263 Comments on “Why Not Feeling Rich is Not Being Poor, and Other Things Financial”

1. What kind of pie? (he said, keeping his pledge not to comment on political threads round these parts, and deleting a well thought out comment)

2. Reading Henderson’s original post, I don’t see it as complaining about losing the gardener, nanny, and house cleaner. I think he’s pointing out how many jobs his income provides. It’s true that the 1.5% of “rich” people employ a lot of us, through the businesses they own or kitchen remodeling projects. By taxing that income, they aren’t able to provide as many jobs to the economy.

3. The important point being missed is not that the dear Professor won’t have his servants to attend to him.

   But that those who make a living by doing such gardening and housekeeping will not be getting paid.

4. So it sounds like we have good evidence here that losing the tax cuts are going to harm people. Namely: the gardener, the nanny and the private school staff.

   Instead of paying these people the money will go to taxes, get spent on administrative costs (paying bureaucrats) and eventually come back around as 1 cent on the dollar of unemployment benefits for the gardener, the nanny, etc.

5. “Accountants are your friends.”

   Of course, I’ve seen many (and known a couple) members of the coming 38% tax bracket for whom their accountant was most certainly not their friend.

   But that’s probably a topic for another day.

   Quite frankly, if you family’s pulling in over $80K annually, ya might want to at least program a CPA into your contact list to hit up 3 or4 times a year. More if your income is higher.

6. Decent idea by the Professor of talking about how his cutbacks, due to a tax increase, will affect others.

   Bad execution.

   And what really should be talked about is dynamic modeling of tax changes and how it can affect secondary spending.

7. One thing to point out is that Henderson says, “Our combined income exceeds the $250,000 threshold for the super rich (but not by that much).” As you point out, all that happens is that you shave an extra couple of percent off the above-$250,000 income, which in Henderson’s case is apparently not all that much. Lesson 5 — “Understand what you’re talking about before complaining”?

   This isn’t surprising, at least. If three years of law school taught me anything, it’s that law professors like saying things without knowing what they’re talking about. Most of the time, though, they call what they’re saying a law review article rather than a blog post.

8. I don’t see this costing any jobs. The gardener is $20/week and the nanny is whatever nannies cost. He and the wife are probably not going to start doing their own housekeeping, and realistically a dual-income household income of half what he makes could pay for the maid and the lawnmowing service and never miss the money. I know many couples with roughly that income who do. By his own admission this will cost him four figures at the most. Not enough to remove a single job in any event, just small pieces of several jobs. This threat, like that of “going Galt”, would have a lot more impact if there were any possibility of it being carried out.

9. So Henderson’s suddenly going to cut his own grass and clean his house himself?

   No, more likely he’d not put back as much in his retirement account.

10. Looks like the tea partiers are out in force today. The poor man having to scrape by on between 250 and 500 thousand dollars a year. Having to drive a 1 year old BMW must be torture…

11. I think you’re still missing Todd’s (admittedly inaptly argued) point, which is that incentives matter even to the upper middle class. There ain’t no such thing as a free lunch. Maybe Warren Buffet doesn’t change his spending habits if taxes go up, but people like Henderson will. The question that Obama and his bots overlook is whether those changes may be socially undesirable. In the case of a law professor, you may think the changes are fine. But what about a small business woman who’s business is organized as a sole proprietorship. Her business income is taxed as ordinary personal income. Raising her taxes thus has a direct impact on her ability to do things like hire new employees, invest in new equipment, and so on. Throwing the campaign of vilification that Obama and the netroots are throwing at people in the $250K+ range isn’t helping matters. It would be nice if we, as a society, could have a civil debate on these issues. But in a world where Saul Alinsky’s Rule 12 has become a core part of both the left and right’s modus operandi, that seems impossible.

12. I believe Professor Henderson’s ranting is the latest example of a trend I read somewhere (and, of course, cannot find the reference at this moment). This goes back to the quote of Tony Heyward (and undoubtedly further, but this works for now), when he made the “I would like my life back” comment.

    There comes a point in the income spectrum where you make enough money that complaining about anything financially related to anyone that isn’t in your extremely close inner circle is in bad taste. I understand what Heyward was trying to say (that his life was turned upside down within his mind by something that he “didn’t have control over” [by which I mean he didn’t hit a button that said BLOW UP WELL]), but he was so far past the point on the spectrum that you couldn’t muster a single moment of sympathy for him.

    Indeed, Henderson’s parting post reads like a bad impersonation of the scene in “Smokey And The Bandit” where, with a large armada of police behind them, Frog turns to Bandit and says “Did you really expect this? I mean, *all* this?”

    My knee-jerk thought is that they’re all just completely tone-deaf, but that almost seems overly dismissive.

13. leigh @8 is correct; the “you are killing other people’s jobs” is very hollow. He admits that after paying for private school, art lessons for his child, a housekeeper, nanny and gardener, paying off those massive loans and investing in the stock market, “we have less than a few hundred dollars per month of discretionary income”.

    So, really, people, come on. We’re supposed to take seriously the argument that if his taxes go up slightly, he’ll have to choose between keeping the lights on and firing the nanny? (You know, the nanny whose services are indispensable so he and his wife can have full-time jobs.) That if that “few hundred dollars per month” is reduced, the gardener will be out of work and reduced to begging for bread?

    This is a particularly disgusting example of somebody dragging in those with less money as rhetorical human shields: uh, no, it’s not that we might have to go out to eat less often, it’s that the housekeeper will starve!

    You know, I’m not above sitting around with other moderately-well-off white-collar friends and griping about problems like the algae in the swimming pool. But I like to think we all have a little perspective on how significant those problems are in the real world, or how much that entitles us to scream about how we ought to pay less for the government services we use.

14. “The important point being missed is not that the dear Professor won’t have his servants to attend to him.

    But that those who make a living by doing such gardening and housekeeping will not be getting paid.”

    Michel using that logic we should never tax anybody as they might conceivably spend that money to employ someone else.

15. @Leigh: I don’t see this costing any jobs. The gardener is $20/week and the nanny is whatever nannies cost.

    That’s only part of the picture. That nanny/gardener in your scenario works for more than one family. If more than a few cut back on their spending for gardeners he becomes either unemployed or underemployed. In either case he loses.

    Savings always come at the margins. Gardeners and Nannys are, often marginal spending.

16. By taxing that income, they aren’t able to provide as many jobs to the economy.

    Really? So tax money just disappears? It goes into an incinerator, never to be used in the economy? Come on people, you are smart folks, you know better than that. Government spending creates an immense amount of jobs, and while keeping taxes flat may keep a handful of gardners paid, it is going to cost a lot of other people jobs.

17. Every time this comes up, it’s clear that a lot of people either have no clue how tax rates actually work, or are pretending not to. Let’s say this guy makes $260,000. A 1.5% rise in the >$250,000 tax bracket means:

    ($260,000 – $250,000) * 1.5% = $150.

    If having a $150 less a year means firing the housecleaner than I want to know where the hell he found her, because I am tired of cleaning the toilets.

18. So that guy is complaining that he is living, if not beyond his means, but right on the knuckle of them and he is upset that he might have to downsize to a smaller (but still very large and well appointed) property, do more of his own chores, and drive an older car?

    My heart truly bleeds for him, it does.

19. What the good professor is actually asking us to do is pay for his gardener. Someone has to pay for the government. If his taxes don’t increase to make up for the shortfall guess whose will. If you guessed the 98.5% of us who don’t make over $250,000 then you guessed right.

20. This kind of shit really fucking pisses me off.

    I, as a white person, am totally fucking sick of hearing wealthy white people whine and bitch about the economy when they are still incredibly capable of eating, paying bills, watching Tivo and living roughly as they have been albeit with a certain sore spot in their 401K’s. It’s been hard not to strangle them to death when I hear them complain about it.

    For some reason I am among many people for whom the current financial state of America doesn’t really nor ever will really affect them like it does me and the rest of America. I mean stupid, staggering eyeball exploding wealth. With them, it’s as if they are sitting up on a hill watching the valley melt and burn while waiting out the conflagration.

    Ah, well. I’m still a white man in Maine so I guess I should shut the fuck up.

21. Thank you Steve Burnap. I was going to say the same thing. If this dude can’t live without $150 a year, he’s doing something very wrong.

22. I just noticed one of his responses is “As marginal taxes rise, so does the disincentive to work. I’m asked with some frequency to write, consult, or testify, and when I do, I face the question of whether the effort and time is worth it. I can choose to watch the Steelers or help a hedge fund with a corporate law question. The higher my marginal taxes, the more likely I am to choose the former.”

    When the poor make that choice, to spend more leisure time instead of working, they get called workshy, and scroungers. I know this because the UK Chancellor of the Exchequer recently did. Yet when the wealthy face that choice they expect sympathy.

23. I read an interesting article the other day that talked about just this phenomenon–the $250,000/year+ earners who say they aren’t rich. According to that author, this comes about in part because we judge ourselves not by how we compare to the country as a whole, but by how we compare to our neighbors and immediate social circle. So in this case, our law professor is looking at people around him in Chicago and at the University and thinking, “Wait. He can afford X and I can’t, she can afford Y and I can’t. How can I be rich?”

    Of course, what this says to me is that, if you’re earning more than $250,000 a year and you don’t feel rich, get out there and meet more people, dude …

24. Just curious in Canada.
    $330,000 divided by 12 is….$27,500 a month. How much would the take-home be?
    Also, my heart goes out to the guy, struggling along on slightly more than 20 times what I make in a year. Blargh.

25. That was so awesome. I mean, really. Just awesome.

    I wrote my own attempted takedown a few weeks back of the idea that’s being passed around that $250,000 is lower middle class in New York City.

26. I don’t really care about definitional fights (“what is ‘rich,'”), but there is some interest in exploring the structure of the top 10% or so of income in America, and also in handling people’s sense of percentages.

    Top 10% is people earning ~$120,000/year or more
    Top 5% is people earning ~$165,000/year or more
    Top 1.5% is people earning ~$250,000/year or more
    Top 0.1% is people earning $1,600,000/year or more

    So, some interesting things to note there: 0.1% of all Americans is something on the order of 300,000 people. And they’re earning a LOT more than the top 1.5% — not 20% more or 100% more, but about 500% more.

    And the ultra-rich, the billionaires, who are a tiny fraction of 0.1%, are again earning greatly more than that — Warren Buffet’s taxable income in 2006 or so was $47 million (so, about 30x more than the top 0.1%).

    If you’re scraping by at $25,000 a year, you’re a lot closer in many ways to someone who’s earning $250,000 a year, than the $250,000 a year person is to Warren Buffet. (You’re earning 10% of the rich guy’s income, he’s earning less than 1% of Buffet’s income.) And you’re considerably more statistically likely to “catch up” to rich guy (ie, increase your income to the $250k/year level) than he is to become a billionaire.

    So, yeah, it may not be reasonable for rich guy making $250k/year to not feel “rich,” but he doubtless sees a clear and not-very-bridgeable gap between himself and the people who are making $1M/year. And they in turn see a clear and not-very-bridgeable gap between themselves and the people who are making $10M/year. And even if you did make Buffet’s ~$60M/year, that doesn’t even make up the gap between you and Buffet — $60M/year means you make $1B in 18 years, and Buffet’s net worth (2008) was estimated at $60B, so that suggests that either $60M is a bad year for him, or (more likely), most of his income in the broadest sense isn’t taxable income under the US tax code.

    None of that is intended to obscure the real and serious difference between someone in the top 5-10% of income and someone in the bottom 40%.

27. ” Let’s say this guy makes $260,000.”

    A friend of mine who’s been following this more closely than I have says that the guy never revealed his exact income, but people calculated out how much he’d have to make to lose money under the Obama plan (since he would still benefit from tax breaks on his first 250k) and apparently it means he must be at least over 300,000.

28. The professor comes off as disengenuous on the one hand, on the other, I can empathize. He and his wife have worked hard to attain their current lofty positions and having reached such heights are surprised to find the wind blows fierecly; one must hang on with both hands. The real pisser is, they are still in the foothills and they know it.

29. I got a chuckle reading this piece, John, because it brought back a memory of an important lesson learned that highlighted one of your key points.

    A number of years ago I had the privilege of working for a bright and talented financial executive of a major pharmaceutical company in Southern California. She used to kvetch occasionally about the difficulty of making ends meet…which I found odd ’cause besides being a finance guru she was married to a lawyer who ran the local branch of a major league law firm. Granted, he had obligations from an earlier marriage, but still…

    One day I finally couldn’t stand the confusion any longer and asked her how she, of all people, could possibly be having personal financial issues. She told me, among other things, that the only decent women’s professional clothes to be had were from San Francisco which of course required biweekly flying shopping trips.

    I never forgot the implicit lesson: a good part of being well-off, at any income level, is to ensure your expenditures don’t rise to meet your income.

    There’s another lesson in there, too, I think. It generally isn’t the large one-time expenditures that cause problems (e.g., that nice vacation). It’s the frequent “modest” outlays that can kill you (e.g., eating out frequently).

30. I think, being married to an academic, that it’s probably my obligation to point out that the guy is a law professor who is also probably practicing law in cases and that this puts him in a very different tax bracket from your average professor, who makes nowhere near that much.

    As for the argument that he’s providing jobs, statistical research has shown that when the wealthy receive tax cuts, they don’t spend it, they save it (and often save it in offshore accounts or tax free investments.) Giving businesses some tax cuts makes an argument for jobs, letting individuals continue to have a tax cut that the government had no way to pay for when Bush came up with them does not, since it reduces the ability of the government to provide jobs and aid to help the economy and jobs, while the wealthy do not create enough jobs to offset the loss. The tax cuts greatly depleted revenues and helped run up the giant deficit that we have. We have no way to continue paying for them for that 2% who also pay no inheritance tax, get a lot of their income from capital gains investment that is taxed at a lesser rate and can shelter more savings into tax free accounts, etc. While the law prof may be paying more tax, he’s paying less of his real income to the government than someone making $30,000 a year in salary. This is why it’s a lot harder for the working class to move up to the middle class, especially the last thirty years, than it is for the upper middle class to move up to the prof’s tax bracket. The wealthy have money to save and invest to make more money, not just to pay groceries, and they pay less tax on it.

31. I’m always reminded of a moment in the film “The Big Chill” where Jobeth Williams’ husband makes a comment about how they make good money but it’s never quite enough, then he sort of hesitates and says, “Well, we spend exactly what we make, actually.” Or words to that effect.

    Which strikes me as being part of the issue with people, and I suppose my wife & I are included in this, although we don’t come anywhere particularly close to a combined quarter-mill a year–it’s that we make pretty decent money nonetheless, and we even manage it quite well, but we really DO have money for most of the comforts and luxuries, generally speaking, if we manage it properly.

    And I can honestly say that a couple whose combined income is $75,000 or $100,000 or $150,000 a year really does have a problem looking at people who make more than $250,000 a year and thinking it’s middle class.

32. CrypticMirror @21: which raises the question of, just how high are those tax rates such that it’s not profitable for him to answer a taxation problem for a hedge fund? Corporate-tax lawyers bill at hundreds of dollars an hour. He’s asking us to believe that the tax rates are SO enormous that it’s actually not profitable for him to do that extra work.

    I guess it sounds better than “I feel like sitting on my ass and watching the Steelers right now.”

33. Mmmmm…pie!

34. “16# Steve Burnap
    Every time this comes up, it’s clear that a lot of people either have no clue how tax rates actually work, or are pretending not to. Let’s say this guy makes $260,000. A 1.5% rise in the >$250,000 tax bracket means:
    ($260,000 – $250,000) * 1.5% = $150.”

    this, this and more THIS

    this guys whole argument was disinformation. no one making this kind of money is firing their house cleaner or nanny. (maybe the gardner ;)

    I would never fire my house cleaner, she and her mother come every other week and mkae my house liveable. plus I am doing my part above and beyond paying taxes to help the economy by keeping them employed!!

    what the rich nuts should do is fire all of their house staff and all of their employees.

    that will really show the government who the boss is!!

    /right until they have to clean the bathroom.

35. CrypticMirror @ 21 —

    A law professor–in Chicago no less!–pontificating about Reaganomics just amuses me somehow. The Laffer Curve was appealing on first blush, but doesn’t get much play today.

    http://www.time.com/time/magazine/article/0,9171,1692027,00.html

    I’m guessing he’s a friend of Richard Posner, am I right?

36. I can see his point, kind of. I make $100K a year. So does my husband. However, we live in one of the most expensive parts of the country. By America’s standards, we make a lot. By our neighbors’ standards? Not so much. We spent the last year looking for a condo that we could afford that wasn’t crap and turned up nothing. We can’t afford a house in a decent neighborhood without going beyond our means.

    Do I feel wealthy? Not really. I don’t have a lavish house or live a lavish lifestyle. I live in a average two bedroom apartment with average furniture on an average block. (Just don’t look at the next street over, it’s got 10 million dollar mansions.)

    Am I wealthy? Hell yes. We have enough money to do whatever the fuck we want. I’ve been poor (the heater in only one room brought back memories of growing up) and fuck me with a stick if I’m ever doing that again. And I am very very grateful for what we have, because I realize how lucky we are.

    I’d rather save our money (and yes, pay the housecleaner and probably the nanny when kids arrive) and live well within our means and NOT EFFING WHINE about it on the internet.

37. 4. With great income comes great (financial management) responsibilities.

    This is basically Sherman McCoy’s problem in The Bonfire of the Vanities: he goes through and details all the expenses he just has to pay to maintain his position in the world as a bond trader for a big-league Wall Street firm. There’s a great scene in the novel where McCoy details all those expenses, and even though he realizes that they are, on some level, ludicrous, he also still feels like he has to pay them.

    The book is worth reading for much more than this, and I won’t spoil the ending beyond saying what is probably obvious: someone who starts with this much cash and privilege probably doesn’t end with this much.

38. How much do I have to make to hire a supermodel? Is that the standard hire after gardener, nanny, and housekeeper?

39. If you want to feel rich, go work as a volunteer in a third world country. You will have a gardener, nanny (or mistress, if you prefer) and housekeeper, on way less than $250,000 a year. Naturally, if you hang around in a country with more millionaires per capita than any other (correct me if I am mistaken, I read it somewhere and I’m too lazy to check my sources), you’re going to feel poor.

    Franky, even the people making $20,000 a day have no “right” to complain. They are also rich compared to the majority of the world making $1 a day. Just saying.

40. John,

    I think you have Mr. Henderson’s lament exactly backwards:

    “First, that your picture of ‘rich’ is predicated on how billionaires live.”

    I think Henderson’s ham-fisted complaint is the opposite: that the picture of “rich” which OTHER people have, namely those writing the tax laws, is predicated on how billionaires live.

    Certainly, Mr. Henderson could benefit from some solid financial advice, which I believe is your larger point. But what I thought he was trying to say is that the $250k mark hits families living decidedly “middle-class” lifestyles (dual incomes, mortgage and school loans, kids in school, saving for retirement), and not the uber-rich Buffets or Hiltons.

41. Oh. My!

    I will be the first to admit that I did not read the previously mentioned post (which I intend to amend soon), but this post could not, for me, have had better timing or giggleworthiness (it should be a word!).

    My SO and I just got word (and proof) that something we have been seeking the last few years, is happening which has increased our monthly income from $2.000/month to, well substantionaly more than that. Enough that we can now get out of massive debt and live, if not extravagantly, comfortably.

    My first thought on receiving this proof? How can I help my friends who have helped us in the last few years.

    So this post iterating Mr. Henderson’s monetary woes is causing giggle-fits in me. We are still, even with our good fortune (which comes at the price of some mental and health issues), going to be considered, maybe, middle class, but we are going to be able to breathe a little bit easier financially.

    Thank you, Mr. Scalzi, for brightening my outlook today and making me thankful my woes are easier to deal with than Mr. Henderson’s.

42. It’s all a matter of perspective.
    Used to be I’d get hot and bothered about rich folk whining to the rest of us about how much it sucks to be rich. Then I decided it’s all a matter of perspective. I live in the USA. I have 2 or more computers that function, a running automobile with AC and a stereo, and internet access that runs like water.

    If I want some water, I merely touch my glass to a paddle on my refrigerator and cool, filtered water is mine for the drinking. I haven’t missed a meal (except when I forget to eat) in my memory.

    Compare this to Planet Earth standards, where depressingly huge numbers of folks still walk miles a day for water, and it becomes hard to get that upset that someone else is upset that they’re not richer.

43. I did not read Henderson’s article as whining about how hard it is to be rich.

    Henderson is objecting to having the government decide how rich he is allowed to be, and deciding who deserves his “extra” money more than he does.

    He’s objecting to faceless government bureaucrats thinking they know better than he does how money he and his wife have earned should be spent.

    He’s objecting to the idea that he and his wife, who evidently have the talents, skills, and work ethic required to pursue their careers, are not competent to decide how much their work is worth.

    And you folks mocking Henderson for complaining “that the dear Professor won’t have his servants to attend to him”? The Hendersons are themselves servants. They perform services for other people who chose to spend their money obtaining those services.

    What the Hendersons do not do is suck at the public teat, protected against their own arrogance and incompetence by civil service rules and public service unions, telling other people how to run their lives.

    (I note, however, that Mr. Henderson is a professor at a public university, which might well constitute “sucking at the public teat”, and may have tenure, another form of protectionism. To that extent, he deserves criticism for whining about the limited size of his particular nipple. But as far as I can tell, he does not make public policy, nor are the citizens of Chicago required to attend his classes.)

44. I have to say that this part also concerns me:

    We pay about $15,000 in property taxes, about half of which goes to fund public education in Chicago. Since we care the education of our three children, this means we also have to pay to send them to private school.

    While I certainly don’t argue with any parent’s right to send their kids to whatever school they can afford, I feel like I see this line of thought trotted out more and more. And in the same way it concerns me that wealthy people move into gated subdivisions and thereby insulate themselves from the problems and circumstances (and just day-to-day existence) of people in different economic classes, I worry a lot about what it does to our public education system when everyone with the money to opt out of participating in it does so.

    I mean, I know: There are a lot of bad public schools, and it’s absolutely understandable not to want to send your kids to one. But all the improvement it could use notwithstanding, the American public education system seems like an awfully important institution to maintain—and I’m not sure how we can maintain or improve it when so many influential families aren’t part of it.

45. JB

    Saving 50,000 a year into his 401k and sending his children $20,000 a year private schools are not marks of being middle class. Neither is having a nanny, a housekeeper and a gardener.

46. This was a lot to keep up with. I am not even close to $250,000 a year but I have owned and operated a small business. And the fact is it is a mind set thing with business owners the less tax they pay the more people they hire and the more people they hire the more tax income is brought in to the government. Crazy as it seems (to me too) just go back in history..

47. Ugh. I am in the midst of an argument right now over this very thing with someone who has likened the pig-pile on Mr. Whinypant’s post as just like bashing someone for coming out as gay, only much worse. The logic of how they arrived at his conclusion is convoluted and stupid, and throwing reason at this person is rather like throwing snowballs into the sun (for a less far-fetched analogy) and yet, because I’m home sick for the day with my judgment distinctly impaired by large quantities of NyQuil, I argue anyway.

    What truly amazes me is how people can whine about Obama not renewing the Bust tax-cuts for the wealthy in one breath and then whine about the deficit (which, from listening to them, you would think appeared out of nowhere in January of 2009) in the other.

48. DJMoore:

    “I note, however, that Mr. Henderson is a professor at a public university”

    The University of Chicago is a private institution, said the graduate of the University of Chicago.

    “Henderson is objecting to having the government decide how rich he is allowed to be”

    Then he’s kind of dumb, because the government is making no decision about that; it’s merely deciding how much his income should be taxed. I understand you’re trying to make a larger polemical point here (as illustrated by the rest of your comment), but, meh. I don’t find it particularly compelling.

    JB:

    “But what I thought he was trying to say is that the $250k mark hits families living decidedly ‘middle-class’ lifestyles (dual incomes, mortgage and school loans, kids in school, saving for retirement), and not the uber-rich Buffets or Hiltons.”

    Those who make significantly more than $250,000 also have dual incomes, mortgages and other loans, kids in schools and are saving for retirement (or should be). It doesn’t make them middle class, either. From an economic point of view “middle class” isn’t about the dynamics of your financial life; it’s about how much money you make.

49. Jeez, I feel SOOOOO bad for this guy. I took a fricking 47% pay cut this year so I could continue to work in the area, be w/my family instead of working out of state away from them, and keep them someplace good for them in terms of home, schools, etc. Waaaah….

50. At risk of being booted off for a third comment, sorry John. I went and looked up on one of those calculate your wealth sites (http://www.globalrichlist.com/) how the Prof and I stood in world wealth, while I wasn’t shocked to find out that 250,000USD puts him in the top 0.001%, I was kinda shocked to find my own measly 11,000GBP still put me in the top 11%.

    I resolve to be a little less righteous over money.

51. snoozebar@35: Yeah, my wife and I are in about the same boat. We make damn good money, good enough to be approaching that magic 1.5% yet we don’t live “rich”. We live in an urban area. Our house is no monster house. My car is three years old, my wife’s fourteen. We have no gardener and no housekeeper.

    Yet we have lots of disposable income and enjoy it. There’s a whole hell of a lot of things we spend money on without having to even think about it because we make damn good money and are conservative about the big things like houses, cars, etc. I’d never complain about my car or my house on the Internet because these are choice I’ve had the freedom to decide about because we have the income to do it.

    I am not rich by the classic conception, but when I look around at others around me, I think “sure, yeah, I probably ought to pay a bit more to hold society together then the average person”. I can afford it.

52. Back when I was in college with lots of rich people (Ivy school, thank you Fin Aid and need-blind admissions), I was told “If you have to work for a living, you’re not rich.”

    Didn’t believe as a poor student, and I don’t think I believe it now.

53. I have always found “The L-Curve” to be very instructive about this sort of thing:

    http://www.lcurve.org/

    The site looks terribly dated, but the information is very pertinent.

54. I’m thinking I should probably start by hiring one or two average models before trying to afford a super model. Plus, then I will get used to having a few around.

55. I would add one more point to Scalzi’s list:

    * If you are tasked with deciding who’s rich and “can afford” higher taxes, remember that “Even well-off people can have money woes,” i.e., any definition of “rich” will include people who will notice their smaller paycheck.

    Beyond that, as others have said, Henderson’s original post wasn’t simple whining. Henderson wanted to make the point that affluent people will likely respond to higher taxes by cutting back spending elsewhere, and those cutbacks will affect non-affluent people. I have not seen anybody respond to that point.

    Yes, the government’s idea is to take the money from Henderson and hand it to less affluent people. But (1) it will be a different group of less affluent people than Henderson is currently handing the money to, so there are still people who lose out; and (2) even the government (especially the government?) has administrative costs, so strategy will be to take $1 from Henderson and hand less than $1 to somebody else.

56. DJMoore @42: yes, your argument is rather deflated by the fact that the professor is employed at a public university, meaning the citizens of his state are required via taxes to fund his gardner, nanny and housekeeper.

    And I get that you saw a lovely opportunity to [insert generic libertarian rant here], but sorry, you picked a pretty rotten soapbox to stand on. The professor was not making a moral argument about taxes, nor pointing to genuine hardships imposed by Obama’s changes to tax policy. He was pretending that a slight reduction in his generous disposable income was an actual hardship.

57. ETA: John corrected the point about the public university (duh). But it is a bit silly to bring up the ‘sucking off the public teat’ argument about pretty much anyone. Unless you’re living in Somalia and paying for your own private police force and food taster, anyway.

58. first – still waiting to hear what kind of pie we’ll be having.

    second – i had not read the piece on being poor and just want to thank you for it.

59. I just found out, thanks to this post, that I make under the median income for the US.

    And I believe I’m considerably wealthy. So much so that I donate at least 10% of my gross income to various charities and am still able to live alone, pay all my bills (including the typical student loan load for someone who put themselves through a private graduate school), eat out four-five times a week in sit-down restaurants and tip generously, and rack up about 25,000 frequent flyer miles a year the butt-in-seat way. All of which also creates and maintains jobs, even (especially?) in this economy.

    My belief that I’m now almost obscenely wealthy comes from two directions– a religious faith that, hey, you know, you don’t have to believe in but it works for me, and that I spent a few years with so little income I didn’t have to even file with the IRS. Much of my charity giving goes to those private social services that kept me fed and dry during those years.

    I can pretty much guarantee you that Mr. Henderson has had a different set of life experiences that lead him to his post. When people protest like this, though, about losing their money, it makes me wonder what their true priorities in life are.

60. @Laura H

    Your statement might be true if taxes never wound up employing people. The government, through its various guises, direct and indirect, employs a very great many people. The various government bodies and companies that get government grants would form a very large, if not the largest, sector of the employed population.

    The question here is a) does the government do a better job of employing people? sometimes yes, sometimes no (I doubt many people would want the Army to be run by a corporation, objections about the military industrial complex aside). b) does the government employ people who do a job that is, overall, a better benefit for society? Which contributes more to society, a Wall St banker or a social worker?

    As a percentage the government spends more of its income (taxes) on employing people than rich people do (they prefer to invest more, however they still spend on employment).

    Saying that rich people do a better job of employing people than the government is not such a simple black and white statement.

61. Anyone claiming that taxing those making in excess of $250k will have a chilling effect on job creation ought to look at the tax brackets we had in 1954:

    http://en.wikipedia.org/wiki/Internal_Revenue_Code_of_1954

    The last column of the article’s table shows the adjusted income for 2008, so you can compare to today’s brackets. The bracket starting at $225k (in 2008 dollars) was 43%; the top bracket, for those making just under $4M (in 2008 dollars) was 91%. There’s more to the tax code than brackets, sure, but the tax code was undeniably progressive then.

    Of course, those of us who were alive in 1954 remember that era as a jobless desert presided over by Chief Socialist Dwight D. Eisenhower, so you have to factor that in.

62. My household income isn’t near the $250k mark (though it’ll get a lot closer if I get a foothold in my professional career), but I can see how it’s possible to be a little exasperated at making a “rich” person’s income without a rich lifestyle. My parents never made near what we do, but they’ve lived comfortably in a large house in a near suburb of a major city, my mom was able to take years off from work to raise kids, and they had a few luxuries besides. I know now that they scrimped and saved for a lot of things, but I still feel like despite higher income in real terms, we haven’t “made” it.

    It’s astonishing to me that our household income is twice the median but we can’t afford a small starter home in a middle class urban neighborhood in any city we’ve lived. If I do find work, I won’t be able to afford to pay people to do all the things I do at home now, and I suppose I’ll just have to let standards slide or spend most of my free time cooking, cleaning, fixing things, etc. I’m not really complaining about these things. I’m happy, and I don’t think more money would make me significantly more happy. But that’s just it – everything I feel like I can’t afford, well in order to afford it I’d have to work so hard that I wouldn’t have time to enjoy it. I’m not kvetching about feeling poor or hating taxes (I feel like we should be paying more, actually), but it would be nice to hold out at least a hope of making it a point where I felt wealthy.

63. Henderson is objecting to having the government decide how rich he is allowed to be, and deciding who deserves his “extra” money more than he does.

    He’s objecting to faceless government bureaucrats thinking they know better than he does how money he and his wife have earned should be spent.

    How is the government telling him how rich he is allowed to be or who deserves his “extra” money? The answer is none. The government isn’t telling him what his job is, nor what the amount he is paid for it, nor how he can spend it. He’s buying a house and cars beyond his means, he’s paying others to maintain said extravagances, and he’s the one who can’t stomach the thought of himself or his family being special little snowflakes. There’s no “faceless government bureaucrats” doing a piss-poor job of budgeting before they even bother get to taxes.

    He’s objecting to the idea that he and his wife, who evidently have the talents, skills, and work ethic required to pursue their careers, are not competent to decide how much their work is worth.

    And were highly likely to have had the economic and social advantages to obtain those talents and skills from, if not birth, then at worst late childhood. And don’t tell us about his “work ethic,” since for all we know he could just as easily be toiling away for 90 hours for the good of the downtrodden as he can seeing one client a day for two hours and spend the rest of the time golfing.

    And you folks mocking Henderson for complaining “that the dear Professor won’t have his servants to attend to him”? The Hendersons are themselves servants. They perform services for other people who chose to spend their money obtaining those services.

    They’re not providing services, they’re providing products. But free-market is AWESOME, amirite?

    What the Hendersons do not do is suck at the public teat, protected against their own arrogance and incompetence by civil service rules and public service unions, telling other people how to run their lives.

    Which, as others have noted, is a misconception perpetrated by the teabagger crowd, and not the reality of the situation for the majority of civil service employees. And whatever the effect, unions are just advocacy groups. Unsurprisingly, I don’t see you kvetching about the Chamber of Commerce or AMA or the many other advocacy groups throwing up shields for the CEOs and other executives of, say, Wachovia or BP or anyone else.

64. Max@55: There are two responses:

    1) We’re talking about a 1.5% increase in the marginal tax rate, so this increase is small enough that it is unlikely to cause great changes in behavior.

    2) As someone up thread pointed out, people making over $250k tend to respond to tax cuts by saving more, not by hiring more.

    So yes, in theory, increasing tax rates on those making $250k or more will cause unemployment among domestic helpers to go up. But this statement says little or nothing about how much it will go up. In all likelihood the effect will be so small that it will be lost in the noise of general economic influences.

    You see very similar rhetoric when minimum wage laws come up. People insist that this *must* cause unemployment to go up. Totally true. Yet when the minimum wage is increased, it is nearly impossible to find any real effect, not because it isn’t there, but because it is so small as to be nearly unnoticeable.

    So the argument isn’t that there is an effect…it’s whether there is one worth caring about, given the positive effects generated by providing more tax revenue to the government that is running massive deficits.

65. On the one hand, I certainly understand what it’s like to feel like you’re making a lot of money but still not feeling ‘rich’. Just last night I said to my wife, who said we weren’t rich that according to the tax code, we are. We live in a house that cost $110,000 dollars, a little townhouse with no yard. We have two kids in public school, my wife is (currently) a stay-at-home mom. We drive two paid-off vehicles that we bought used (a caravan [not even a Grand Caravan] and a Sebring). I work as a network administrator. After years and years of accumulated debt (stemming all the way back to college for me and exacerbated by a year of unemployment 8 years ago), we have managed to reduce our debt considerably. We got a home-equity loan to repair massive water damage this past winter, pushing back our plans somewhat.

    But unlike Professor Henderson, I don’t make the mistake of thinking that we’re not doing much, MUCH better than many (perhaps even MOST Americans). We have managed to actually accrue some savings and maintain them more than six months. We have the luxury of eating out from time to time, of having TiVo and FIOS, being able to buy the occasional video game and otherwise indulging in entertainments. And unlike Professor Henderson, I don’t feel the need to use a public forum to make an appeal to authority that I am somehow put-upon by society in that the government is going to return to taxing me at levels from years prior. I realize that my situation would be even better if we were better at managing our money. I certainly don’t go on the Internet to blame Obama for my own lack of fiscal responsibility.

    When I lost my previous job and was unemployed for nearly a solid year, we made do. And even then, we still weren’t poor, we had just dropped to lower middle-class. Unlike Professor Henderson, our personal income is tied entirely to my job, which is somewhat unsettling, at times. Professor Henderson is so far removed from a situation where he would actually have to make significant sacrifices that he may have lost perspective. He sees his discretionary income as not nearly so discretionary. Note the ‘because I care about my kids, we send all three of them to private school’ part, for example. Unless he’s sending them to some really inexpensive school, that’s like he’s putting three kids through college, unless Chicago tuitions are much less than ones in the Philadelphia area. He sees this as necessary and probably views his taxes that fund the local school as robbery of a sort. That’s his prerogative, but if so, he needs to move to somewhere else (if such a place exists), find a way to get a tax credit for his kids schools (usually only given for medical reasons) or deal with it.

    And honestly, not having an accountant with his financial situation? That’s just STUPID.

66. Caroline @62: “My parents never made near what we do, but they’ve lived comfortably in a large house in a near suburb of a major city, my mom was able to take years off from work to raise kids, and they had a few luxuries besides.”

    That’s a lot of my disconnect, as well, and I’m certain it’s a large part of my wife’s. I know my father never made as much money as I do, but he seemed to manage to do much more with it than I have. I know inflation plays a part in that and I know I was lucky then like I’m lucky now…but it still feels frustrating when you look at the numbers and try to figure out why you’re not doing better.

67. Lately it seems as though the same people wailing over how cush the $100k a year government employees have it are arguing that $250k a year barely constitutes not starving.

    Apparently the $ spends waaaay better than the $. Stupid forex markets.

    DJMoore

    “Henderson is objecting to having the government decide how rich he is allowed to be, and deciding who deserves his “extra” money more than he does.”

    Yar. Stupid government. I’m pretty sure the tax law doesn’t say that if you make $300k a year, you have to lavishly spend every dime not confiscated by the Evil Sheriff.

68. As Prof. DeLong pointed out elsewhere, the US Government is up to its frigging eyeballs in debt, much of it incurred to pay for our recent boondoggle in Iraq. If Prof. Henderson does not want the government to pay all that money back by getting more tax revenue from people in his own economic class, lest he fire his maid and gardener, what is his alternative proposal? Getting more tax revenue from the maids and gardeners? Cutting Social Security benefits to people who used to be maids and gardeners and who are now retired?

    Furthermore, the whole “how dare you call me greedy when I provide an income to these little people” gambit assumes that your employees owe their livelihood to you and only to you, the way medieval peasants were at the mercy of their feudal lords.

69. Sorry, bad link above. Try this.

70. “nless he’s sending them to some really inexpensive school, that’s like he’s putting three kids through college, unless Chicago tuitions are much less than ones in the Philadelphia area”

    Not really. As a faculty of the University of Chicago, he gets 50% off for tuition for his kids at the U of C’s elite private Lab School. So he shouldn’t be paying $20k for any of his kids in school. That’s before the discount. He’d be paying roughly $12k a year. That’s a lot, but a lot less than someone without the connection to U of C.

    Also, as faculty, U of C will pay for 8 semesters or 12 quarters of undergraduate tuition, for each of his kids, at any college (as long as that tuition is equal to or less than the tuition at U of C).

71. ” If you are tasked with deciding who’s rich and “can afford” higher taxes, remember that “Even well-off people can have money woes,””

    But people like Henderson tend to look at people with money problems due to, say, cutting unemployment benefits or food stamps or being laid off and go “tsk tsk, they’ve made poor choices and should learn to manage their money better. Life’s not fair.”

72. Bob @ 61:Of course, those of us who were alive in 1954 remember that era as a jobless desert presided over by Chief Socialist Dwight D. Eisenhower, so you have to factor that in.

    If you turn down the reflexive scorn for a second, you might also remember that era as the one where stock dividends and corporate executive non-financial benefits became lavish. This was no accident, as dividends were considered “capital gains” instead of “income”, and the company-paid car/country club membership/restaurant account were tax write-offs.

    You might wish to acquaint yourself with the premise and research behind Hauser’s Law, which indicates that the US tax revenues generated in the modern age has remained reasonably close to 19.5%, regardless of specific tax provisions.

73. Bastiat would have grokked the point.

74. This reminded me a lot of what I used to run into on a daily basis at my old job. I’m sorry if this sounds pedantic, but I wasn’t personally familiar with a lot of what I learned and I think it’s something with which more people should be familiar.

    I was, up until very recently, a Bill Collector. I talked to about 50 people every day to help them resolve credit card issues, and was successful enough that I was eventually promoted to a managerial position. I was, more often than not, in the top ten performers in the nation for a major credit card company’s collection department.

    Based on the several thousand people I’ve spoken with in the American population, I have come up with two general rules:

    1. Regardless of education, Americans do not understand debt or compound interest

    2. Americans do not understand the concept of a monthly budget or a savings accounts.

    The problem I encountered most frequently wasn’t that people were living well beyond their means, or even that they had personal disasters, but that people were living EXACTLY at their means or only slightly beyond their means.

    It was their habit to spend their entire paycheck, completely, between one pay period and the next. That meant if ANYTHING at all unforeseen happened, they had to charge it on their credit card.

    Worse, a lot of people are in the habit of charging all incidental expenditures on their credit cards, until they max out their credit limit at which point they find themselves suddenly “broke” even though they’re making the same amount of money.

    The accounts I handled had balances ranging from a couple hundred dollars to tens of thousands of dollars, so I talked to a wide swath of the American population. Including people who had annual household incomes in the 250,000 range.

    I always advised people of the following rules:

    1. Your zero point for the month, or the point at which you decide you have no more money, should NEVER actually be zero.

    I don’t care if that has to start out at $50 every month going into a savings account, but it should eventually work out to be about 20% of your income.

    Your goal should be to get to a point at which 20% of your money is left and you think to yourself “I don’t have any money left.”

    Not being able to get there right away is fine, but that should be the goal.

    2. Work up enough money in your savings account so that you can stay liquid for three months before you start diversifying or investing. That way if your lose your job, or if you have an appliance go out, you won’t have to incur debt.

    3. Take all of your loan documents and write out the balance and the APR on a sheet of paper. Take the APR and multiply it by the principle and figure (approximately) what you’re paying in interest every year. This number isn’t actually accurate (it will be higher) but it’s what most Americans are able to do on a calculator and it’s close enough.

    Pay as much over the minimum monthly payment as you can on the highest cost loan. If you can afford it, do it for the rest of your accounts as well.

    Buried deep in your terms and conditions for your credit card (this won’t be true of your house or your car) is the following formula for a minimum monthly payment 1% of the balance + Fees & Interest. That means if you have a 12% APR (which is a decent APR for a credit card) ONLY HALF of your payment is going toward the balance.

    4. If you’ve worked out the math, and you can honestly only afford to make a minimum monthly payment on all of your loans, then you cannot afford your current lifestyle unless all of your loans are low interest installment loans (installment loans are things like car loans, house loans, etc that are at a fixed APR for a certain period of time).

    Under the Unfair and Deceptive Practices Act your credit card company is required to tell you how long it will take to pay off your credit card. I strongly urge you to look at that if you haven’t, because it can be anything from 50 to a 100 years.

    If you cannot work out your budget such that you are not able to do the above and pay off all your debt (except for house loans/car loans) within 5 years then you need help.

    Two further resources, because I think this is really something that every American should take the time to be educated about, are:

    1. “Maxed Out” This documentary explores the way most Americans handle credit card debt, and the way it affects the nation.

    It’s available for instant streaming over Netflix*

    2. I.O.U.S.A This documentary explores the long term consequences of the way the government handles its debt.

    It’s available for instant streaming over Netflix*

    3. “The Giant Pool of Money”

    This explains, more or less, how the above two problems conspired to create the current financial crisis. It was produced by NPR and it is worth your time to listen.

    I know this is kind of off topic, but I read that guys “spiel” about not feeling rich and I had a flashback to a pissed off doctor explaining how he was too “smart” to have as much debt as he did.

    This country really needs to get a control on spending if a 3% change in tax rates makes someone feel like their life is going to spin out of control.

    *Another money saving tip: Consider upgrading your internet and getting Netflix and canceling your cable bill to save money.

75. Steve @ 11: But what about a small business woman who’s business is organized as a sole proprietorship. Her business income is taxed as ordinary personal income. Raising her taxes thus has a direct impact on her ability to do things like hire new employees, invest in new equipment, and so on.

    As the owner of a sole proprietorship I call BS, since employee salary and equipment lease are both tax deductions. Even capital expenditures like large machinery are tax deductible, they just need to be amortized over 3 years. So, if anything, an increase in her marginal tax rate should incentivize your small business straw-woman to invest in her business.

76. I really like this post, and thank you for writing it.

77. Earnings are not a measure of wealth. And wealth is a concept only meaningful to the individual, rendering discussion problematic.

    An Ivy-League professor will intellectualise life and see that savings for retirement and trust funds are valuable to give himself and those important to him those things he values, such as an opportunity for his children to go to med. school.

    A tribesman in some undiscovered part of the Amazon will have another set of values, and will “work” his very best to ensure his close relations are well served accordingly.

    Both the tribesman and the professor will be poor in the eyes of the other. These stereotypes exist on a gamut. To compare checkout lady to investment banker is akin to comparing an apple to a warship. You can describe the differences, but there’s not a whole lot of benefit in doing so.

    The O-OP (Henderson) DID have a point, but it was clouded by his closeness to his own situation. His arguments were 1.) that he believes that he can make better decisions about wealth redistribution that the government and 2.) that he can perform this task more efficiently.

    These arguments form the bedrock of the political divide in more than one western country, with some (many?) having around a 50/50 split of opinion. Decades have not changed either side’s opinion, so I suggest, where a central government is appropriate, a compromise falling somewhere in the middle.

    Which is pretty much what we have (the taxation system hits most people around 40% of their earned income).

    I conclude that those with a bent for the political, head for Washington or London or wherever; and the rest of us focus on whatever is important to ourselves and look upon others with a renewed sense of distance.

78. First- for those of you with sound arguments, thank you for your insight as many of you have added to this post in a beneficial way.

    Without repeating any comments, I have read everyone’s posts and do not see mention of his comment where he says:

    (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.)

    Now, this blows my mind. Because as a married couple, you receive LOTS of tax benefits. My only thought is that he means that since they have combined income, that it moves them into a higher tax bracket. However, while, yes, that happens, this is grossly offset by the BENEFITS of filing as “married filing jointly” as opposed to just single or most other categories. Again, I think this is an example of how “out of touch” he actually is with all of this nonsense. Please, correct me if I am wrong. I am an accountant myself, but presently working on my CPA. I HAVE studied the disgusting topic known as: Individual Taxation.

    Again, I won’t repeat what has already been said. But Mr. Henderson is just… *UGH*… see I can’t even find the words…

79. According to DeLong here, Henderson actually makes $455,000 a year. In that article he makes similar points as Scalzi about why you might not feel very rich with almost half a million dollars a year.

    But look at his expenses. He spends $100,000 a year on retirement savings — savings aren’t even really expenses. And they apparently spend $10,000 a year on new cars, which surely must count as “discretionary.”

    He also spends $60,000 a year on repaying student loans, which even with loans from a top law school will be repaid in maybe five years at that rate. If he and his wife keep their jobs with no raises, in probably less than 10 years they’ll have many thousands of dollars in discretionary spending money.

    It’s really not a bad position to be in.

80. @Laura H.: Rich people don’t create jobs. I’m sorry, they simply don’t. Jobs are not created by people who have money; when was the last time anyone employed anyone else just because they had extra money?

    Jobs are created when demand for a product exceed the current capacity. So to create jobs, all you really need to do is increase demand. Now, there are many ways of doing that. But a tax cut for the rich is just about the worst way imaginable. You see, the rich don’t usually spend all their income. They tend to park it in speculative instruments, which have very little economic impact, compared to direct spending. The economic impact of buying 1$ worth of a mutual fund is so diluted as to be nearly zero.

    Tax cuts to the middle class are another matter entirely: the middle class tends to spend extra money directly into goods and services, so the economic impact is direct (it’s actually multiplied). And most effective of all is direct investment into infrastructure (and not the shell game the current administration played with the stimulus package). All this is well established economic fact.

    So Obama, for once, is correct in maintaining the tax levels for the middle class, while letting the tax boondoggle for the rich expire as is the law. Remember that Bush CHOSE to have the law sunset because he had to use reconciliation to pass it (now where have I heard about this recently?); he had to do this because otherwise he would have had to find a way to pay for the massive increase in the deficit his tax cuts would bring.

81. @BC Woods

    I am a professor of math at a rural community college. I always work compound interest into my algebra classes, which includes me bringing in a credit card statement and working out the APR and APY. I would agree completely with the advice you gave.

    My Mother, a banker for thirty years or so, says that you should think of large purchases as costing three times the listed price. If you pay the minimum payments, that is what the total payments will be. I haven’t run the math yet to see if that is true, but if you can’t trust your mom, who can you trust?

    My money saving tip would be to cancel the cable and get an antenna. When I visit the home of someone with cable, I mostly watch PBS anyway. I can get that off the air for free. (Actually my TV is second and, so I had to plop down $10 for the converter box.)

82. For reference, since I didn’t see anyone post them, here are the tax rates for 2010–

    Married, filing jointly (rates apply to adjusted gross income):
    # 10% on the income between $0 and $16,750
    # 15% on the income between $16,750 and $68,000; plus $1,675
    # 25% on the income between $68,000 and $137,300; plus $9,362.50
    # 28% on the income between $137,300 and $209,250; plus $26,687.50
    # 33% on the income between $209,250 and $373,650; plus $46,833.50
    # 35% on the income over $373,650; plus $101,085.50

    Plus: Social Security tax of 6.2% on gross income up to $106,800 (not AGI)

    Plus: Medicare tax of 1.45% on total gross income (not AGI)

    (A thoughtful commentary on these numbers is beyond my mental capacity at this point in time. Work sucks, brain empty. Research is easier.)

83. Ben Aston @ 76 —

    Your post reminded me of one of my favorite moments from The West Wing.

    *****

    We need to cut taxes for one reason – the American people know how to spend their money better than the federal government does.

    Mr. President, your rebuttal.

    There it is. That’s the ten word answer my staff’s been looking for for two weeks. There it is. Ten-word answers can kill you in political campaigns. They’re the tip of the sword. Here’s my question: What are the next ten words of your answer? Your taxes are too high? So are mine. Give me the next ten words. How are we going to do it? Give me ten after that, I’ll drop out of the race right now. Every once in a while… every once in a while, there’s a day with an absolute right and an absolute wrong, but those days almost always include body counts. Other than that, there aren’t very many unnuanced moments in leading a country that’s way too big for ten words. I’m the President of the United States, not the President of the people who agree with me. And by the way, if the left has a problem with that, they should vote for somebody else.

    *****

    Bottom-line (for me) is that the esteemed Law Professor should stick with legal nuances and avoid economic nuances. Because while he is apparently gifted at the former, he sucks at the latter.

84. @Chris S

    Thank you so much for running over interest rates, because that is probably the single most important bit of math an American will ever need to know in their entire life outside of basic arithmetic.

    The bigger problem, to me, is that savings and frugality aren’t big in the American culture anymore. I actively ENJOY finding ways to save money, and I LIKE paying my bills at the end of the month. To me it’s like getting a reporting card that says “BC Woods once again accurately predicted what the future would bring.”

    With all the credit card legislation that has been passed, I think the simplest thing would be that you have to pass a standardized test before you’re allowed to charge anything. The way we do debt as a nation is not sustainable, and the problems go all the way down to our culture.

85. His post is what worldly people would call a threat. “I better be allowed to keep my wealth, or poor people will suffer” actually means “We better be allowed to keep our wealth, or the middle class gets it”. I would prefer, “Nobody tax or the underclass gets it!”

    The arguments against increasing the tax rate are nothing more then libertarian trickle-down bullshit that has repeatedly proven wrong since the industrial revolution started.

    You don’t generate national wealth by consolidating money in the upper class. They will just sit on the money and pour it back into patronage and consolidation. The upper classes aren’t intested in creating jobs, they are interested in maintaining their wealth at the expense of all other concerns, including your job, your health, and your liberty.

    You generate national wealth by creating a large middle class, who spend proportionally more of that wealth on things that involve commerce.

    @63:
    “2) As someone up thread pointed out, people making over $250k tend to respond to tax cuts by saving more, not by hiring more.”

    Or with campaign contributions. Or that that money will be invested overseas and we will see no improvements here. Or a change in money management which leads to even less being taxed. Or increases in luxury goods, where more demand does not lead to more supply.

    All this has been proven, of course. If you hypothetically give more money to 1% of people and take a small amount from 99%, total demand is proven to decrease.

    Really, the list goes on, but you can’t argue with zombies wearing Reagan Masks.

86. Like many Americans, I felt poor, until I went to Russia on a Fulbright scholarship.

    In Russia, my comparable teaching colleague makes about 1/5 of what I do.

    I know that there are poor and hungry Americans. I grew up as one.

    But we make a huge amount of money compared to those in the world community. That eye-opening trip made me realize how prosperous I am, even at half my income.

    I also admire the social safety nets of the US, which, while not perfect, are better than, say, nothing at all.

    Catherine

87. @Chris S

    Oh, another interesting thing to share with your students:

    When a business offers your 0% financing on a major purchase, like furniture or an appliance through an in-store credit card there are three things they don’t tell you about:

    1. If you don’t pay it all off within the 0% time period, you will get charged all the back interest as if you were being charged interest for that entire period of time.

    2. Only 7% of consumers ever actually pay off those loans before they’re charged the back interest.

    3. The interest you pay is actually going to be higher because store credit cards have traditionally higher interest rates than bank backed credit cards.

88. I was, up until very recently, a Bill Collector. I talked to about 50 people every day to help them resolve credit card issues, and was successful enough that I was eventually promoted to a managerial position. I was, more often than not, in the top ten performers in the nation for a major credit card company’s collection department.

    Based on the several thousand people I’ve spoken with in the American population, I have come up with two general rules:

    1. Regardless of education, Americans do not understand debt or compound interest

    2. Americans do not understand the concept of a monthly budget or a savings accounts.

    You realize, of course, that you only see the people when they have demonstrated that they’ve already failed at 1 and 2? So you’re drawing universal conclusions from a pre-selected sample, which is a logical fallacy (I’m sure it has an exciting latin name, but I don’t know it).

89. Erik @74: “As the owner of a sole proprietorship I call BS, since employee salary and equipment lease are both tax deductions.”

    I agree. I’m a sole prop too, and though last year I grossed as a sole prop about 90% of what I’d grossed in 2008 at my previous salaried day job, my tax bill was reduced by more than half because of all the deductions for business expenses – even with the extra self-employment taxes I have to pay now.

    Business expenses are writeoffs, they reduce your taxable income dramatically.

    And mind you, a lot of wealthy people incorporate themselves and then sell their houses to their personal corporation. As I understand it, this makes all the money spent on the home, including maintenance and housekeeping, a deductible corporate expense. (plz to correct me if I’m wrong)

90. Ho0w rich you are at $250K/ year Depends a whole lot on where you live

    My wife and I make around that, but we live in the Bay Area. That means around 1/3rd our net goes to mortgage for a not very nice house in a not very nice neighborhood. Factor in another $2K / month for private school (schools in SF are AWFUL) and you are not rich, trust me.

    Not whining or saying I’m poor either, but man I am certainly not rich. If if I had 250K/year in Kentucky I would live like a king.

91. BC Woods @86: “2. Only 7% of consumers ever actually pay off those loans before they’re charged the back interest.”

    O_O

    Are you effing kidding me??!

    That… that is just phenomenally stupid. Given FREE MONEY, 93% of people will mess it up and get ripped off?

    *shakes head in abject amazement*

    I need to start a credit card company, clearly that’s how to get really rich.

92. gerrymander@71: You might wish to acquaint yourself with the premise and research behind Hauser’s Law, which indicates that the US tax revenues generated in the modern age has remained reasonably close to 19.5%, regardless of specific tax provisions.

    The article you linked to states:

    “However, 2009 tax collections, at 15% of GDP, were the lowest level of the past 50 years and 4.5 percentage points lower than Hauser’s Law suggests.”

    Sounds like it’s time to raise taxes on the highest earners. But maybe that’s just the reflexive scorn talking.

93. I agree. It sounds like a case of bad money management. He says they pay property taxes of $15,000/year. I don’t know the millage rate in Chicago, but that is roughly three times as much as I pay. If you assume the tax rates are roughly equal, that puts their home value (or at least what the city thinks it’s worth) somewhere around $600,000 to $800,000. The tax rates here in the People’s Republica of Ann Arbor are actually pretty high, so if you assume a more normal tax rate, you get a $1,000,000 house. There’s no way with the income and debts they describe they should have bought such an expensive house. The lawn service, housecleaner, nanny, cable, and art classes are beside the point. They are house-poor, and it’s a very easy mess to get into, even if your income is well into six figures.

    I haven’t read the comments there or here, but I do think people underestimate the sincerity of the concern of “the rich” for the people they employ. I have a number of friends and acquaintances that fall into that category, and they do care about keeping people employed, and those are people that fall well below that $46,000 mean.

    Still, I don’t agree with the conclusions of the post, and I do think he should have sprung for a “fancy accountant.” He certainly could mow his own lawn to pay for it.

94. I could have written that post by Henderson.

    I’m a law professor. I’m married to a doctor. We probably make in the neighborhood of the same amount of money as our good friend here. And like Professor Henderson, we have a ton of debt–that $250,000 figure for partner debt sounds oh-so-familiar. I live in an area of the country that is well above the norm.

    I could have written that post by Henderson.

    But I didn’t, and here’s why. For those who argued that the law professor and the doctor are not sucking on the public teat…

    Where do you think those $250,000 in student loans came from?

    Half my student loans from law school–locked in through the magic of consolidation at a ridiculously low interest rate–are a present from the United States of America. Those loans were made available to someone who had no collateral. How did that come about? Oh–thank you, government.

    Now, how about a doctor’s education? They surely also have the benefit of student loans. Back in the day, people used to pay for their medical apprenticeships. Luckily for us, these days medical residents are actually given salaries, many funded through Medicare. That’s right–the government paid to train my partner so that he could earn his six-figure salary.

    And thank you, U.S. government, for paying my salary as a law clerk–giving me an incredible credential and an amazing experience while paying me for the chance.

    Today, my law professor salary is subsidized, in part by the government’s decision to put its finger on the prime rate and hold it down, making it possible for people to pay $40,000 a year in tuition in a time when most people are hunkering down, trying to save every penny they have.

    If I had a gardener, he would drive to work on roads built by this government. If I had a nanny, she would be capable of reading to my child because of the free education she got, provided by the government.

    And I haven’t even accounted for the free libraries that I visited as a child, the government grants that kept my professors in research, or my own education at public institutions.

    I am sick and tired of wealthy people wanting to pull up the ladder after themselves simply because they are too blind to see that they have gotten handouts.

    After all that it has given me, I owe my country a hell of a lot more than a tiny sliver of taxes.

95. It seems to me that the problem with Henderson’s attitude is not so much that he’s facing personal budgetary challenges – that’s a reasonable thing for someone at any income level to worry about, so long as they’re not expecting sympathy from the worse-off – but his burning resentment that he has to spend his money on things (including taxes) instead of being able to keep it all.

    As far as the taxes go, he’s one of those idiots who think tax money just disappears into thin air and produces nothing. While, no doubt, also thinking that money for government services, including those wars we’re fighting in the Middle East, comes equally magically out of some cornucopia. Bah.

96. “That means around 1/3rd our net goes to mortgage for a not very nice house in a not very nice neighborhood. Factor in another $2K / month for private school (schools in SF are AWFUL) and you are not rich, trust me.”

    Rich? Maybe not, but the fact that you have the money to make those choices means that you are at the very least wealthy.

    That you can choose to live in a neighborhood that isn’t a total craphole and send your kids to a decent school are indications of thus.

97. This guy’s numbers are silly. When my husband and I were a dual-income family, we employed a housecleaning service, a lawn care service, and an in-home daycare provider. The housecleaning was about $250/mon, as was the lawn care. I think the daycare was $500/mon. We paid for it on an income that was far less than half of this guy’s.

98. This whole small government fair taxes shtick seems remarkably analagous to the successful perpetrator of a coup: “The Government is dead, long live the Government.”

    “My taxes are impossibly unfair. You there, bookchain bookseller, pay your share! Who do you think got you that minimum wage hike? Huh? People like me, working hard everyday. And you want me to fund your stupid pell grants? Go DIAF. But empty my pisspot first.”

    I really understand why so many people are so eager to defend stories like the Rich Professor’s Lament. Particularly the ones not actually earning more than $250K a year.

    Another Law Professor:

    Whoa whoa whoa. What’s all this keeping a rational head about your position in life and what helped you accomplish it? Stop ruining my American dream. One day I too shall be wealthy enough to get out of this tent I’m stuck in and piss back into it. That’s what America’s based on, buddy.

    And if you don’t like it, you can move back to Canada with their manners and their reasonability and their ice fishing.

99. @95 yes, certainly we are certainly not poor, I consider us upper middle class. However, we are also not wealthy, no summer cottages, fancy cars, employees (ok cleaning lady for 1 hour every other week), shopping trips to Paris or any of that jazz. We watch our money just like everyone else.

    The fact that I have to pay $2K/month for an equivalent education for my child that I got for free in the Midwest is not an indicator of wealth, just an indicator of how bad our public school system has failed our heavily urban areas.

    Also, for the record, I don’t mind paying a bit more in taxes. Figure I can afford it better then most and we are collectively going through a hard time. But I do get annoyed at people from other areas of the country with much lower standards of living making ridiculous assumptions about how high on the hog I must be yucking it up based on their own local standard of living. $250K/year in SF, $100K/year in Kentucky, same life style. Only difference is the tax rate.

100. What bothers me the most about alot of the complaints about taxes is that they might be perfectly valid if it wasn’t for the fact that we can’t have all of the things that our government is paying for, and these tax cuts, and still have a balanced budget.

     What the law professor seems to be ignoring is the fact that our children and grandchildren are going to be the ones paying for his tax cuts if he doesn’t. And no one seems to be getting a handle on the fact that it isn’t the “discretionary” budget items that are doing it, but Medicare, Medicaid, Social Security and the Department of Defense.

101. One little thing: Absolute values of income are meaningless outside of cost of living for where one resides.

     My household’s income may seem astronomical to someone who lives in the Midwest. Here in the Puget Sound area, it’s only in the upper 30%.

     And no, we can’t choose to move to an area with a lower cost of living, because the incomes are lower there, too.

     That said…

     There is a point at which cost of living for basic expenses tops out. Yes, a gallon of milk in LA is going to cost plenty more than that same gallon of milk somewhere in South Dakota, but that cost does eventually level off.

     And that’s where the tax bracket thing comes in, and why selfish rich people Just Don’t Get It.

     Even with eating out regularly and buying some frankly high-end groceries, my household still only spends less than 10% of our income on food. On the other hand, 15 years ago, when we were poor enough to need food stamps, our food budget–scraping the bottom of the barrel, mind–was instead around 20%. To spend that percentage on what I make now, I’d have to be eating filet mignon and drinking Dom every single night. Someone making even 10 times my income? Would have to be eating said meal every night in Paris to spend that much.

     So, while I do have some sympathy for folks who are barely making six figures and happen to live in really expensive areas being told that they’re rich, I absolutely have none for folks who are in the top 5% even for their zip code and still bitch. Seriously? STFU.

102. @silbey

     Yes, I do understand that. I should have been more careful about making it sound so universal, but it is nevertheless a big problem that’s faced by a big portion of the population.

     @Jeff Zugale

     That was the figure right before some of the latest credit card legislation hit. And you can’t really blame people too much for messing it up, because credit card companies do have a sort of Mephistophelian (sp?) way of doing business, which I think is actually terrible for them over the long run because it’s not sustainable.

     Banks used to not require people to make monthly payments on a zero percent “promotion” rate, like what you get when you finance a new stove or whatever through Home Depot, Sears, etc for twelve months.

     Of course what that inevitably led to was people not making payments for the entire length of the loan, and then getting charged the back interest rate at 22.5% or whatever the hell the standard rate is for the brand card.

     Now, you have to make minimum monthly payments on a promotion (As of Feb 22, 2010). And most people, being busy, just assume if they keep making the payments as they show on their statement they will pay it off before the end of the promotion, which still never ever, EVER happens.*

     Another thing that is pretty evil, if you’re not careful, is credit insurance. If you look at the terms for most credit insurance “products” it says something like this “For only 1% of your balance per month, we will insure your account against job loss, natural disaster, etc” HOWEVER, since your minimum monthly payments are calculated such that every month you pay 1% of your balance plus fees or interest, what credit insurance ACTUALLY does for most people is turn their credit card into a machine for charging them interest without making any headway.

     You’ll also find that a shocking number of people who have these products are elderly, and don’t actually qualify for job loss benefits because they’re already retired. AND, most people fail to activate within the notification period of the life event, which voids their coverage. If you do qualify, however, be prepared to fax in a bunch of documents, which get lost. A lot.

     Also, all “Identity Protection Products” they sell you on your credit card are a scam. Your credit card company is already federally mandated to protect you against fraud and to cover the charges. They’re just trying to pay for their losses (and make a profit) by making you think you get something extra for paying for it.**

     The problem is that all of this is in black and white and no one takes the time to look. It’s a cultural problem with the way Americans think about debt.

     *Absolutes added for dramatic effect

     **I have seen Identity Protection Products help people about twice in out of the thousands of people I’ve seen who had it.

103. @100 , totally agree, it’s always better to live in a high cost of living area during income accumulation years and a low cost of living area during deaccumulation years.

     Not only do base cost of living things top out but also your savings dynamic is much more advantageous. For instance, I drop half my net on my house, but at some point (say retirement), in theory at least, that house can be sold, I could move to the low standard of living area. Saving 10% of $250K is much better then saving 10% of $100K. 401k is better. Career options are better. There are reasons why people live in dense urban areas.

     That to me, justifies the higher tax brackets I am people like me pay.

     Just, for our brethren in cheaper parts of the country, do a little research before you pay too much attention to the dollars on the paycheck, that is all. Being in the upper 5% of wage earners might just mean you live in a really expensive place.

     What is middle class? Used to be a house you owned, a car you owned, decent set of household luxuries and ALL ON A SINGLE INCOME. Times, they are a changin

104. It’s a cultural problem with the way Americans think about debt.

     Again, cut it out with the universals.

105. Like unholyguy, I live in an expensive city in the Bay Area. I too own a very expensive house that doesn’t look at all special by the standards of most of the country. (If you don’t live here, you might be surprised at what a million dollar house looks like in some Bay Area cities.)

     So there are a couple of ways I could look at this. One is to say: I’m not rich, and $100k or $200k or more is just a middle class income. Or alternatively I could say: I have an awful lot of money, more than most people even in the Bay Area, and my wife and I simply chose to spend a large fraction of it on a house in an expensive city. If we ever decide we’d rather spend our money on other things, we could always sell the house and move somewhere else. It’s worth remembering that whenever I’m tempted to feel sorry for myself.

106. John, thanks for the response!

     I’m still having a hard time with your economic definition of middle class. The median household income in the US may be $46,000, but this isn’t representative of most families/married-couple households.

     Families where the husband works full-time have a median household income of $86,000. When the wife works, too, the median is $93,000.

     http://www.census.gov/compendia/statab/2010/tables/10s0684.pdf

     I think that is a much more realistic baseline, but it’s roughly double your metric. Do we need to recalibrate “middle class” definitions when talking about families?

     And we haven’t even begun to take into account regional differences.

     A San Francisco family where each parent works a full-time minimum wage job ($9.79/hour) is going to take home what is roughly your definition of a middle class income ($40k). If the lowest income a working couple can legally take home is enough to rank them as the national median in income, then using the national median to determine “class” on a local level doesn’t really work, does it?

     So, while I get and agree with your larger point about fiscal responsibility, I think your definition of “middle class” is unrealistically narrow.

     There’s got to be a better definition for middle class, but nobody seems to have one.

107. @104 or you could say all those middle class midwestern people are actually wealthy because they choose to pay to live in a house rather then to sleep in a field.

     That is about as real as your options of “moving somewhere cheaper” is. Life is full of choices, but choices have consequences.

     “Middle Class” is by definition a standard of living / quality of life thing not a numeric income.

     One of the interesting experiences about living in any densely urban area is it really makes you realize how many variables there are in “quality of life” and how radically the monetary cost of influencing those variables varies over geography.

108. Short and sweet: Dude has a house that costs 4x his annual family income- no WONDER he feels stretched! Thrice your annual is the rule-of-thumb I’ve always heard for “the most house you can SENSIBLY afford.”

109. @#83 BC Woods
     The bill collectors’ case you present on Americans and debt has some validity (except for sample source, as noted), but it can also sound like the field overseer suggesting people shouldn’t become slaves: the American standard of living peaked in 1974 and has been going downhill ever since. Wages have been flat or falling for more than a generation and, much as it galls me to repeat because the term is so abused, the middle class is being wiped out.

     My point is to highlight the difference between average people unsuccessfully trying to survive and those like the professor in the OP. It would also be nice if we didn’t treat our national existence as a game of Beat the Check.

     Irony Points Dept: No one has yet pointed out that the University of Chicago is the source of the economic dogma that has caused such misery around the world (see ‘Chicago School economics’ and ‘overthrowing Allende’). Based on that, the professor should not only have his taxes raised, and more steeply, but be thrashed with a cane switch twice a week for good measure.

110. JB:

     “I think your definition of ‘middle class’ is unrealistically narrow.”

     I’m not aware of having offered my definition of “middle class,” actually. I did note the median household income.

     I will say, however, that no matter how you slice it a household income of $250,000 cannot be considered a middle class income. San Francisco, which you offer as an example, has a median household income of $65,500; Chicago (where Prof. Henderson lives) has a median household income of $47,000 as of 2008. Even a best case median income scenario — the median household income for those with professional or doctoral degrees — is $100,000 nationally. So even among the best paid and best educated, a $250,000 household income is multiple of the median.

     Professor Henderson and those of his particular household income level may be able to make a cogent argument that they are not rich; what they will have a very difficult time doing — statistically or otherwise — is arguing they are middle class, economically speaking.

     Dave P:

     Mind the U of C bashing, man.

111. BTW, Krugman made the same point about the well-off not feeling rich because of the widening income disparity (which is, ironically, caused in large part by conservative policies championed by Prof. Henderson) here:
     http://krugman.blogs.nytimes.com/2010/09/19/rat-race-america/

112. So let me get this straight. The Hendersons makes over a quarter a million dollars a year. They hire a professional to help take care of the children (nanny) a professional to help care for their premises (housekeeper) a professional to care for their grounds (gardener) and yet they file their taxes via TurboTax?

     Really?

     I earn a LOT less than they do, and I pay a professional to take care of my finances. Because that’s the fiscally responsible thing to do.

113. Thanks again, John!

     While you did not offer a specific definition of middle class, your posts and comments argue a definition of middle class from an economic, specifically an income, standpoint. Or, more precisely, they argue that income over a certain level or multiplier is “not” middle class.

     This is where I get confused, because the median income for families with dual wage-earners is a multiple (2x) of the median household income. Does this mean that the median two-income family is not “middle class”?

     But my main point is to ask whether definitions of “class” should take more into account than annual income. We don’t have a fixed caste system here in the US, but we do have social/cultural strata which does not necessarily relate to income but absolutely affects our interpretations of class.

     People who earn $250k but consider themselves middle-class might do so if they perceive themselves (and feel themselves perceived) as having no more “power” or “social standing” from a cultural standpoint than people earning $50k, and a whole lot less than CEOs or celebrities earning millions. Somewhere between homelessness and the Bill Gates, Britney Spears, and Kennedys of this country lie the great mass of Americans. By all means, there are further divisions, but in a country where 95% consider themselves middle class, defining class solely by income may be missing something important.

     Anyway, I never would have dreamed that the conversation I had with you would be *this* one!

     Thanks for the thrill.

114. @Steve Bainbridge

     Well, you haven’t approved my response to you on your website yet but have put up a new post there. Not sure if you are busy or censoring or [deleted because pointless name calling is pointless — don’t do it again, Richard – JS].

     In any case, as you saw above, multiple actual businesses owners have already discredited your sole proprietor example.

     In another case, you have no data to back up your claim that taking more taxes from the well-off would have a discernable effect on their incentives (just 1 anecdote). In fact, the economic research shows your claim to be wrong.

     Also, as you point out, there is indeed no free lunch. Amazingly, you fail to then see that cutting taxes on the likes of Henderson would mean raising taxes on the middle class or raising taxes on our children or cutting Social Security or cutting defense (hard choices that Henderson doesn’t make; prefering to whine about his situation instead). From a stimulus perspective, cutting taxes on the rich probably gets you the least bang for the buck (backed up by many economic studies, not fact-free ideology).

     Really, I’m rather disgusted with all you right-wing law profs (yes, you Bainbridge & Henderson) who profess to worship at the altar of the market yet either have huge holes in your knowledge of economics and basic tax laws or, worse, are deliberately deceitful and aim to deceive the gullible.

115. Josh @44: I’m pretty sure the public schools in Hyde Park don’t suck the way they do in some parts of the city, mainly because of the proximity to UofC. The private school they choose to send their kids to may end up providing a better education, but probably not by much.

     No sooner had the smackdown on Prof. Henderson subsided when Ben Stein decided to start whining too. At least Ben had the good sense to admit he and his family are well off. But then he equates not renewing the ill-advised Bush tax cuts with punishment on him and others in his position.

     Bozo.

116. @Dave P

     Sorry if it sounded like I was trying to be condescending or anything. That was not my intention, and it definitely doesn’t reflect the way I feel. I do worry about the middle class, and how it is shrinking.

     In fact, I HATED that part of my job the most. What should have been a straightforward business transaction had predatory overtones because of the general ignorance (see, no absolutes!) of a lot of the American Public in regards to debt.

     I was just trying to be informative and offer a perspective that would help people understand that these things CAN be beaten.

117. Tagging onto Rachel Swirsky’s comment @27, rule #6 should be:

     Gross income and taxable income are not the same thing, don’t confuse the two.

     Everyone knows what their gross income is because they know what their salary is, but rarely remember what their taxable income is because they only ever see *that* number once a year on their annual returns. One word: deductions!

     Mike @ 82, those rates you’re quoting are for taxable income ranges, NOT adjusted gross income.

118. Urk, that should be ‘lesson #5’…

119. Scalzi observes, “When one is poor, the problem you have with money is not having any. When one is well-off, the problem you have with money is managing it.”

     If the good law professor will just call into David Ramsey’s radio show, I am quite sure that Ramsey will invite him to the 13 week long Financial Peace University series where the professor and his wife can learn how to manage their money. As Ramsey says, financial management is 80% behavior and only 20% head knowledge.

     I agree with Ramsey. Normal in America whether poor, middle class, or rich is to be broke spending more than you make, living paycheck to paycheck. Made Financial Peace myself back in 2001 and am now totally debt free living on a public school teacher salary, right at the medium income for Texas. And you know what, being debt free, I feel rich!

120. I came over here from Kizz’s place.

     First I read “being poor.” It certainly resonated with me, from my past, when I had to live that way. That, and my experience, has helped me keep in mind what other people, less fortunate than me, are experiencing. It’s been some thirty years since I had to eat ramen, but I haven’t forgotten it.

     Then I read Henderson’s article.

     First, I have to wonder about his figures. He and his wife pay $100,000 a year in state and federal taxes on a combined income of $250,000? Really? Then they are abysmally ignorant about filing their returns.

     Second, I had to think about myself and my family. My spouse is a university professor, too, and I work for a public agency. We both have good jobs and, like Henderson, earn over $250,000 combined income.

     When we voted for President Obama, we knew that folks like us might have our tax rates return to the rates we paid under Clinton (although my spouse and I didn’t earn that much in the ’90s.) What we didn’t know was that the economic crisis would furlough my spouse 10%, and forgo my COLA increase. But we realized people who lost their jobs, or suffered deeper furloughs were worse off than we were. We feel pretty grateful we still have jobs.

     We also feel pretty grateful we live in an unique community so the value of our house hasn’t dipped – much. I’m shocked to think that Henderson’s property taxes are $15,000 – ours are less than half that, and we live in Los Angeles.

     Another note about houses – we chose our home because it was in a location with a good public school. And, sure, it cost more than houses in locations with not-so-good public schools. What kind of house does Henderson have that commands $15,000 in property taxes yet isn’t in a neighborhood with a school he can send his kids to? Another note – if he is at U of Chicago, he probably lives in the neighborhood where my nieces go to school in public schools.

     Like the Hendersons, we have someone do yardwork for us, and clean our house. We figured times are tough for them, too, so rather than cut back on the couple hundred a month we pay them, we’ve decided to cut back on stuff like shopping and eating out. We don’t need that stuff and we are lucky that we can afford to buy good food at the store to cook at home.

     Cars – yes, we have two cars, too. We recently splurged and bought me a new one after my 2000 wagon finally tipped 120,000 miles and became unreliable – I got a compact car costing under $15,000. It get me to work fine and it’s a pretty good little car. What do the Hendersons drive, I wonder, and how often do they replace them?

     We also feel like we might feel less pinched if we hadn’t been financially irresponsible in the past, if we hadn’t splurged on that great vacation on our credit cards. If I hadn’t bought all that stuff in 2006 without thinking of how much they cost. I look at those green suede pumps now and think, WTF?

     How do we feel about having to pay a little more in taxes? We’re grateful we’re so fortunate. We’re grateful we have enough money to give a little to some charities and fundraisers. We’re grateful we still have jobs. We’re grateful we have two cars, and they’re reliable, not like my co-worker, whose beater died and she can’t afford to get new one and has to carpool.

     We understand that in a devastated economy, everyone suffers – and we’re grateful that our burden isn’t as severe as that of others.

     Henderson sounds like someone who feels that he should be unaffected by an economic downturn somehow – I’m not sure I understand why he feels that way, but it’s clear he feels it shouldn’t be his problem.

121. John you have to watch those median income numbers, they don’t tell the entire story. They tend to be skewed by the old and the young.

     For instance if I am a retiree in SF and I own a million dollar house I can live quite cheaply. I might have ten million in the bank but as long as that is socked away in equity, it doesn’t count as income.

     Similarly if I am a foot loose and fancy free 19 year old I can live fairly cheaply again.

     That being said, I guess a lot depends on how wide you make middle class. To me, where middle class ends and upper class begins is where luxuries and lifestyle appear that are out of the reach of the middle classes. Second homes, servants, yachts, jewelry, the trappings of the upper classes. Might not be the best definition…

122. unholyguy @90 et al: yes, the Bay Area is expensive. But consider that if your household is pulling in $250K, you are making roughly four times the median income of where you live. I understand you’re not whining. But imagine trying to get housing, educate your children and buy groceries on a quarter of what you make now.

     This is why people are justifiably jumping down Professor Whineamaker’s throat. Not simply because he complained about taxes, or bemoaned high expenses on a high income. But because he looks at his wealthy, privileged life and pretends that if you make him pay a couple hundred more in taxes, that will hurt poor people.

123. I suspect the cause of Professor Henderson’s financial “woes” is that he bought a trophy house. Buy too big a house, and not only do you pay a huge mortage, but you pay more in property taxes, homeowner’s insurance, heating/electric bills, and home maintenance, not to mention the housecleaning service is going to charge you a lot more to clean 6000 square feet than 2500. Also, if you pick a house in the right neighborhood, you don’t have to pay for private schools. I chose my house based on the quality of the school district it was in, because education was important to me and I knew I couldn’t afford private school tuition.

124. Unholyguy, sorry but I don’t understand the point of your comments in this thread of discussion. The title of this post reads “Why Not Feeling Rich is Not Being Poor, and Other Things Financial”. You clearly don’t feel rich, and you are not obviously poor. They are NOT the same things. What’s the trouble?

     I, too, live in SF Bay Area, I am very cognizant of the cost of living here. The basis of Mr. Scalzi’s post (per my understanding) has to do with reaction to the sunsetting of Bush-era tax cuts that will not effect you if, as you say in your post @ 90, you and your wife make “around” $250k. You state that you pay 1/3 of your net income towards a mortgage, which tells me that a large portion of those payments are towards mortgage interest which are deductible, so therefore your taxable income wouldn’t even come close to being effected by this possible tax change.

125. This entire thing is reason 1 that you shouldn’t bitch about money on the internet. For instance: My parents didn’t make the most money in the world when I was growing up but I never wanted for food. I only ever saw movies at the dollar theater but that’s a luxury and I can’t justifiably whine about waiting 3 whole months to see a movie that just came out. For this reason alone I would never say I grew up poor(even if I didn’t grow up rich).

     Once my parents had started to make good money I ended up in college. During that time I did have some trouble with money and at one point ate white rice, hot dogs, and stale movie pretzels from my job for a month. Again: if I had truly NEEDED help I could’ve gotten it.

     I’ve never made 250k in my life but I can’t say I’m poor if I’m being honest with myself. I WISHED I made as much a year as they claim to be taxed though.

126. Just to put some context, I grew up dirt poor in backwoods Kentucky, so a lot of what John wrote in his original article resonated. Never had to raise kids like that though, cannot even imagine, probably wouldn’t have even tried. But most of the rest of it, yes been there, done that, got the scars to prove it.

     That professor needs to spend a couple seasons picking tobacco it would probably open his eyes a tad I think.

     I would never in a million years describe myself as anything other then very fortunate. I benefited from a great public education system and some wonderful parents, and the luck of the genetic lottery. I do not mind paying taxes, and shouldering some extra in hard times like this. I don’t mind paying back into the system, though I sure would feel even better about it if it didn’t feel like it was being run by morons that were pissing the money away, but heh, what are you going to do…

     When my wife and I first moved out here in ’99 after we graduated from college, we made about half what we do now. We had a much higher standard of living, much more disposal income. We actually kinda felt rich on $120K/year back then. We didn’t have kids. Dinks for the win.

     Now you can say we choose it, chose to have a kid, chose to buy a house with a bedroom for the kid, chose to buy it in a place that didn’t have 1.5 hour commutes each way to work so we actually SEE the kid, and chose to not send him to the public school that we lotto’d into that is probably going to get shut down for sucking so bad. Made bed, am lying in bed, am not complaining about bedbugs. Certainly are a ton of people a lot lot worse off. We manage our money, we do ok, we can pay some extra taxes. If this is what rich is though, man it’s oversold. Isn’t it suppose to have a yacht in it or something?

     I do admit I winced a bit when Obama (who I voted for) originally announced that the cutoff line for being rich was $250K and god help you if you were over it. I remember looking at my wife and saying “boy are we rich, cause it sure doesn’t FEEL like it, maybe we should move back and slide under that cap” and laughing.

     There is a lot more to it then the number that shows up on your paycheck, that is all I am saying.

     When you tax people like us, you are not always taxing Porsche driving, champagne swilling yacht club monkeys. It’s easy to take an arbitrary point and run with it, but sometimes life is more complicated then that.

     Now this professor, he needs to stfu and take his lumps like a man. But he’s not Thurston Howel III. Those bastards do not pay taxes.

127. @cyan you have obviously not encountered the wondrous mysteries of the AMT

128. @ unholyguy – you need to get a better CPA.

129. @cyan you know you would think there would be a way out, but in actuality there does not seem to be. There is actually very little in the way of loopholes in the modern tax law, at least as long as you are in the world of actual salary type objects and not capitol gains.

     Here is a link

     http://moneycentral.msn.com/content/taxes/taxshelters/p33512.asp

130. @unholyguy – you’re linking to an MSN site as opposed to an Irs.gov publication? Seriously?

131. @cyan well i wanted something that could be read by ordinary mortals without their heads exploding.

132. Exactly, well off people are not forced to live in San Francisco. They are not forced to put their kids in private schools. These are choices people make about their lives and careers and family, and insisting that the rest of the populace pay for those choices because you don’t want to is hardly an argument for you knowing better than the government how to manage money. There are plenty of people living in San Francisco who make $30,000 or less a year, who are forced to live in San Francisco and who don’t have choices. If you have large debt to go with your large income, that’s your problem from the choices you made and the things you bought — house, advanced education degrees, etc., not the government’s.

     We have credit cards and we use them, but we use them as a temporary one month loan and pay the balances in full each month. That means we may not have as much for savings in certain periods and the credit cards still make money off our purchases, but it also means we’re cognizant about how much we’re spending and can make smarter choices about when and how we buy, and we keep our debt lower besides our mortgage.

     Henderson got a free ride with his tax cut. Bush rammed the tax cuts through with the little expiration/reconciliation bait and switch so they didn’t have to be paid for, and now that free ride is done. His taxes, as noted, are only going up a few hundred dollars. That’s a few restaurant meals at his level of living. His other debt is entirely by his own choice. Meanwhile, he, being a high income guy with a big house, uses up more public resources than others in terms of water use, roads, trash pick-up, etc. Yes, he pays property taxes — again his choice — but it’s unlikely he pays a proportionate share for the services he uses compared to someone living in a tenement apartment and using public transportation, and he gets a much bigger tax deduction through his mortgage interest, IRA contributions, etc.

     Americans pay lower rates of taxes than most of the Western world and get a large amount of government services and aid for a very large population. And yet they constantly want more services for less tax, while the wealthy and corporations send their money overseas. You can’t get blood from a stone. Put simply, the middle is the middle. If you’re in the top 2% of income in the country, that’s not the middle. If you have the option of choice, use it to make yourself less in debt, not blame the government for your choices.

133. When my father moved from Orange County, CA to Pittsburgh, PA he calculated the difference in the cost of living taking into account housing, food, and utilities (maybe some other expenses, I don’t know). Much to his surprise, the cost of living was not substantially cheaper in Pittsburgh. While housing was cheaper in Pittsburgh, other costs were higher which offset the savings from the lower housing costs.

     This is not to say that living in SF or NY is a piece of cake, simply that housing costs are not the only measure of the cost of living.

     As someone whose gross income is definitely in the top 10%, I have no problem paying higher taxes (even though my taxes will not be affected by the expiration of the Bush tax cuts yet … in a few years, probably). I can guarantee that I won’t be firing my gardener or housecleaner if my taxes go up. (I did have to pay a marriage penalty tax of $2000 although I think that penalty has increased … should have just lived together :))

     I’d like to see higher income tax and lower sales tax. The more money you get into the hands of the poor, the more demand there is for products (as they start to be able to afford products again), the better for the economy.

134. Oops – that should have been the marriage penalty has decreased, not increased.

135. Man, I wish I could decide how rich I was allowed to be! For some reason, the people cutting my paycheck have always been the ones who make that call.

136. I can’t imagine allowing the tax burden to increase is going to help put Americans back to work. My numbers might be old but about 80% of all employment comes from small businesses. So shouldn’t we be interested in decreasing the tax burden on Americans to help the economy grow?

     If rich (or anyone) have less disposable income, who does that help? Not me that for dam sure. The government? Not really sure the history of taxation and tax revenue isn’t static, meaning increases in taxes do not necessarily equal increases in tax revenue, in fact some would argue that tax cuts lead to increase taxable revenue and thus greater tax revenue. Generally taxing something discourages grow in what ever that something is, and income tax can be a seen as a taxation on productivity.

     So having the government tax monies out of the private economy to redistribute it into job making policies/programs in both the private and public economy doesn’t make sense. Especially when it comes at the cost of 1.4 or 4.4 million per job, in the case of LA and California. That is pretty shitty stimulus and some of it did not even go into creating jobs but saving current government jobs. If you want to waste more of your money give it to the government to “grow” the economy otherwise let it stay in private hands.

137. @unholyguy – which is why I say you need a better CPA. The detailed specifics would make any ‘normal’ person’s head explode. What TV shows do is to minimize such potential ‘head-expodi-ness’; details and terminology are glossed over for ‘understandability’. And, and this is important, if you’re NOT the type of person who will put a lot of time and effort into understanding the meaning of all that terminology, you can unwittingly buy into a reality that is other than what you thought…

     Get a better CPA.

138. Paul:

     “My numbers might be old but about 80% of all employment comes from small businesses. So shouldn’t we be interested in decreasing the tax burden on Americans to help the economy grow?”

     This was already addressed earlier in the thread, actually, by at least a couple of small business owners. One reason why it pays to read the thread at least cursorily before commenting.

139. Sorry John, I kind of skip around and I am not as through as I should be, I will do better next time.

140. You are in the “middle” or not in the “middle” depending on what you use to measure middleness.

     If you use income alone without any concept of anything else, then you get very much the wrong answer.

     This is why our tax structure in theory has provisions for things like “do you have children” and “how much do you pay in mortgage”.

     Except of course those things don’t actually work all that well anymore due to haxxors like the AMT, that favor the lower cost of living, more rural areas, over the higher cost of living more urban ones.

     Those @cyan is telling me that the interwebs is lying to me and maybe it is just that my accountant sucks and if I put more of my money into tax exempt interest from private activity bonds or Intangible drilling, circulation, research, experimental or mining costs I would be off the hook. Haxxors to hack the hacks I suppose.

     Course all those subtleties tend to get dropped since most people do not say “if you have a taxable income of more then $178,156 you are a rich bastard who deserves to get taxed to death unless you live in a high cost of living area in which case you are only comfortably well off” they go for the over simplification, $250K, bam, off you go.

     Honestly, to most people, rich means “20% more then I make” and that is pretty much the end of it

     It also tends to piss off Californians since we get the shaft about every way there is.

     Now admittedly, I could always move. However, I always kinda thought the idea was to maintain all 50 states as habitable, viable places for people to live in.

     Again, am not saying don’t tax me. Just saying there are complexities here

     To me, what matters is the excess after the standard middle class spend is spent (food, medicine, house, car, decent school, etc). Far more complex question I admit.

141. Let’s figure out how much money we’re really talking about here. The Delong article states that their income is $455000. I think he means total income, but for the sake of making the tax hit as large as possible, let’s assume that does not include employer match and employer benefits. Based on the article, we can assume $15,000 for property taxes, $60,000 into a untaxed savings (I’m not sure about that one), $30,000 for mortgage interest, and $13,650 for state income tax. All of these are deductible, leaving a taxable income of around $336,350. Actually, it’s likely much less than that, since they are likely taking other deductions not listed.

     The amount above $250,000 is $86,350. The Obama tax increase will cost them $2,590! That’s 0.5% of their income. Assuming they take home about 50% of their pay, that’s $215 per month out of a take home pay of about $18,958.

     They are complaining about an impact of about 1% of their check each month. No, they are not rich, but they are clearly well off. Gee, the well off have gotten whiny these days.

142. @unholyguy: you do realize that you have the option of filing under the AMT provisions or not, right? If you did so and it resulted in your disadvantage, either you completed the forms yourself without understanding the implications, or your CPA sucks.

     In both senarios, I recommend getting a better CPA (and for the former situation, it should be one better than you)

143. Honestly Charles, I doubt anyone is really worked up about what the bill is now, I think what is left of the upper-middles and lower-uppers are more scared about what it will become.

     The country is on the ropes, the working class is broke and out of work and probably never going back to work, the super rich are untaxable for whatever reason, similarly the baby boomer retirees are off limits to anyone with a political brain in their head.

     The wars are not ending, health care is only going to get worse as the population ages. Our politiciains could not balance a budget if someone crashlanded a asteroid made of platinum on the capitol building.

     It does not take a rocket scientist to figure out who is going to be footing the bill.

     This is all preemptive positioning.

144. @cyan I’m not sure what you are saying. You have to calculate both rates and pay whichever is higher. Else there would not be much point in having it.

     My CPA might well suck, but he is not me, I may be a fool but I am not a damn fool (-:

145. Unholyguy, please see my comment @ 117. Gross income is NOT the same as taxable income. Look at your last year’s return.

146. If you use income alone without any concept of anything else, then you get very much the wrong answer.

     Which is why “OMG everybody over $250K gets taxdeath” is also very much the wrong answer.

     And, as has been pointed out over and over, Henderson painted himself not as middling or simply well off; he claimed his family was “just getting by”. You know, because after you invest in the stock market and hire servants and buy new cars every year, you’re just living paycheck to paycheck.

     It sure didn’t help that his piece was larded with privileged wankery of the sort rarely seen outside of op-ed pieces in The Economist. He sends his children to private school not because the public schools near him are hellholes, but because he and his wife care about their kids. A nanny on top of paid daycare is a “must” for two-income couples. They bought a house not because they liked it or thought they got a good deal, but to “invest in the University community”. You start to wonder how he managed to type a whole blog post with his hands nailed to a cross like that.

147. @cyan. Oh yes, I know. However, to quote wikipedia (and John please feel free to tell us to STFU if we are annoying)

     “In practice, taxpayers must compute tax owed under the “regular” and AMT systems and are liable for whichever is higher. The AMT system has in general a broader definition of taxable income, a larger exemption, and lower tax rates than the regular system. For taxpayers subject to the AMT, it means that a portion of their itemized deductions are effectively eliminated, and thereby increases the tax they owe the federal government vs. the regular tax system.”

     For me, property tax, state income tax are the killers. I do still get to claim mortgage interest, but that is about it. Child credit was long gone even under the normal system

148. Heya John.

     Just on a cursory look at the figures, They don’t look right. This man at the very least needs a good tax accountant.

     (Okay, okay, I’m a currently unemployed investment accountant who has moonlit for a long time as a tax accountant…)

     Lets go with his numbers for a minute. Lets ‘say’ his family income was 260,000. That would make, as a married man, his family federal income tax (by the tax rates in front or me for 2009) 63,421. The state tax rates for Illinois is a flat 3%, whatever you make, so that’s an additional 7,800.

     A total, state and federal tax of 71,221. That’s for a taxable income of 260,000. not a ‘gross’ income, a taxable income. Income AFTER all exemptions, which he has 5. he is in phase out, but he cannot get less than 2/3rds of a full exemption each. So, he may only get 2422 each, and not the 3650… but that’s an additional 12K in gross income. Add back all his deductions. the 7800 in state taxes. the 15K in property taxes he states. We’re now up to 295K in gross income. And we haven’t even touched home loan mortgage interest on that property.

     I know I’m ignoring alternative minimum tax so far, but even that… If he’s paying what he said, he’s paying far too much. I can’t ball park 100K in state and federal taxes for someone living in Illinois for someone with a TAXABLE income of less than 325K. And that is only if we’re dealing with a very high mortgage interest deduction, triggering alternative minimum tax.

     As a tax professional I cry ‘foul’. Get this guy to a tax accountant.

149. @unholyguy – now you are quoting Wikipedia? Have you actually consulted a CPA professional? And by that I mean an actual Certified Public Accountant as opposed to someone who plays that role on the Internets?

150. Wrenn @ 148 posted: “We’re now up to 295K in gross income.”

     You mean down to ‘taxable’ income, do you not? Because otherwise, the math don’t add up.

151. Unholyguy:

     “You are in the “middle” or not in the “middle” depending on what you use to measure middleness.”

     Seriously. This line wins the comment thread.

     mythago:

     “You start to wonder how he managed to type a whole blog post with his hands nailed to a cross like that.”

     Exactly. The Good Professor’s post was so unselfconsciously selfrighteous I really thought it was going to turn into a Pink Floyd dark sarcasm in the classroom bit.

     It’s so much less a commentary on tax policy than it is an insight into how readily people nail themselves to their own personal crosses. Also, whilst apparently forgetting that the internet is not a speakeasy for your country club grievances.

     I kind of wonder how many bushes his gardener pissed on after reading that.

     Middle.

152. Wow you’re being nicer that Krugman

153. Bugger. Spelling Fail. s/that/than/

154. His point might be that $250,000 is too low of a threshold to be considered super rich. Super rich is not working anymore and living on your investments and net worth. At $250,000, people still have long commutes to their full-time job trying to pay off credit cards, student loans, car payments, alimony, etc …

     Also, with out the extra help around the house and the kids, he and his wife probably couldn’t be a successful professor/doctor. So while they might seem like a luxury, they might be necessity to maintain their jobs. Unless you’re a successful professor or doctor, don’t assume to know what his needs are.

     Anyway, I wish people would stop hating him for being successful and wanting to be better. It’s just jealousy, like when people complain about runway models doing hard work, or thin people saying they’re fat. They’re successful and better than you at life. Do something about it instead of complain about it.

155. LMAO I am laughing at both the subject and those defending him by saying he somehow needs a break because his over-the-top lifestyle provides jobs. This is an example of trickle down economics at its best, and it is an outdated class system that deserves to die out. This mindset is the reason a certain element of our society feels it has the right to be ill-mannered, rude, and condescending to the lowly rest of us pouring their coffee, ringing their purchases, etc. They feel they are doing us a huge favor by merely existing and throwing their credit cards dismissively at us. No sympathy here! I’d like to see him go from working for years, then having enough to own a home, to losing it, having had to take a lower paying job. and having a taxable income of $16.5K. That man doesn’t *need* a break. Can’t believe he was whining in public about what amounts to petty cash for him, but would be a lifechanging amount for some of us. What an oblivious dreamworld he’s constructed for himself.

156. Not Super Rich:

     “I wish people would stop hating him for being successful and wanting to be better.”

     Yes, that’s why.

     His point may be that’s he’s not “super rich,” but fellow is doing more than well enough, NSR.

157. Of course $250,000 seems high, but them so does your income and most everyone else who reads this when compared to true lower class citizens. A question I have. Assume that you (JS) has a income that would be considered mid-high to high level and it was proposed that you pay more taxes than many of your readers because of it, would it bother you? Forget that you work hard and really apply yourself to make a very good living for your family. Would you feel it fair that the someone makes you pay more percentage wise because of your success? And what if there is some truth to the thought that some of those receiving your additional money are simply lazy or unmotivated to do better for themselves?

     Just curious.

158. Terrific summary. Well done.

159. LeftField:

     Well, in fact and without going into any detail, I do have a high-level income, and if the Bush-era tax reductions on top level earners are allowed to expire, I’ll see my top marginal rate go up.

     And yes, I’m perfectly fine with that. Your question fundamentally boils down to whether I am I fine with a progressive income tax scheme, and the answer is, generally speaking, yes I am. In a specific sense, the potential bump in my top marginal tax rate will be not at all onerous to me or my family, because of the nature of marginal rates, and because, apparently unlike some, we engage in intelligent financial planning and don’t live on the ragged edge of our income, because that would be stupid.

     In any event, I can easily afford to pay that higher marginal tax rate, and I don’t think it’s unfair that those like me who are financially more fortunate are called upon by their government to contribute more for the common weal. Even after I pay my taxes, I’ll still have more than most.

     As for:

     “And what if there is some truth to the thought that some of those receiving your additional money are simply lazy or unmotivated to do better for themselves?”

     I doubt that the soldiers in Afghanistan, or the NASA scientists putting together the next planetary exploration spacecraft, or the workers repaving the road in town, or the teachers educating my kid, or the sheriff’s deputy who makes sure people don’t speed past the school in the morning, or the very nice lady who brings me my mail, or, for that matter, my Congressional representative, who seems awfully industrious for better or worse — all of whom are paid from the taxes I provide — are “simply lazy and unmotivated.”

160. For posterity’s sake (and as someone who aspires to the petty problems of the 250k+ crowd, and as someone who didn’t read all the rest of the comments):

     This was so very awesome and also true.

161. I don’t begrudge paying for the government to do some tasks.

     But after reading this thread, I realized that what does bother me is that the government is the largest employer in the US, but it produces no product that builds up the economy. It takes over an industry – health care – and expects me to pay for it. It takes over college loans, thus forcing me, if I want to go to college, to get money from the state instead of a private fund.

     I want to see the government reduced and taxes cut.

162. I wish people would stop hating him for being successful and wanting to be better.

     Oh, spare me. I don’t hate this guy at all, and certainly not for his money. I have some relatives who are probably in a higher income bracket than he is, and I love them dearly and for reasons that have nothing to do with their wealth. I wouldn’t mind making a half mil myself, although I suspect I’m reading the wrong blog for tips on how to do that.

     The reason this particular well-off gent has set the left wing of the Internet on fire is not because he is wealthy, and not even because he sees himself as part of the struggling middle class: it’s because he saw fit to whine to the entire Internet about how IT’S NOT FAIR to put ANY MORE of the burden of running the United States government on HIS tender shoulders.

     That government maintains an army for the ostensible purpose of protecting his property; it subsidized student loans for himself and his wife; it recently ponied up a trillion bucks to prevent him from waking up in the morning and discovering that the balance in his money-market account had mysteriously evaporated. But none of that matters to him; the only government activity he perceives is the activity that might deduct something from his current cash flow.

163. @cyan Unholyguy is 110% correct when it comes to AMT. You cannot just pick and choose whether or not you want to “use” AMT. I am an accountant and I have studied AMT. The Wiki quote is 100% accurate. You calculate your taxes BOTH ways (if required) and you pay the HIGHER amount. You can’t just say, “Oh, don’t want to pay that! Back to the old way!”.

     AMT IS nasty business. If anyone ever is required to figure out AMT, I would always recommend a CPA. AMT was supposed to be a temporary thing. (Like the IL Tollway) We see how well that turned out. Long, complex explanation grossly shortened: AMT goes “backwards” into figuring out your tax liability. It is meant to be an indirect method at collecting more taxes instead of saying “we are increasing taxes”.

     You pay whatever amount is higher. You absolutely cannot pick and choose.

164. “Anyway, I wish people would stop hating him for being successful and wanting to be better. It’s just jealousy, like when people complain about runway models doing hard work, or thin people saying they’re fat. They’re successful and better than you at life. Do something about it instead of complain about it.”

     I’m not sure that I’ve seen hate more than frustration and irritation, but the source of that discontent isn’t jealousy. I make enough to come close to that tax bracket, as do several others posting above. And we all agree, that his implied sense of entitlement and insinuations that ‘lower my taxes or the poor people get it‘ might not have been the best way to make friends and influence people, given that current national economic situation.

     I have friends who have been rendered jobless, some for the first time in 19 years. They are not jealous, they are INSULTED.

     (I’m not even going to touch the implied ‘poor people are poor only because they are lazy and want to be‘ message embedded in your post.)

165. Oh and I also wanted to comment on how some people are theorizing that Prof Henderson MUST own a $1M home because his taxes are $15K.

     When house shopping myself just last year, I was looking at homes in Arlington Heights. A suburb of the city. One house we were looking at: $190K with $8K in taxes.

     Yes, you read that correctly.

     It’s not ALWAYS about the price of the house, but rather, also the location. The Professor said that he and his wife live in the college area of U of C. I can easily see him living in a $500K home paying $15K in taxes. That said, I also don’t think that homes in that area are that cheap anyhow.

166. @LeftField #157:

     The amount of money you make isn’t proportionate to the amount of effort you put in. I say this knowing full well how hard it is to be a law professor. (It’s hard to GET the job. Doing it, however….)

     I don’t kid myself. I’m smart and clever, but fuck, if I wanted to work my ass off for money, I’d have gone to a law firm and made partner.

167. On a side note, I live in the Socialist Dominion of Europe… I make a fair amount of money, about 130,000 USD combined family income (but of course our wages are hard to compare with US wages because our social and taxation systems are so different).

     In any case, the federal income tax rate for a family like mine is 45%. In fact, it goes up to 50% and more if you add communal, car, and property tax.

     Is this a problem to me? No. I gladly pay up because I know that (most) of the government personnel paid by my taxes actually do work to make my life better; I have almost-free access to healthcare that is just as good as that in the US or anywhere else in the world; we have the densest rail network in the world, good roads, one of the best educational systems in the world, etc etc.
     You get what you pay for, in this as in any other area.

     Of course with taxes you’re not just paying for yourself, but also for your less fortunate compatriots.
     Because, like it or not, the essence of the whole taxation debate is not about the economy, about slowing down growth (at least not until you reach the taxation levels we are facing over here, which really are at the upper limit, as recent experience has taught us).

     No, the reason why people feel so strongly about taxes is that taxes are all about ‘Me’. It’s about ‘The Man’ taking ‘My Money’.
     And sadly that brings out the worst in many of us…

     Personally, I pay up happily, because I know it means that it might just be my ‘donations’ that allow the kids of our recently immigrated Polish cleaning lady to go our free schools, and that will give them a chance to attend one of our almost-free top universities…

168. Cassie @161: Your last line is the only accurate statement in your post. “I want” is not the basis of a proof, however.

     And, for the nth time, the professor wasn’t leveling a sound critique of how the government spends his money improperly, or why the rollback of tax cuts is bad policy.

     It is amusing (if somewhat predictable) to see the Gilded Age wannabes crawling out of the woodwork to tearfully defend this guy.

169. I said nothing in defense of the professor, Mythago.

     I stated that there are two programs that the government is taking over that 1) cost me money and 2) I see no constitutional rationale for the government to stick its [proverbial] nose in and take my taxes to fund. I said reading this thread got me thinking. No reference to the professor at all.

     “Gilded-age wannabe”? Ad hominem attack? So beneath you, Mythago.

170. Stephanie: I haven’t run the numbers myself for Chicago, but I know that Boston taxes for owner-occupied residences are substantially lower than taxes in the wealthier Boston suburbs, because (a) the city can also get revenue from taxing property used for business; (b) the suburbs may have higher budgets per resident (in particular, they may have more expensive public school systems); (c) the Boston city fathers want to give people an incentive to live here and own homes here and have some vested interest in not dropping garbage all over the sidewalks.

171. Cassie @169, you flatter me to suggest that such things are beneath me, but nonetheless I owe you an apology; that remark was directed at @154 and similar, rather than your post, and it was inexcusably sloppy of me not to be clear about that.

     But what you stated was actually that “the government is the largest employer in the US, but it produces no product that builds up the economy” – a very different statement from whether the (presumably, federal) government has a constitutional right to tax you. As to the former, I’m genuinely not understanding your argument that the government ‘produces no product that builds up the economy’.

172. “But after reading this thread, I realized that what does bother me is that the government is the largest employer in the US, but it produces no product that builds up the economy. It takes over an industry – health care – and expects me to pay for it. It takes over college loans, thus forcing me, if I want to go to college, to get money from the state instead of a private fund.”

     It doesn’t? It produces a bureaucracy that maintains our laws, infrastructure, defends our borders and freedoms. It produces jobs to support those goals, such as the huge number of jobs created for the 2010 census (which in turn produces accurate reports about our populace, valuable information used for many purposes).

     When did the US government take over the entire Health Care Industry? Apparently no one informed my pharmacist, doctor, employer or insurance providers…because I’m still dealing with all of them, not the federal government.

     I’m not really sure what you’re referring to in regards to student loans. Government oversight of student loans has been in play for decades, guaranteeing low-interest loans to allow for expensive higher education. You certainly aren’t forced to go to public sources for your funds, though the government oversees student loans to make sure they aren’t harming students. A large number of lenders offer private student loans…and failing those, good old fashioned regular loans are available (though harder to get and for higher interest).

173. I’m noticing a fair amount of statements equivalent to “Progressive taxation discourages ambition and small business and thus decreases social mobility.”

     Other folks have pointed out the errors in the small business argument. Allow me to note that the USA has less social mobility than many more progressively taxed nations.
     (see: http://www.oecd.org/dataoecd/2/7/45002641.pdf, in chapter 5 )

     Apparently rampant socialism is better at encouraging ambition than you might guess from first principles. Some might say social and health safety nets encourage risk taking in business, good infrastructure encourages competitiveness, and heavily subsidized education encourages ambition. However, it is my understanding that these old progressive saws were conclusively disproved when the USSR showed that ruthless communist dictatorships are not necessarily economically successful. So it must be American Exceptionalism, only not in the way you’re used to.

174. Oh, and also allow me to note that BushCo put the 10 year expiration on those cuts as a trap, and I gotta give ’em credit – as a trap it is working pretty darn well. I would have thought that the blatantly cynical nature of the whole thing would have just made people roll their eyes at it, but nope.

175. No huhu, Mythago.

     The government is pretty much a service organization, isn’t it? What physical product does the US government produce?

     The link between the right to tax (unfortuantely, clearly constitutional) and the government as the largest employer – well, that would be my taxes paying those salaries. Reduction in the size of that government means reducing my taxes, right?

176. “those receiving your additional money are simply lazy or unmotivated to do better for themselves?”

     Code for “I’m well-off, and you’re not. So obviously, you should have done whatever it is that I did to be me, and not you, moron.”

     This is obvious crap.

     For instance. I am a software engineer. I make a very cozy living at this profession. Do I think that other people are stupid/lazy for not being software engineers? No. If we were all software engineers, who would cook? Who would fix things when they broke (I’ll give you a hint, NOT A Database Admin)?

     If we all did the “$M4RT” thing, we’d all be training for positions at hedge-funds.

177. WizarDru @ 172

     I’m not really sure what you’re referring to in regards to student loans. Government oversight of student loans has been in play for decades, guaranteeing low-interest loans to allow for expensive higher education. You certainly aren’t forced to go to public sources for your funds, though the government oversees student loans to make sure they aren’t harming students.

     To avoid the spam filter, I removed the http://

     articles.sfgate.com/2010-03-30/business/20827156_1_college-loans-stafford-loans-rate-on-plus-loans

     Feds take over student loan program from banks
     March 30, 2010

     President Obama will sign a bill today that ends a 45-year-old program under which banks and other private-sector lenders such as Sallie Mae receive a federal subsidy for making government-guaranteed college loans.

     Instead, the U.S. Department of Education – which already makes roughly a third of these loans through its direct-lending program – will make 100 percent of them starting July 1.

     Surely you didn’t miss this too? en.wikipedia.org/wiki/Patient_Protection_and_Affordable_Care_Act

     Eventually, you’ll be dealing with the government for your health care.

     I do thank you for the census -that is one I hadn’t thought of. But what other physical product does the US government produce? Wouldn’t it be better for the economy if production of goods was larger?

178. I’ve largely ignored this tempest in a tax code because there’s little point in any of the surrounding discussion that’s happening. It really all boils down to one thing:

     You believe in progressive taxation or you don’t.

     A significant portion of the people on Henderson’s “side” simply do not. If you don’t accept the idea that you should tax income above a certain threshold at a higher rate than the income below that threshold then you will never be okay with it, ever.

     What’s the point in that discussion? We can have worthwhile debates about the optimal point to draw the lines and what the percentages should be but I don’t see it happening. Instead we get things like the easily disprovable canard (kudos to the people above who mentioned it) about salaries and job creation or folks like Henderson who just don’t want to pay more taxes.

     Maybe I’m just tired but I’m steadily coming to believe that to engage in this discussion is to enable the progressive taxation opponents to control the debate. They’re creating a discussion and not playing by equitable rules of engagement (see above lie re: salaries) so what they really get is an opportunity to smash at progressive taxation at every turn.

     That’s fine, but I’m no longer going to help them avoid saying “we do not believe the people who have more should have to pay more.” This “debate” is disingenuous and I’m not going to play along anymore by getting caught in the deep details that aren’t the real point.

179. Cassie,

     I’m not sure where you’re getting your facts, but the government hasn’t taken over either health care or the student loan industry.

     You can still get private student loans. Just ask any student who has to borrow more than allowed under federal loan limits–there is a vibrant industry out there willing to loan students money. People prefer the government loans, because, well, lots of reasons–but that’s not the same thing as taking over the industry.

     What the bill you’re pointing to did was remove the entitlement program that allowed the loan industry to stick the government with the cost of default, but pocket all the profits, from the loans they were generating.

     Private loans still exist. The government didn’t “take them over.” The government just stopped subsidizing private industry.

     Period.

     Your facts about health care are equally wrong. There is no provision in the health care code that “takes over” private industry. Not one.

     This is why this debate is so frustrating: because it’s impossible to argue with people who don’t actually know what is happening, but think they do.

180. Cassie, the student-loan bill that you refer to is saving taxpayers money. Previously, private banks made most of the loans with government guarantees, which meant that the banks got to skim risk-free profit from those loans. Now, the government loans the money directly.

     The Affordable Care Act does not change the fact that non-elderly, non-poor Americans get their health care from private-sector doctors who are paid by private-sector insurance companies.

     I don’t understand why it matters whether or not the government produces any “physical product”. Would the country be better off if the government owned millions of acres of farms, rather than issuing food stamps (or whatever they’re called these days) so that poor people could buy food from the private sector? Would the country be better off if the government owned the factories that built fighter jets, instead of buying the planes from Boeing?

     If you would like to know, in general, what the government is spending your tax dollars on, you can start here (requires Flash) or here.

181. Cassie,
     as someone who spent SEVEN YEARS repairing his credit after the damage done to it by an error in reporting and handling of his student loans by not one, not two but THREE separate banks…I’m not seeing how moving guaranteed student loans directly to the federal government could really lead to poorer customer service. My loans were sold, reported delinquent and defaulted while I was still in school and still collecting them, re-sold, sold again and then consolidated, re-sold and then misreported AGAIN. It actually took the intervention of my congressman at the time, now the Vice-President, to help clean things up. And some of it only went away when my credit record was cleared after 7 years, thanks to pro-consumer legislation from the federal government. And regardless, none of that is preventing you from getting a loan…just a guaranteed loan. And who was guaranteeing that loan?

     You want physical products of the federal government? I’m not sure WHY you want them, but there are plenty. How about the entire United States Military? How about government buildings, a vast postal system and all the infrastructure required for it, dozens of federally funded US Army Corps of Engineers Civil Works Projects and more than anything else….huge volumes of data, reports and information.

182. Don @ 178

     Awww, what fun is a debate without all the canards, fallacies and disengenuousness? : )

183. I can’t afford pie, you insensitive bastard.

184. Cassie: “Reduction in the size of that government means reducing my taxes, right?”

     No, it doesn’t. Reduction in the size of the government means that there are fewer people to provide effectively the services you demand (fewer people employed, messing up the economy,) but you’re still demanding those services, so the government still needs the tax revenue to pay for them. To reduce your taxes means that you have to reduce your demand for services from that government. Which means you pay for private cops, no public education, etc. (And you’re going to need the private cops to protect your extremely vulnerable gated fence from the hordes of youth gangs who are no longer in school, have no future and so think taking your stuff is a really good idea.) No subsidized utilities so if you want water in an increasingly water-strapped world, you will be paying a lot more for it. No farm subsidies so food prices shoot through the roof. No grants for research or aid for seniors in their prescriptions, so the price of drugs shoots through the roof. The biggest cost to the government is the defense budget, and a lot of that goes to civilian contractors. We can trim waste and the budget in defense, and they are working on that, but if we had to do the sort of reduction you’re looking for and a disaster hits your town, don’t expect the National Guard to come in and help anymore, assuming we still have one. Don’t expect border guards either.

     We had one of the largest tax cuts in years from Obama last year. My taxes went down. The expiration of the tax cuts is not a tax increase; it’s a return to previous tax levels that are not particularly burdenous on the well off or on businesses making a lot (which does not include most small businesses.) And Obama is proposing a further tax cut for the middle class. You don’t have high taxes in the first place. And that’s why your state government has a shortfall of revenue and can’t provide services.

     Bush cut the size of the government. He gutted agencies and fired people. But he and his Congress also spent like mad, on two wars and the military, on subsidies for his business friends — who then turned on him and demanded bail-outs later, and turned the surplus we had into a deficit. And they did it for the same reason people argue to extend the tax cuts for the 2% now — we can’t pay for it, but we want it and we don’t care if the rest of the country sinks for it.

     We have all these people who think the coolest thing to do would be to have a system and a society like Mexico. Which isn’t working out very well for Mexico. The idea that we should privatize everything and that the private market would then do a better job at lower cost has been shown to be utter bunk again and again. The government is better at providing low cost services, whereas the private companies price gouge and form non-free market oligarchies at every opportunity. Which will cost you a lot more than a return to older tax rates.

185. Eventually, you’ll be dealing with the government for your health care.

     As an ex-pat Brit living in the US, all I can say to this is, you should be so lucky.

     Dealing with US healthcare providers is a nightmare compared to my experiences with the NHS.

     Anyway… as many others have pointed out the problem is that Henderson has set himself up to live on the edge. And, having not quite been there, but close to it, I can testify that its easy to do.

     You take that third vacation, you fly yourself First Class without playing upgrade roulette, you book a nicer hotel and use the spa package, you “pick up a few things” at Whole Pay Check rather than Safeway and a myriad of other things that you just don’t think of because $250,000 is a metric sh1tload of money.

     The interesting thing is you can quite easily restructure. We recently had to go from 2 large salaries to one while I start a business, that’s extra hard as I’ve decided to bootstrap it using savings and personal resources – not something I’d generally recommend but the credit markets are still a mess and I haven’t met an investor I’d want to work with yet. Any we reduced our monthly outgoings by more than half and we still have a cleaner…

     Even with the Bush cuts reversed the levels of effective taxation in the US are laughably low. You can’t have the size of military the US has and the taxes – if you want both, forget about the social stuff and accept you have to pay more tax.

186. WizarDru @ 181

     I never said that the government’s service would be better or worse than a bank’s – only that the government has taken it over and I see no constitutional basis for it. Your story does show there are many failings in the system, but does it demonstrate a need for the government to take it over?

     As for student loans guarantees: the lenders (government) seemed to think that I should guarantee my son’s loan. That didn’t change with the new law.

     It’s an interesting mindset that I think has changed over the years from “keep the government out of my business” to “the government needs to fix this.”

187. Is being “rich” solely about income? I thought the classes in our society are supposed to be labor and capital. So if you have a high income for a few years but have not yet accumulated very much capital, are you already rich or just on your way to becoming rich?

     Seems to me you are still labor, not capital. You could lose your job tomorrow. Wouldn’t a precise definition of the wealthy require some consideration of net assets in addition to income?

     Or maybe we don’t care about precisely defining “rich”, because it is not a legal term, just a cultural reference point. Sometimes, though (as in the tax code), it does filter over into a legal term.

188. @Cassieon:

     OK, do you know what the biggest government expenditures are? Social Security, Medicare and defense spending. Discretionary non-defense spending has been flat the past 3 decades. SS is rising but slowly. Healthcare spending is out of control in this country, and defense costs have ballooned. Oh, but when the government tries to reign in health care costs, they’re accused or running “death panels” and taking away Medicare from old people.

189. @Richard: Not that I disagree with your larger point, but I think some of your budget details are not quite right. If you look at the CBO data over the past few years it seems that while defense costs have increased they haven’t “ballooned” when compared to the rate of growth of Social Security and Medicare/Medicaid spending.

     Defense used to be a higher percentage of the federal budget than either Social Security or the combined cost of Medicare and Medicaid. That ceased to be true some time in 2008, and it will probably never be true again unless the Earth is invaded by aliens.

190. @Cassieon again:

     Also, if the government didn’t “take over” health care, you’d still pay for it (indirectly, by subsidizing hospital emergency rooms with your taxes) but in a less efficient manner. If your laissez-faire ideal actually existed in healthcare (which, BTW, wasn’t the case before Obama; group plans put in place perverse incentives and are NOT market-driven), it’s true, you wouldn’t have to pay for healthcare insurance if you didn’t want to. You also wouldn’t be able to get health insurance if you got diagnosed with cancer or something. It would be there when you don’t need it, and wouldn’t be there when you actually do. If you don’t like government-controlled healthcare, you would love living in China. Sure, their government’s totalitarian, but in healthcare, they fit your ideals to a T. Pretty much everything is paid out of pocket, so when you go to a hospital, you bring a hunk of cash with you. They actually won’t let you in if you don’t show them you actually have the cash with you first.

     Also, the government has subsidized student loans for decades. Please don’t be ignorant (and yes, it’s sad but true that most libertarians I’ve come across are rather ignorant about basic facts in the world or the world in general; how many advantages they were born with in this country but are unaware of, etc.)
     If you would rather that the government didn’t subsidize student loans at all, then I hope you come from a fairly well-off family, because you wouldn’t be able to negotiate a loan for yourself if you’re poor. In countries where the government doesn’t subsidize student loans, students who want loans need to find someone who have enough wealth set aside to cover the amount of the loan and is willing to co-sign the loan for the student.

191. When SS and Medicare were created, the government in effect created a contract with those who contributed (aka taxed) that certain funds would be made available to those who paid in, for themselves and specific descendants. People have a right to expect the government to fulfill that contract, do they not?

     Where did that contract include the government’s right to decide medical treatment?

     Insurers claim that right all the time (hence my inability to get the meds I need that my doctor prescribed). Will the government be different? Will that lead to “death panels”? I pray not, but I look at how long it takes to get a mammogram in Canada and wonder what our health care in the US under government control might look like.

     My husband works for the government. It’s no secret around his offices that as soon as it’s possible, we will be switched from private to government care. Therefore, I have a specific interest in what’s coming.

     Discretionary non-defense spending has been flat the past 3 decades.

     Yes, that’s why I see all those signs on the highways. http://www.syracuse.com/news/index.ssf/2009/07/highway_signs_identifying_fede.html

     No pork barrels were hurt in the production of the stimulus package. /sarcasm

     Perhaps you mean some other non-defense spending other than the stimulus. Can you be specific?

192. Cassie,

     You’re confusing a number of different things.

     No law has passed that prevents private lenders from issuing student loans. None. Not one. Private lenders can still issue student loans.

     Federal student loans, however, have substantially better terms. You can consolidate them and lock in interest rates. You can get portions of them forgiven for public service.

     There are a number of different federal student loan programs.

     There are subsidized student loans, granted directly to the student. You don’t have to guarantee these as a parent, and the student doesn’t have to pay interest on them in school.

     There are unsubsidized student loans, also granted directly to the student. You don’t have to guarantee these as a parent, but interest accrues while the student is in school.

     Every student (with some exceptions) is eligible for these loans, period, without a cosigner. These loans are limited, however. The limits depend on what year you are in school.

     For many students, these loans do not fully cover the cost of education, and so there are gap-fillers.

     One federal gap filler is the PLUS loans, which are given to the parents of students. That’s what you’re talking about when you talk about guaranteeing your student’s loans.

     Then there are private gap fillers: private banks who would be utterly delighted to fund the entire cost of your education, assuming you’re credit-worthy. Almost nobody uses these programs unless they have no choice, because the federal programs are far, far superior.

     The only thing that has changed in recent years is that the federal student loan programs are now run entirely by the federal government, not by a private/public partnership. Nothing has been “taken over.” The only thing that has happened is that Congress decided not to give private banks money to run the federal program that was already in place.

     I assure you, Congress is free to stop giving people money under the Constitution.

193. Sorry Cassie, but I am tired of hearing these healthcare strawmen about Canada/UK/where-ever when this topic comes up. They’re just that, they’re bogeymen made up bits of fear mongering designed to scare people who aren’t thinking all that critically about the problem.

     I come from a country with probably the most socialist healthcare service in the world (Britain) and it was actually pretty damn good – it was certainly good value for money.

     It saddens me to now be living in the richest country on the planet and see that it can’t even provide a basic level of primary care to it’s citizens at a level that you don’t even think about in any other industrial country. ER is not a substitute for a primary care doctor.

     The US spends too much on an inferior overall level of healthcare delivered in an insanely inefficient way.

     Part of the problem is the organisation, another, more serious part, is that people in the US don’t pay remotely enough tax, myself included, and that was much more true when our household income was up over $280K.

194. Richard @ 190

     If you would rather that the government didn’t subsidize student loans at all, then I hope you come from a fairly well-off family, because you wouldn’t be able to negotiate a loan for yourself if you’re poor. In countries where the government doesn’t subsidize student loans, students who want loans need to find someone who have enough wealth set aside to cover the amount of the loan and is willing to co-sign the loan for the student.

     Not well off, in a nation where loans are subsidized, and still expected to cosign my son’s loans.

     Alas, off to work. Enjoy the rest of the conversation, fellow-Whateverites.

195. @Andy:

     Since 1997, defense spending has more than doubled. The percentage doesn’t look much different just because all the manditory spending has ballooned as well. Since 1997, SS outlays have not quite doubled. Medicare&Medicaid have more than doubled.

     BTW, GDP in 1997 was $8.25. GDP in 2009 (latest figures) was $14.25.

     http://en.wikipedia.org/wiki/1997_United_States_federal_budget
     http://en.wikipedia.org/wiki/2010_United_States_federal_budget

     Note that $1 in 1997 is worth 73 cents in 2010.

196. Cassie @175 – well, cars, for one thing. I realize that the federal government is primarily a service provider – we don’t live in a country where production is nationalized – but I’m not really sure what your point is. Are you arguing that only physical objects have value and contribute to the economy, while services have no value?

     As for insurance companies, those are run with the primary goal of making money, not providing you with a service. That’s why government can be both good and bad; lack of profit motive leads to inefficiency but also leads to putting the welfare of your customers over making a profit. You do understand, I assume, that your insurance company screws you on getting your meds because they make money doing so?

197. @Cassieon

     Discretionary non-defense spending as a percentage of GDP (see Wiki links above); it seems to have increased a bit recently, though I swear I saw a chart where that line was essentially flat over decades. Not sure where the stimulus fell in there. As a one-off, though, even if all of it was paid for by loans, given the miniscule interest rates the federal government is paying on its bonds right now, it’s not so much a concern as big annual expenditures like defense spending, SS, and the healthcare programs.

     As for the SS and Medicare contract thing, sure, I agree that we should still fund SS & Medicare, but as healthcare costs have ballooned, I can assure you that those folks right now getting Medicare are taking much more out of it than they ever put in. It’s our tough luck as folks who are still paying in and not getting Medicare yet, but at some point, the books have to match, and they’re not going to if we keep allowing healthcare costs to eat up a greater and greater percentage of our GDP without increasing taxes a fair amount.

198. I’m also a Canadian expatriate living in New York who recently had to use the American medical system when I developed a severely infected sebaceous cyst I can guarantee you that the treatment I used to receive in Ottawa, Canada was far superior than what I received in New York.

     The wait times in Canada for diagnosis and treatement were shorter. The bureaucracy was less cumbersome and far far less confusing. The treatments were equally good. And in Canada, I wouldn’t have gotten stuck with a $6,000 bill for the charges my insurance company didn’t cover.

     The Canadian system isn’t perfect. No system is. But it is a far, far, far superior system than exists here. The only people who would benefit from the American system over the Canadian system are the wealthy who can pay all costs out of pocket.

199. Let’s not drift into a general health care discussion, here.

200. @Richard: Thanks. I never realized that the Peace Dividend was paying off so much in 1997. One more reason to miss the ’90s I guess.

     I do, however, think that comparing 1997 to today is sort of disingenuous, because you are using a sort of low water mark for defense spending as your point of reference. If you were to start from any year prior to 1990 or any year after 2001 you would find that Social Security and Medicare/Medicaid are growing more quickly than defense costs.

201. I think I don’t like the progressive tax, or rather it doesn’t go far enough. Paying higher taxes as you move up the income bracket is fine, but why exactly is it that most of the ultra wealthy are paying a lower tax rate then people like me?

     I think taxing income rather then taxing wealth leads to a lot of the free ride the ultra rich get. It’s basically the middle classes taxing themselves and letting the truly wealthy off the hook.

     I was serious when I said “what do you use to judge the middle”? You get a very different answer when you analyze the wealth-middle as opposed to the income-middle.

202. @unholyguy:

     True, I think that the capital gains tax should be as high as the income tax (which you have to pay on interests and use to have to pay on dividends; I’m not sure why corporations should get more of a break when they issue equity rather than debt, or why executives should be incented to buy back stock rather than issue dividends) and the estate tax should be higher.

     For some reason, it seems politically even less popular to increase capital gains taxes than it is to increase income taxes, and the pushback against the estate tax is out of proportion to all rhyme or reason (Do people really want to build up a permanent aristocracy in this country? Do people really want to tax living people who earned what they got rather than dead people and the kids fortunate enough to be born to the right parents….or do people not think things through…or do the conservatives who rail against the “death tax” like to increase the national debt; I never hear them say “we will offset the loss of reventue from not having an estate tax by cutting Social Security or cutting defense spending or cutting unemployment insurance”?)

     If I was cynical, I’d say the uber-rich really do run this country.

203. Well, I hadn’t read your post from 2005 before, but whatever else may be caused and said about the recent $250k / annum individual, I’d like to thank you for pointing it out. I thought it was the most impacting thing I’ve read in a long while.

204. “Do people really want to build up a permanent aristocracy in this country?”

     Yes, some of them do and they’re happy to shrink the middle class to do it. It’s supply side trickle down feudalism and incompetent capitalism as opposed to efficient capitalism. It’s very simple: Bush gave the 2% tax cuts we could not afford, in addition to all the other tax breaks and dodges they get. Those tax cuts, according to the CBO, were major contributors to running up the federal and state deficits and eating up the surplus. So extending them for the 2% is suicide in the current economy. It will just get us deeper into debt and the wealthy 2% will not put any more money into the economy because they haven’t for the last ten years. The standard blackmail, which Henderson reiterates, is that they’ll only spend if they are given every break on earth, but it’s a lie. They don’t put enough into the economy to compensate for the loss of revenue and the costs of the services they demand. They’re wealthy freeloaders. :)

     I do feel for the lower portions of the 2%. They can’t escape to that island if things get hot. So there they are, three, four million people with a lot of stuff, and there are the poor, forty four million with decreasing options and more being shoved into that category. And many of them don’t get that grabbing everything for themselves means those increasing poor will drag them under economically. If they ever did get the feudalism they want, they and their lovely houses would also be stuck as targets. It’s just incredibly short term thinking. But that’s why we have a market crash every ten years or less and then expect the government to ride to the rescue. Money for nothing and your chicks for free.

205. Mythago @ 196

     “Cars” is indeed part of my thinking. In the 60s, a man could work at a car factory, a tire factory, a steel mill or any other type of manufacturing job and support a family of 6 comfortably.

     With the shift from manufacturing to service jobs, what service jobs provide a comparable standard of living for high school graduates now? That’s why I wonder about physical products vs. service.

     My husband and I are better educated than either his parents or mine, but my father in law earned virtually the same money (in current dollars) working in a factory making parts for cars than my husband does in his managerial position. My father was an engineer for a tire company, and bought cars with cash. From my window, it looks like my husband and I are not doing as well as our parents.

     As for my insurance company – screw is right. I don’t argue that our system cannot be improved, but I don’t have a lot of confidence in the government’s ability to do it better. If our armed forces/vets hospitals are any indication, the government does NOT.

     I don’t have the education/ability to quite figure this out, but it seems to me (and read the first part of this sentence again before going further) that when an intermediary is put between a purchaser and the manufacturer/service provider, costs go up. That intermediary has to make a profit – and I wonder if removing the government and insurance companies from the equation might not reduce costs significantly. That being said, the consequences to the R&D in any field (tires, healthcare, cars) by removing the government/insurance companies who are major players in the R&D (government to some degree in financing, insurance for paying those developments to presumably improve health) may be catastrophic.

     Daveon @193

     With the permission of our gracious host:

     From a logical fallacy perspective (thus avoiding the forbidden further discussion of health-care), how is what I said a straw man?

206. cyan @117 sez:
     Mike @ 82, those rates you’re quoting are for taxable income ranges, NOT adjusted gross income.

     Can you explain the difference between AGI and taxable income (and how such a distinction meaningfully affects this discussion)?

207. Do people really want to build up a permanent aristocracy in this country?

     Yes, they do. That’s what the longing of a certain segment of the privileged and libertarians for the Gilded Age is all about: just enough government services to keep them safe and comfy (police, national defense) but nothing that would impose on them or require taxes in any way.

208. From a logical fallacy perspective (thus avoiding the forbidden further discussion of health-care), how is what I said a straw man?

     You’re making a number of sweeping statements which are terribly soft and easy to hit targets – in this case I’d say the British version, the Aunt Sally, is closer to the mark.

     Like this one: If our armed forces/vets hospitals are any indication, the government does NOT.

     Interestingly, at least from my perspective, you seem to back track on this position in your most recent post. You seem to mistrust government, except you seem also to see that the alternatives are also out to get you. In general, if given the option of a faceless government system run by people I get to vote for and a faceless commercial one run by people who have one goal and one goal only (maximising shareholder value) it’s not terribly hard for me to make a choice.

     That’s without lots of empirical evidence suggesting that, on the whole, government services, when well funded, actually do tend to run pretty well on the whole.

     Ask the Germans.

209. NFL players stepping out on the field together before games to show unity in the face of an upcoming lockout have been booed in many cities. The guy making $46K per year can barely afford a ticket to the game, let alone a $12 beer, and probably has very little sympathy for the millionaire players or the billionaire owners.

210. But… pressed send to soon… this all is beside the point that the challenge is that general levels of taxation in the US are much too low for the kind of services and society that people want.

     For example: I had dinner with a friend a few weeks ago who is a civil engineer and we were talking about infrastructure. He basically said that given the lack of investment in infrastructure in the US since the early 1980s, they were now facing a point where in a lot of rural areas they’d have to go back to dirt roads because they didn’t have the money or time required to maintain properly paved roads.

     He also said that much of the interstate highway infrastructure was beyond economical repair and actually needed wholesale replacement, including the major bridges.

     The stuff done in the 1950s was designed to last 30-40 years and is now getting decades past the point where you can patch it up. The trouble is not only isn’t there enough money to do that, there’s a huge logistical problem too.

     Healthcare, postal services, social security are awfully soft targets to throw things at. But when the United States of America in 2010 is looking at a return to dirt roads (http://online.wsj.com/article/SB10001424052748704913304575370950363737746.html) there is something deeply wrong. There’s a lovely money quote in that article.

     “”I’d rather my kids drive on a gravel road than stick them with a big tax bill,” said Bob Baumann

211. Interestingly, at least from my perspective, you seem to back track on this position in your most recent post. You seem to mistrust government, except you seem also to see that the alternatives are also out to get you.

     I’m reluctant for anyone other than me and my doctor to make decisions regarding my health care. Does that resolve the conundrum of apparently opposing opinions?

     As for the veteran’s health care, there is plenty out there on its failure to serve adequately, but we probably shouldn’t go there either, lest the Mallet fall.

     Aunt Sally is a variation of the strawman that I haven’t run into before now. Thank you.

212. I’m reluctant for anyone other than me and my doctor to make decisions regarding my health care.

     Which is fine, but then you need to be reluctant to have anyone other than you and your doctor involved in the financial arrangements for your health care.

     Slightly on topic, I find it interesting that health care is probably the only thing (other than perhaps a World of Warcraft subscription) that the professor didn’t list as a Necessity Of Life that would be destroyed when Obama, Harbinger of the Taxpocalypse, increases the marginal tax rate on his over-$250K household income.

213. I’m reluctant for anyone other than me and my doctor to make decisions regarding my health care. Does that resolve the conundrum of apparently opposing opinions?

     No, sorry, but not really. And, if John stays his mallet for the explanation… that opinion is no different to anybody else, anywhere in the industrial world. :)

     And, for 99.9% of the time, that’s how it will be. But unless you’ve got Steve Jobs levels of cash on hand, if you have something seriously wrong, somebody is going to get to have a say whether you like it or not.

     But consider this. I actually feel comfortable knowing that if I get something seriously wrong with me, I can fly back to the UK Business Class for less than my insurance deductible…

     Anyway, this also is going off the topic.

214. My wife and I make just over $200,000 between the two of us and live in the San Francisco area and that, as noted by someone above, doesn’t actually go as far as you might imagine.

     The thing is, all of our financial “woes” are entirely self inflicted. We live in a very nice house in a nice neighborhood because we *want* to. We could live in a smaller house or in a cheaper neighborhood, but we don’t (moving to another city would involve income changes, so it’s not particularly fruitful to note that this income would be a fortune in Omaha. We wouldn’t be *making* that in Omaha. We could probably move to Omaha and retire on our savings but… no offense to the fine folks in Nebraska, not a chance).

     The good professor chooses to pay private school tuition for his kids. He and his wife chose to have a third kid. They could, presumably, live in a not-quite-so-nice house in a not-quite-as-swanky area and save some money that way. They made these choices knowing the financial consequences and they are lucky enough to be able to deal with them. Complaining that these choices, which he made with his eye’s open, have left him with very little cash at the end of the month is just whining.

     California is suffering under a huge budget crisis (for a bunch of reasons). Taxes have to be raised before this can be fixed and the burden would fall, partly, on me. I don’t like paying taxes any more than anyone else does, but I can hardly claim it isn’t fair.

215. I was going to say that I’m reluctant to drive my 2000 Sentra instead of a 2010 Boxster, but it seems other people replied before I did.

     To see just how out of control health care spending is in this country, take a look here:
     http://economix.blogs.nytimes.com/2009/07/08/us-health-spending-breaks-from-the-pack/

     Among the many faults of our current health care system is that the wants of patients and the costs of health care have been untied in a way that the true cost of healthcare is hidden from almost everyone.

     People understand that if they don’t want restrictions on how their children are taught (in public school; say teaching religion in class), they have to either find a private school that teaches them the way they want and pay for it, or they have to homeschool (and pay by labor).

     So, if we adopt Canada’s healthcare system, you still get choice. If the government plan declines to cover a procedure, you can still get it; you’d just have to pay for it, just like most things in life. For that matter, that’s true in the US as well. Unless you have a tremendously expensive plan, certain procedures will be denied (and more will be in the future given the rate of increase in healthcare costs in this country), however, most people don’t actually see or care what their employer has to pay insurance, don’t peruse in detail the booklet that explains what’s covered and the coinsurance of various procedures, and thus are under the illusion that under their current plan, they can just get whatever they and their doctor decide with cost not being a concern.

216. @211

     “I’m reluctant for anyone other than me and my doctor to make decisions regarding my health care.”

     They already are. If you have insurance, decisions are being made on what will and will not be paid for, and the effects of those decisions are influencing your Doctor.

     Likewise, the decisions he makes are being influenced by, amongst other things, pharmaceutical companies.

     But to avoid the loving mallet of correction, government money (our money) doesn’t go solely into service. Quite a lot of it is spent on stuff.

     That stuff needs to be produced by someone. There’s a reason to discuss the notion of the military industrial complex.

     Secondly, it does grow the economy, since people, you know, buy stuff. You could argue that this would be better done by having private industry do stuff but, crucially, you also get stuff from the service.

     I’d also note that in any competently run country the government will always be the largest single employer.

217. “The government” is a bit misleading, in that the United States has many “governments”. There’s the overarching federal government, of course, but each state has its own on top of that.

218. Dad taught me that you get what you pay for in life. Nothing is free, not even lunch. I rather like the government services that we receive now at all levels. So I am willing to pay taxes to pay for them.

     And progressive taxation where those who have more pay more also seems morally right as it imposes a lesser burden on those with less. I guess I buy the argument that the marginal utility of the next dollar earned is less than the earlier dollars. With those early dollars you purchase necessities. With those later dollars earned you purchase luxuries.

     I really think John hit the point on the head by musing that the good law professor had not managed his money well and that would explain his alarm that his tax burden might creep up soon. Spend less than you earn and save the difference works. That law professor really does need to ring up and sign up for Financial Peace University with David Ramsey.

219. Mike @ 206: Yes… you googled something like ‘2010 tax rates’ and got something like this: http://www.moneybluebook.com/2010-federal-income-tax-brackets-irs-tax-rates/, right? Exact same ranges and percentages you quoted (not presented all that nicely though). But note that it does state *taxable* income ranges, not AGI. Taxable income is the amount upon which federal income tax is assessed, that being AGI *minus* all eligible deductions. Those eligible deductions include (amongst many others) mortgage interest payments, student loan interest payments, medical insurance contributions, 401k contributions, IRA contributions (up to a certain amount), charitable contributions, state taxes paid, property taxes paid, and of course personal and dependent deductions.

     The difference between AGI and taxable income can be HUGE, which was the point of my comment @117. So, if your *gross* income (or AGI, which is salary plus dividend earnings and interest payment and earnings outside of your regular employment and a bunch of other stuff) is *just* over the $250k mark, in all likelihood you will be not effected at all by the sunsetting of the Bush-era tax cuts in question because of all of the deductions you can claim would reduce your *taxable* income under the strike level.

220. For me, one of the most annoying things in the professor’s post was this:

     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.

     Because it’s so stupid. Bush cut taxes without doing a damn thing to reduce spending. He started two wars without asking the American people to pay for them. He signed Medicare Part D without doing a thing to cover the costs.

     Nothing Obama has done can match the deficit-busting power of Medicare Part D. That debt, and much more, has Bush’s signature all over it. Nothing Obama has done matches the any of those Bush policies, and the Affordable Care Act actually reduces the deficit. Why does he keep kicking Obama for trying to fix Bush’s screwups?

     As for Cassie and the other anti-government crusaders, I’ll only point out that their condemnation of government care for veterans is woefully out of date. <— That's a link, btw, since John's current WordPress theme doesn't get all showy with the hyperlinks.

221. JS:
     “I doubt that the soldiers in Afghanistan, or the NASA scientists putting together the next planetary exploration spacecraft, or the workers repaving the road in town, or the teachers educating my kid..”

     Yeah, that is why I qualified my statement with the word “some”. You clearly are happy with paying more taxes that others based upon your income and that is great, I assume you do not look for tax shelters or any other types of ways to game the system. I also assume you can easily overlook ways in which your money is spent foolishly or on things with which you disagree.
     I for the most part do not have a problem with paying soldiers, teachers, scientists, etc, etc. I do have low tolerance for people who feel entitled to do the nothing or the minimum and have everyone else support them. I would say that is a small minority but they are there none the less.

     “Nothing Obama has done can match the deficit-busting power of Medicare Part D…” This is simply not true, Obama spent way more that Part D. According to wikipedia: Projected net expenditures from 2009 through 2018 are estimated to be $727.3 billion. That is over 9 years.

222. You forgot 5) Suggesting that increasing your taxes will negatively affect the economy because you won’t be able to pay your housecleaner and nanny was a bloody stupid thing to say back when Reagan first coined the “Trickle-down” theory of economy and it’s only gotten more stupid and asinine since.

223. LeftField:

     “I also assume you can easily overlook ways in which your money is spent foolishly or on things with which you disagree.”

     I’m not sure why you would assume that. That said, in a nation of 300 million people there is going to be a wide variance as to what foolish or disagreeable government spending would be. What my definition of those might be will be different from the definitions of many others.

224. Leftfield: You’re quoting wikipedia?

225. JS: very true.

     Harry Connolly:
     “Leftfield: You’re quoting wikipedia?”

     Of course, it is simply the most modern, up to date and accurate source of information ever….

226. Regarding wanting a hereditary aristocracy: I’d say it’s instinctive to want to leave your stuff to your kids. Swooping in when someone dies and taking their stuff so their kids can’t have it is always going to be viewed with suspicion, even if done solely to the rich – it’s exploiting a family tragedy to tax. Worse, to avoid obvious cheats, you have to start placing severe restrictions on what you can give to your kids when you are alive to boot.

     I’m all for preventing inter-generational accumulation of wealth and power. Aristocracies tend to suxor giant dingo bollocks. I’m not sure inheritance taxes are a good way to go about it though. I’d much prefer something that made it harder for wealth to self perpetuate. Unfortunately, that has its own problems.

227. @martin:

     I can see the moral argument against inheritance taxes, except when it is balanced against the alternatives. I’m mean, it’s instinctive to get 100% of the value of your labor, and to pay 100% or less for something, but when you balance having an estate tax vs. increasing income tax (taking money from people being productive and who earned their money rather than being born lucky), increasing sales tax (highly regressive), cutting SS, cutting defense, or adding to the federal debt (taxing our children), etc., which one would you choose?

228. Mind you, I would be fine with the estate tax kicking in only at a fairly high level (say $10M, adjusted annually for inflation), so long as the rate is rather drastic after that (say 80%).

     It’s going to be hard to argue that you can’t provide for your children if you leave them $10M, or that working for that next $10M after already accumulating the first $10M would provide that much motivation to people to work harder. Hell, set the level at $10M per child. Then, even if you have 20 kids, they’d all start out with at least $10M each just from the good fortune of being your kid.

     After all, it’s not the petty millionaires that I care about, but the billionaires that I’m worried about.

229. The letter actually seems pretty reasonable. A lot of middle-class people in the blue-collar town where I live hire a lawn service. Most of us do not employ maids, but he says the maid only comes in “a few times a month”, which is probably less of an expense than many blue-collar workers pay for their gazillion cable channels.

     The point of his letter is not to bemoan his fate, I think, but to point out that there is a huge difference between those making $250k and those making boffo millions.

     I don’t disagree, really. I think the problem with our progressive tax rate is that it’s not progressive enough. Why should $250k income be treated the same as $1 million income? By all means raise the rate for $250k, but raise it slightly higher for $300k, and higher again for $350k, etc.

230. David @229: did you read the same letter I did? Because I didn’t see a letter from a middle-class guy making $250K a year who pays for a lawn service and the occasional visit from The Maids. I saw a letter from a law professor at one of the nation’s top law schools, married to a physician in a lucrative specialty, whining that he is “just getting by” because he only has a few hundred bucks to blow every month after paying for: the nanny, the private schools, the new cars, the gardener, the housekeeper, the nights out with the wife while a babysitter is with the kids, the cable, and the stock market investments, his family’s income in excess of $250K is going to get a slight bump in taxes.

     Someone with a million-dollar income could, as you do, point out that there’s a very big difference between them and Warren Buffett. So what?

231. Um, I don’t think that was his point.

     Here’s a follow-up defense of his retrieved from Google cache. This was the post where I went slack-jawed and said to myself “I can’t believe this guy is a UofC law professor”. To see why, read the comments. I’ll also add that while he only relies on one anecdote (himself), actual economic research has shown that raising marginal rates a slight amount at these levels has a negligible if nonexistent impact on their motivation. If you run the numbers, you’ll see why.

     http://webcache.googleusercontent.com/search?q=cache:SYEa0C5sKoMJ:truthonthemarket.com/2010/09/19/now-i-know-i-must-be-right/+http://truthonthemarket.com/2010/09/19/now-i-know-i-must-be-right&cd=1&hl=en&ct=clnk&gl=us

232. 231 was in response to David Carrington Jr.

233. Oh, and evidently he was ashamed of his arguments as well (or else he didn’t want the world to see how easy it was for regular joes on the internet to tear holes in his reasoning), or else he wouldn’t have taken that post down.

234. 227 posts on the subject of increasing taxation and not one single person has mentioned Art Laffer.

     Must be some sort of record.

235. Richard @233 – to be fair, it’s not pleasant to be on the receiving end of an Internet dogpile under any circumstances, and he also mentioned that his wife was more than a little cheesed that he unilaterally decided to tell the world all about their lifestyle and income. He claims they were also getting threats, which may or may not be the case, but I can’t say I blame him for not wanting himself or his wife to continue to be an anger magnet.

     Anyone can make that mistake, but I think professors are especially prone to it; they live a life where much of their debate is with younger, inexperienced people who they have the power to flunk. That’s not necessarily the best environment for robust debate skills, especially if you also live in an ideological echo chamber as far as your colleagues and professional community are concerned.

236. Mark Horning:

     Laffer is in fact mentioned upthread.

     Mythago:

     Yeah, I think Professor Henderson really had no idea what he was doing when he posted his initial piece — and, aside from whatever I think of the points he was trying to make, I have sympathy for his complete confusion when the Internet blew up in his face.

     That this confusion was apparently compounded by his wife’s anger at having the details of their personal life strewn all over the Internet without her consent just makes it worse. I never EVER post something online involving my wife and family life without running it past her, and she has a complete and unquestioned veto. Nothing I need to say here on Whatever is worth making a mess of my home life for.

237. Nothing I need to say here on Whatever is worth making a mess of my home life for.

     But why isn’t Magnificent She granted a similar veto?

238. Mythbuddy: “Anyone can make that mistake, but I think professors are especially prone to it; they live a life where much of their debate is with younger, inexperienced people who they have the power to flunk. That’s not necessarily the best environment for robust debate skills, especially if you also live in an ideological echo chamber as far as your colleagues and professional community are concerned.”

     Again, as someone married to a professor, I can say that this is offbase. Professors don’t live in ivory towers, despite the rep, and in general are in fact more aware of what’s going on and the statistics involved than the average citizen, because they are often studying it. They don’t live in ideological echo chambers but in faculties where very different ideological views often create clashes and debates.

     Now lawyers, on the other hand, of which Henderson is one…. (I kid, I have a lot of lawyer relatives too, and law professor relatives.)

     You know, reading all this conversation and on the Web, I’m just shaking my head in sadness. The conservative Democrats are taking down the party again and they may cave altogether on the tax cuts. And so we have depressing things like this from Andrew Leonard at Salon:

     “The Census Bureau recently reported that in 2009 43.6 million Americans were living under the poverty line, up from 39.8 million in 2008. The poverty rate is 14.3 percent, the highest since 1994. A record number of Americans — around 40 million — are enrolled in the Supplemental Nutrition Assistance Program (SNAP) (formerly referred to as food stamps)….But what you might not know is that in August the Senate cut funding for the SNAP program,as part of a deal to ensure that “legislation enacted to save teacher and other public sector jobs and to provide support to the states attempting to shore up Medicaid budgets” was “deficit-neutral.” The funding cuts for SNAP don’t kick in until 2014, so we can hope that the economy is strong enough by then to be pulling Americans out of poverty rather than grinding them down into the midnight Walmart baby formula bread line. But just ponder the symbolism of this. Senate Republicans are demanding that tax cuts for the wealthy — costing around $700 billion over the next 10 years — be retained, regardless of the impact on government finances. But money directly targeted at saving public sector jobs and paying for Medicaid must be offset by cuts to the welfare net for the poorest Americans. No baby formula for you, ma’am, but we’re happy to subsidize your new BMW, mister hedge fund manager.”

     I’m just tired of it. Henderson is a heartless bastard. Sorry, but he is.

239. Kat @238: I know that professors do not all live in ideological echo chambers, but this particular fellow is a law professor at the University of Chicago Law School; I’m guessing he’s not a lone fiscal conservative floundering in a sea of Marxist colleagues. Professors do not live in ivory towers, but they also (if they teach) spend a lot of their time in dialogue where they are the dispensers of wisdom. This is particularly true of law professors, who use the Socratic method to educate, not to engage in a free-wheeling, evidence-based debate among equals with their students.

     And yeah, lawyers. I’m allowed.

240. When I said he’s a heartless bastard, I should probably be clearer. I don’t mean he’s horrible to his children or that I wouldn’t have a drink with him and try to talk to him. I just mean that he has been taught and has chosen to embrace a philosophy of the world that dehumanizes others and keeps him from viewing a picture larger than himself. He has lost all empathy. And people like him unfortunately do a lot more damage collectively than someone armed with an assault rifle. He’ll in all likelihood get to keep his tax cut, thanks to others who share that world view, elected by others with that world view even if they don’t have his salary and investment options, and others without his resources will pay for it and he won’t care. And the economy will get worse because of it and he’ll rail about that and blame the poor and any aid to the poor for what is really the result of his own greed. He’ll rail about the government having a giant deficit and refuse to accept that the tax cut he demanded caused that deficit. Because he’s learned to care only about what he wants and to treat that as a virtue.

     I’d say that it was kind of like Invasion of the Body Snatchers, except that it’s been going on forever and in many ways was worse in the past.

241. Oh, and evidently he was ashamed of his arguments as well (or else he didn’t want the world to see how easy it was for regular joes on the internet to tear holes in his reasoning), or else he wouldn’t have taken that post down

     I think it was more the death threats that did it, rather than the shame.

242. @mythago 230

     I never said the guy was middle class. But the “extravagant” services he writes of are not unavailable to the middle class. I have friends who are certainly not above middle class who have an au pair, which is not terribly different than a nanny.

     Lawn service is widely available to middle and even working class families.

     Maid service costs about $100-150 per day, so having a maid come in 3-4 days per month is a nice luxury, but it’s not robber-baron territory.

     I don’t have any of these services myself, but I could, if those were the choices I made with my money, and I make a LOT less than $250k. Ironically, the largest expenses he mentions are the ones nobody is complaining about: his mortgage and the private school tuition for multiple children.

     I don’t see the relevance of your comment about millionaires Vs. billionaires. As I said, the progressive tax table should continue climbing all the way up the scale. A $1 mill income SHOULD pay a higher rate than a $250k income, don’t you think? And a $100 mill income should pay a higher rate than a $1 mill income, etc.

243. mythago @ 235:

     Yes! It’s the problem with these types of professors blogging. At school, he likely _is_ the smartest guy in the room, the students don’t know as much as him, his colleagues show him deference, and no one challenges him on silly logic too harshly, so he can intellectually bully people around. Most importantly, though, he _chooses_ to insulate himself in an ideological echo chamber, so not only is he genuinely shocked when people don’t buy his basic premises, but he doesn’t even have decent arguments to defend himself with, because he never actually encounters people who both disagrees with him and knows more than him.

     Oh, and he seemed to have taken down all his posts (not just the one detailing his financials). If I had to hazard a guess, I’d say someone wasn’t happy about the hit the reputation of the UofC Law School was taking because one of its esteemed profs was putting silly, ill-thought-out tin-eared arguments on the internet.

244. @RA Munroe

     He hinted at upsetting emails. He didn’t mention death threats. Considering how this guy exaggerates, and goes about life with a woe-is-my-poor-libertarian-self attitude, I’m not willing to give him the benefit of the doubt and assume death threats, as I’d expect him to mention death threats explicitly instead of dancing around the term as he did.

     In any case, why would death threats lead him to take down the rest of his posts (best hits list composed here: http://delong.typepad.com/sdj/2010/09/oh-dear.html#comments)

     A taste:
     “I’ve read and enjoyed all of Ayn Rand’s fiction, especially “We the Living,” but I’ve always wondered how I can convey her ideas to my children before they are able to read the books for themselves. What is a Randian to do when the hippies at the local playground sermonize about sharing and winning not mattering? Finally, here is a helpful guide for how to raise your child as an Objectivist. A taste: “You should never feel guilty about your abilities. Including your ability to repeatedly peg a fellow Xxxxler with your Elmo ball as he sobs for mercy”…”

     I wonder how he feels about being dealt his own medicine….

245. @mythago & Kat

     You’re right. Being a law prof is also part of his problem. You debate an econ prof, and you can at least have an honest discussion. They’ll back up their theory with data and studies, and they’re able to anticipate at least rudimentary challenges.

     What’s most annoying about these right-wing law profs is that despite worshipping at the altar of the market, they have big holes in their knowledge of the economic literature and basic tax laws; probably because their their theories don’t have to be grounded in reality. Operate as these guys do in any social science (much less science), and they wouldn’t be able to get tenure.

246. To be fair, the quote about the Objectivists there is from a McSweeney’s humor piece, and it’s very likely the professor realized it was meant as satire.

247. Right, I realized that after reading more. My mistake.

248. I actually wouldn’t mind a progressive tax that does have a few more layers between $250K and 1 million, etc., but you’ll never get the rich people to go for that, which means it’s highly unlikely it will ever happen in government.

     The fundamental of competent capitalism is that your employees are also your customers. Basically, he thinks he’s holding up the lawn care guy and his boss, the housekeeper, etc., but the reality is that they’re holding him up. Every time he acts against them, he shoots himself in the foot. For millionaires, this is not a problem — they go to their island and wash off the blood. But for someone like him, stuck in the country, the value of his house, the cost of his private school tuition, etc. are dependent on the economy which is dependent on their success, not his. It’s not trickle down, it’s burble up. And if you keep chipping away at the base that holds you up, you’re going to fall down. (Unless you can transfer your accounts to Switzerland and retreat to your island.)

249. cyan @219 sez:
     Taxable income is the amount upon which federal income tax is assessed, that being AGI *minus* all eligible deductions. Those eligible deductions include (amongst many others) mortgage interest payments, student loan interest payments, medical insurance contributions, 401k contributions, IRA contributions (up to a certain amount), charitable contributions, state taxes paid, property taxes paid, and of course personal and dependent deductions.

     Yes. I stand corrected. Mostly, I was attempting, in my own limited way, to make the point that the ~10% increase in the top marginal rate will apply not to one’s entire paycheck, but only that portion of one’s taxable income that exceeds the (new/old) threshold for that top tax bracket. It will certainly be a significant hit for a few folks, especially owners of S-Corps and LLCs, but probably not for our friend the professor. Hell, his weighty student loan debts should be nearly as big a benefit at tax time as they are a burden on his monthly budget.

250. David @242: as you say, those are “nice luxuries”. They are not necessities of life, and they are choices. So to say that one’s family is “just getting by” because one chooses to spend discretionary income on those nice luxuries, while having money left over, is disingenuous. (That’s a technical legal term meaning “bullshitting.”)

     I’m not sure why you believe people are giving him a pass on the mortgage or the private schools; I’ve seen numerous criticisms of this, particularly since he doesn’t offer any information as to why that might be a necessity; all we get is a snotty remark that parents who “care” about their children send their kids to private school. He doesn’t exactly live in a neighborhood where the public schools require metal detectors, as I understand it.

     The comment about billionaires wasn’t about a progressive tax rate; it was that his “people are richer than me so why tax me?” argument can be applied to anyone with large amounts of money. There’s pretty much always somebody you can point to and say “They make oodles more than I do; why pick on me?”

251. Richard:

     He hinted at upsetting emails. He didn’t mention death threats.

     He has discontinued the blog, and said:

     The electronic lynch mob that has attacked and harassed me — you should see the emails sent to me personally! — has made my family feel threatened and insecure.

     Okay, maybe not death threats per se but still, not done out of a sense of shame either.
     FWIW his post was naive and misguided. But even so, he has a right to complain that the government will be taking more money from him, and to point out that it will have noticeable effects even though he is very rich.

252. Mike @ 249 says: “It will certainly be a significant hit for a few folks, especially owners of S-Corps and LLCs…”

     Maybe. I never did entirely understand all of the different rules that apply to hybrid forms of business ownership like S-Corps and LLCs. In the case of S-Corps, my initial thought is that the corporation is still a separate entity and so the *owner* still files his/her individual return.

253. R.A. Munroe: “But even so, he has a right to complain that the government will be taking more money from him, and to point out that it will have noticeable effects even though he is very rich.”

     Except it won’t have a noticeable effect on him at all. It will be a few hundred dollars at most, less than what he probably spends annually in hair care products. And the government isn’t taking it from him. He’s paying for clean water and roads and a zillion other things he uses with the tax. He got a discount, which was unsustainable and ran up the deficit, and so now he doesn’t get a discount and the rate on his post-$250K taxable income goes back to 1990’s tax levels, which are considerably below what his daddy used to have to pay.

     What continuing the unsupported tax cuts will do is run up the deficit even further, which will have a noticeable effect on his life, such as making his house be worth even less than what he paid for it. He wants to ruin the slightly recovering economy, which will put him even further in debt, to save a few hundred dollars in taxes. It’s penny wise and pound foolish.

     Cyan: “I never did entirely understand all of the different rules that apply to hybrid forms of business ownership like S-Corps and LLCs. In the case of S-Corps, my initial thought is that the corporation is still a separate entity and so the *owner* still files his/her individual return.”

     It’s a tax dodge. The person can have a “small” business with only one employee (himself) or even technically zero employees and that business generates income (which can be from investments,) and the person can then put the profits from that business into his personal tax return, which means he avoids higher and additional business taxes on it. If he reports a loss from the business, he can use that as deductions to his income, reducing his taxable income. It’s a legal scam, one of the many opportunities that wealthy people have to make and hide more money that middle class and working class folk don’t.

254. Kat Goodwin @ 253: is that true of both S-Corps and LLCs? And owners of such forms of businesses can move around their earnings/profits to their best advantage? If so, the owners of S-Corps and LLCs could potentially be the *least* likely to be affected by the sunsetting of the Bush-era tax cuts in question?

     Because if you have the ability to move around earnings/profit at will for the purposes of seeking the out most advantageous federal tax assessment, that’s a damned nice arrangement!

255. Beautiful. A friend linked me to your blog after I’d ranted about this on my own, and I’m glad he did! Thank you for writing this and the subsequent pieces about the subject!

256. But even so, he has a right to complain that the government will be taking more money from him, and to point out that it will have noticeable effects even though he is very rich.
     

     Watch those goalposts trundle away. No one’s saying he doesn’t have the “right” to complain. We’re saying he’s a callous idiot for complaining. Note the difference.

257. Cyan 254: I don’t honestly know. (This is why I am not a tax accountant.) But apparently a lot of small businesses have zero employees because they are basically used to funnel income into personal accounts and get taxed at a lower rate. It’s one of those legal loopholes. I don’t know how much you can do in pursuing that course of action legally and I don’t know what the tax code is on it exactly, never having had one.

258. The question isn’t “is he rich”. The question are people making his income paying enough tax to pay for the myriad of government services which is has grown accustomed? NO they are not. Which is why he’s an ingrate.

     PS: what a coward for turning off comments on his blog! He can pontificate and, like a pope, he doesn’t want to hear a responses!

259. Other than I completely agree with everything in both articles you’ve posted on this subject.

     It’s awesome to see John Perry talk about contemporary politics. :D

260. I’m an wont to say that the biggest success of corporation America is to convince the average American that 50K a year is a lot money and don’t ask for more.

     I guess this guy wasn’t convinced.

261. Maybe if you are doing something with your money such as employing someone, there could be some type of break for that? Just a theory.

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