better worth it to pursue genuine tax shelters than to pay the tax — somewhere above 40% but far below 90% being the quick answer) and those who believe that Henderson is right could pull out their own peer-reviewed articles (although from what I can tell, there are fewer for that side — but of course _I_ would say that), and none of us would budge an inch.
It doesn’t really matter whether Henderson feels rich or poor. It might not matter whether we believe he’d fire his housekeeper or not (studies suggest he and his cohort would actually lower their savings rate, which would result in less capital available for investment, although if the additional tax revenues were used to pay off the deficit, the deficit’s distortion of capital markets would dissipate and offset the difference). What should matter is whether we think 36% is the appropriate highest marginal tax rate given the federal programs we want to fund and the costs we’ve already incurred.
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“How much would your current lifestyle cost in NYC (house square footage, quality of school for kids, etc.)? ”
No idea. But y81’s hypothetical mortgage was 3x mine, so I’d go with about 3x takehome, which would be about … 250K.
I live in a small house. Quality of schools? Who knows. I contend that schools today do not suck as badly as everyone says they do.
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Ah, it’s Friday, so the comments will go dead for 2 days, right when I start having free time. But here’s a post that looked at the possible numbers behind Henderson’s lifestyle, including the info that under Obama’s proposed tax policy, the dude would pay less in taxes.
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y81 — reducing the pay of teachers in elite private schools (of the kind Obama sends his kids to) doesn’t bother me. I’m just observing that Henderson is an ignorant twit as well as a moral cretin.
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“Ah, it’s Friday, so the comments will go dead for 2 days, right when I start having free time. ”
Exactly.
Henderson’s list of expenses is mostly related to his children. No one forced him to reproduce. Three times.
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“y81 — reducing the pay of teachers in elite private schools (of the kind Obama sends his kids to) doesn’t bother me. I’m just observing that Henderson is an ignorant twit as well as a moral cretin.”
I don’t know what elite private school teacher pay is, but lower down the private school food chain, it’s much lower than the public system (parochial schools famously pay teachers rather less than a “family wage”). A year or so ago, my kids’ private school (which started as a free homeschool co-op but has certain elite features–lots of faculty kids studying, lots of faculty wives teaching, Latin starting in 4th grade, classes of about a dozen kids) started raising tuition because (if I recall correctly) their goal was to get the full-time teacher pay up to $28k, so that they’d be at least somewhat competitive with the public schools. At private schools, at least some of your pay is going to come in the form of small class sizes and a pleasant working environment. I also remember recently a figure for per-student spending for Washington DC in the public schools that was actually very much on par with the tuition (which I used to think quite shocking) for elite DC private schools. I expect MH can probably report something very similar for Pittsburgh.
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Yes. We have a hugely expensive public school system. This is at least partially due to a huge drop in enrollment which drove per pupil costs through the roof. The fancy private schools are now over $20k (I think) and that is more than the public school.
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MH,
But it’s within a few thousand dollars.
By the way, my husband just came in from a speaker dinner, and he just shared the following with me:
http://www.templeton.org/what-we-fund/funding-priorities/thrift-and-thriving
Templeton is offering between $50,000 and $400,000 for research projects on the subject of thrift.
“Applicants are asked to respond directly to one or more of the following Big
Questions:
“1. What is the relationship of self-control and future-mindedness to the practice of thrift and the avoidance of imprudent investments?
“2. Can a renewed cultural emphasis on the connection between thrift and thriving contribute to a recovery of the “American Dream”?
“3. What kinds of interventions and programs can be developed that will inspire and empower individuals and institutions to be thrifty?”
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Answer to 3: not giving somebody $400,000.
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I do think though, that the media is partly to blame for the fact that most people in America think they should have more money and that there are others who have more. When we lived in the pricey NoVa suburbs, my neighbor used to joke about how they couldn’t watch “Wife Swap” or “Supernanny” because her husband would hyperventilate every time he saw all the regular, working class people on those shows who lived in McMansions full of granite countertops, new furniture and who drove shiny new cars. He made a pretty good income and their cars were old, there was no granite and the house was SMALL.
I’m amazed at women’s magazines like “Ladies Home Journal” and “Redbook” which regularly feature so-called family vacations at places like dude ranches that cost 6,000 for a family of four for a week plus transportation to get there. Oprah Magazine’s “My favorite things” column regularly features 400 dollar coffee mugs and scarves and picture frames.
I could see a situation where a family earned 400,000 a year and still couldn’t afford the dude ranch and the picture frames — and you could see these people wondering “who the hell buys these things? If we can’t afford them, then who can?”
I’m always really angry at the kid’s movies by Disney and the like where the parents are divorced and EACH parent has a shiny car, four thousand square foot house and the family goes to Hawaii on vacation. (My girls and I spent some time attempting to do the math after watching “It’s Complicated”, for example. Divorced couple — four kids, plane tickets, four seasons hotel, expensive massages and dinners, an expensive wedding, four private school tuitions, two beautiful houses, a second wife who comes with kids and private school tuition for her kids and a very expenive party thrown. How would anyone afford that?)
Remember, those of us in our forties now are the first generation raised on a steady stream of shows like The Love Boat and Fantasy Island, the Brady Bunch and shows which set unrealistically high expectations regarding standards of living. (Mike Brady was an architect, his wife didn’t work, they had six kids and a housekeeper.)
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I’m still blown away by the massive house my daughter’s friend’s family bought. He’s an electrician.
One thing to consider, though, is inheritance. We’re in the process of inheriting enough money to pay off our mortgage. We used a previous inheritance to pay off our student loans and credit card debt. Where did we get this money? From my in-laws. They lived like paupers and saved a lot for retirement. We had no idea how much until my MIL died.
Maybe these other working-class/lower middle-class families are similarly benefiting from inheritances. Or maybe they are like this family and just pretending or going into serious debt. Note: the people in that story are close friends of a friend of mine. Tragic.
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The Brady Bunch wasn’t that unrealistic (as far as the economics go). The house was small, the kids in public school, and they drove on most vacations.
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“Divorced couple — four kids, plane tickets, four seasons hotel, expensive massages and dinners, an expensive wedding, four private school tuitions, two beautiful houses, a second wife who comes with kids and private school tuition for her kids and a very expenive party thrown. How would anyone afford that?)”
A close relative of mine used to be married to an airline pilot who at the top of his career was bringing home $200,000 or $250,000 a year. They raised four kids and then he divorced her to be with a woman with two kids and then had a fifth child with her. So, to recap: four his, two hers, and one theirs. Combined with the new sweetie’s income, the new household income was in excess of a quarter million dollars a year, but by the time my relative finally got her divorce, between Southern California prices, teenagers in college, and lots of fun trips, her ex-husband had managed to rack up $80,000 in credit card debt. My relative has had a hard row to hoe since the divorce, but I wouldn’t be surprised if her ex-husband has worse cash flow, because he never seemed to figure out that while a quarter million dollars is a lot of money, it’s not infinite. As I said at the time, in this day and age, you can’t afford to live like an Old Testament patriarch.
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electrician, huh? middle class income, and NO HUGE STUDENT LOANS TO PAY. It’s all good. Just saying…
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A big YES to Rolanda.
Every magazine aimed at women seems to feature page after page of $1500 vases and pairs of shoes and articles on super expensive vacations. The magazines for men have ads for private jets and features on early retirement. Every reality show seems to feature granite kitchens and pools and really nice furniture. The poorer 99% of us think, “How on earth is there even a market in this country for so many $500 knick-knacks and bracelets? How many people buy the $400 Pottery Barn Kids dollhouse?
BTW, 11% of kids in the U.S. are in private schools. But most private schools aren’t Georgetown Prep. They are places like the Baptist school down the street from me — $4,000/year, with steep discounts for each additional child (4th kid is free!). And this is in the county with the highest median income in the U.S.
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The whole private school/tutor thing is just another form of class anxiety. And just to be straight here, the vast majority of public schools are significantly better than they were 40 or 50 years ago. While it’s hard to compare apples to apples here, you could easily graduate from HS without taking algebra or a foreign language. And lot’s of people never went to school past middle school much less finished high school (For example, almost everybody who was black in the South, Latino in the West, and damn near everybody in South Philly regardless of race, religion or which part of Italy their parents were from.) For comparison, the good suburban school I went to 25 years ago offered 4 APs and 2 Syracuse University extension classes (for which you had to pay extra). Now, they offer at least 18, I don’t think those kids are learning how to think or write any better than I did. (And, in fact, given my exposure to the AP program, they may be learning how to write worse than I did.) But all the neighboring schools offer it so they do. It’s all a crock. Just like the discussion of the high price of colleges. The vast majority of people will not get a degree from a high price college and incur a ton of debt. They’ll graduate from a second tier state school with a minimum of debt. And they’ll be just fine. Honest.
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“The vast majority of people will not get a degree from a high price college and incur a ton of debt. They’ll graduate from a second tier state school with a minimum of debt.”
There are also a lot of scammy vocational programs that generate a lot of debt. Here’s a thread entitled “Graduate From Culinary School, Then Be In Debt the Rest of Your Life” from 2 years ago:
http://chowhound.chow.com/topics/399391
I didn’t read the whole thing, but commentors point out the difficulty of paying of $30,000 in loans on an $8 an hour restaurant job.
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“he vast majority of people will not get a degree from a high price college and incur a ton of debt. They’ll graduate from a second tier state school with a minimum of debt. And they’ll be just fine. Honest.”
Western Dave, I’m not sure about that. I taught at second tier state school for three years, and while these students weren’t paying $50,000 for their education. They were still racking up a lot of debt. Many of those kids weren’t getting any money from their parents and they had to pay for their entire education with loans. They had $40,000 or so of debt when they graduated. Middle-class/working-class kids. This had a huge impact on them. It determined what majors they chose. It also limited their opportunities to spend a year or so taking a chance at a high risk career – music, art, or whatever. They were also profoundly more serious about their futures that I was at that age. No talk about driving across the country just for the hell of it. They needed a job pronto upon graduation.
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