Mr. 'Deling' Responds to 'I make 500K/yr and am not rich'

http://delong.typepad.com/sdj/2010/09/in-which-mr-deling-responds-to-someone-who-might-be-professor-todd-henderson.html

by georgecmu • 16 years ago

58 87 16 years ago

delong.typepad.com

georgecmu• 16 years ago

This leaves about $90,000, a lousy $245 a day, for food, clothes, vacations, cable TV, and like that. You can walk into Nordstrom’s on Upper Michigan and spend that in a minute, and for stuff you really need. Really, I don’t know how these people get by; their adaptive skills, economical habits, and modest living style is an inspiration to all of us. Perhaps they are careful to tip no more than 15% at the Sizzler when they splurge.

TeHCrAzY• 16 years ago

Thats more "spare" cash in a week than I pay in rent over a fortnight.

SamAtt• 16 years ago

I don't think this makes the point that 500k/yr isn't rich but it does make the point that people's expenses will grow to fit their income. I've known several people in this pay bracket and I've often found their standard of living isn't all that much better than mine. They have a 60" TV instead of my 42" and a BMW instead of my Chevy but their still watching the same shows and stuck in the same traffic.

kiba• 16 years ago

Produce and reap the reward of wealth later. With some luck, you'll be able to afford that 60'' TV and a fancier Chevy.

It still won't solve the traffic congestion problem though. That will take explicit toll fee for using the roads, and that won't be popular.

Division of labor and global trade has made us incredibly wealthy compared to the past. So focus on a niche and make people richer. Remember, self-sufficiency mean we have to make our own clothes, grow our own food, etc.

Daishiman• 16 years ago

Or, instead of going along like everybody else, find a job where you're valuable, take a pay cut, work 30 hours a week and take 2 months off a year and make your schedules so you're never stuck in traffic again.

The belief that material wealth is always more valuable than being able to spend time doing what you want is astounding.

hugh32• 16 years ago

While I feel sorry for the guy whose taxes are about to go up substantially, he shouldn't be trying to claim that $500K a year isn't rich. It is rich.

Instead he should be pushing the argument "Why the hell should I have to pay for all these government just because I'm more productive than other people? If I use $10,000 a year worth of government services why am I paying $200,000 for it while some other guy using $10,000 a year of government services pays nothing? Why can't the burden be spread more equally among all those who use government services instead of lumped almost entirely on the top 10%?"

That's the argument he should be pushing. Of course there are possible responses to that, but it's a better starting point for debate than "I only make $500K a year, you should tax the real rich, who are making $800K a year!"

Cushman• 16 years ago

I'm not sure I agree that calculated evil is preferable to well-intentioned ignorance.

"Life is hard for me, too" is a lot easier to sympathize with (even if it's complete bullshit) than "I don't care if life is hard for you."

vaksel• 16 years ago

   While I feel sorry for the guy whose taxes are about to go up substantially

that's where you lost me.

His taxes aren't going to go up...his tax CUTS are about to expire...as they were supposed to. The sunset clause was part of the original bill...instead of bitching that his taxes are going to go back to normal...he should be happy he got to enjoy this tax break for all these years.

And "substantially"? His taxes are only going up by ~3%

hugh32• 16 years ago

And "substantially"? His taxes are only going up by ~3%

Which is, like, $15,000 a year. That's substantial -- in fact it's more than most people pay in taxes at all!

We should start from the fundamental question: why should this guy pay more than Joe Schmo at all? Why shouldn't the tax bill be spread equally over everybody, so it's (say) ten thousand dollars per head? That would be what I call "fair".

It's also not possible because some people just aren't getting off their butts and earning $10K per head, but that should be considered a deviation from fairness. We should look down upon those with below-average incomes as jerks who aren't working hard enough to pay their share.

natrius• 16 years ago

> His taxes aren't going to go up...his tax CUTS are about to expire

That isn't a meaningful distinction for individuals. It only means something for the government's budget outlook. It is a little silly for the law professor to complain about a tax increase without considering the alternatives, which are insolvency or drastic budget cuts. Regardless of the merits of the latter option, it's clearly not politically feasible.

moultano• 16 years ago

The government providing those services is what allows jobs that pay so well to exist. Most of the function of government is protecting property rights, and the largest part of that is creating a stable society where the poor don't have an incentive to murder the rich.

_delirium4• 16 years ago

I'm not sure $10,000 is a fair-market value for the government services. Probably the biggest single service a government provides to well-off people is protection for their property and person, via policing, military defense, and a centralized property register and court system willing to enforce their ownership of assets. The value of that guarantee goes up with your level of asset ownership.

dedward• 16 years ago

There are things that guy could do with his money that would give him tax breaks - like using that excess wealth to create jobs, donate to charities, etc.

If his burn rate is $500k a year then he's not financially any different from anyone else who's burning theorugh their paycheck - he's just got different hobbies - he's not contributing more meaningfully to society or anything like that - so why not higher taxes?

_delirium4• 16 years ago

I don't think I've ever met a person who made a lot of money who'd admit they were rich. The standard these days seems to be: you're rich if you could never work again for the rest of your life, and still live extremely lavishly, with the private jet and yachts and multiple houses. That sets the bar at maybe $100m net worth, which yes, very few people have.

Weirdly, I know people who make around $70k who claim that they're very well off, and seem to actually feel that way. But the people making $300k, $500k, $800k? Invariably they feel middle class, perhaps upper-middle-class, but not even that upper. My guess is that it has a lot to do with social circles and where you live. The guy making $70k who lives in a modest house and whose friends all work at coffee shops feels rich; the guy making $300k who lives on the upper east side of Manhattan and whose friends are all VPs doesn't.

brianlash• 16 years ago

Nassim Taleb makes exactly that point in Fooled by Randomness, which is a terrific read incidentally.

klochner• 16 years ago

I loved the book, but don't remember that being one of the points.

Locke16895• 16 years ago

My parents (both physicians) both readily admit they are rich. They also believe the highest tax bracket (their tax bracket) should be raised considerably.

grandalf12• 16 years ago

How's 80%?

mmorris• 16 years ago

That's nice to hear. I'm nowhere near the upper tax brackets at the moment, but I like to think that I would be okay (and even encouraging) of the taxes I did face in such a situation.

I know many people who make lots of money and are bitter about paying so much tax on it, but very few people who realize that the taxes they pay make a real difference in everyone's lives (especially the lives of those who are less fortunate). Or that the taxes they pay make possible all of the benefits the Federal, State, and local governments offer.

Sure, the government may not be the most efficient of entities, but I think it's difficult to make a serious argument that we would be better off without most of the services provided by the various levels of governments, or that they could easily be replaced. And none of these would be possible without some form of taxation (though how the taxes should be structured is up for reasonable debate).

While I believe that people should be fairly compensated for their hard work, and that we shouldn't penalize people for working harder, I also believe that it would benefit most people to stop and think about how much their taxes help to make this/any country a great place.

*disclaimer: this is mostly about the US, as this is my main experience, but I'd guess most of it applies to (at least some) other nations as well.

tomjen32• 16 years ago

I very much doubt the IRS is going to mind if they send them bigger checks than they have to.

So why not do that, rather than demand that the tax level be increased?

callmeed3• 16 years ago

I don't think it's social circles (although, that might be a by-product), rather parkinson's law kicking in at all levels.

The people I know making $70k don't feel rich–but that might be because they are married with kids. If the people you know are single, I could see how that would be different.

It's weird–I'm half-way between 70k and 300k now and I feel above middle-class but definitely not rich. We live modestly but have 4 kids and travel a lot.

_delirium4• 16 years ago

Yeah, I do know mostly single people making $70k. Some have families, but I can mostly think of reasons why it makes sense to me that they'd still feel well-off. A few live in generally poorer areas; e.g. someone making $70k in Fresno or Fort Wayne is doing well by local standards, and even though they have families to support, they're surrounded by other people who also have families to support who make closer to $50k. A bunch of the rest are immigrants, whose norms are calibrated by a lingering sense that the U.S. is absurdly rich any way you slice it, and that their lifestyle is quite nice compared to family back home.

An interesting case are the locals here in Santa Cruz who don't work over the hill in Silicon Valley. There aren't that many good local jobs, and my sense is that the people who make $70k whose social circle is mostly other non-commuting locals feel well off, despite the fact that it's a pretty high-cost-of-living area--- because they know lots of surf bums, coffee shop employees, and people who have to commute from Watsonville because they can't afford to live in Santa Cruz or Capitola.

enjo2• 16 years ago

Just curious: Define "modestly". Do you own your house? Is it a big house? Is it a nice area?

I'm always fascinated by the varying definitions of living modestly. I don't mean that as an attack on you in any way. I find that people definitions really do differ quite a bit. What's yours?

ajdecon• 16 years ago

Just to point out: by the definition of a lot of Americans, "travel a lot" is part of the definition of "rich". And it's a big part: most people can't really afford to travel at all. And for some people, "4 kids" is also part of that definition--especially if you treat them right. If you send them to private school, that's certainly the case.

(Personal anecdote which is not data: a lot of my family are autoworkers, and if you asked them they'd say they're doing pretty good, definitely middle class. One of my aunts on that side just got on an airplane for the first time in her life last year, because it was the first time she could afford the price of the ticket.)

This post is not meant to be snarky or insulting at all. But you are in the top few percent of the income distribution, and you don't feel rich because the things you spend the money on are things you think you should have. And you might be right! Because I think a life which involves family and travel would be a good thing, and that everyone should have that. But that doesn't mean most people can have it, or that those who can afford these things aren't rich.

temphn• 16 years ago

> saith O'Hare: It’s worth a close look because the author is a law professor, not some high-school dropout Limbaugh lemming, and because the tone of entitlement and whining is typical of a fair number of the comments I got on my post about intergenerational equity (and by extension, equity).

That little snippet gives the whole game away. We have a strange situation in which Michael O'Hare, speaking as an ostensible advocate of "equity" and "the poor", nevertheless casually mentions that he would not pay attention to a word coming out of the mouth of an actual poor person, and that only a law school professor is worth listening to.

Of course, he wouldn't frame it that way. There is a tacit and unspoken mental calculation in which "Limbaugh listener" cancels out and reverses the street cred of "high school dropout", and in which "rich" reverses the intellectual cred of "law professor". So he feels fully entitled in trashing a poor person who does not share his views.

He does not spare one moment to consider that perhaps his views are a function of his power and social class as a Berkeley professor, rather than the outcome of some Platonic reasoning process. He believes what he believes and mouths what he mouths because that's what everyone else around him believes, and because political deviation is punished with social ostracism.

In particular, he is one of those who calls most loudly for "equity" without practicing it himself in his treatment of others.

The point is that there are other things in life that people value beside income. Income can be quantified, so we tend to fixate on that. But what about things like looks? Or IQ? Or power? Or status? Like the status to get people to take you seriously. Especially the last.

That can't be taxed, at least not directly. Imagine how Harvard professors would howl if Harvard degrees were handed out willy nilly, or redistributed from the (no doubt privileged) people who'd earned them to the unprivileged who hadn't. Imagine if column inches of New York Times columnists were taxed and redistributed to people who don't have as much of a say in national affairs.

The narrow focus on income happens for a reason. People who have more status than money (like O'Hare and Delong) are using the government to attack people who have more money than status. There is no question that Brad Delong will come out better in this trade, because he and those like him are the ones dictating its terms.

ryanwaggoner• 16 years ago

But, curiously enough, not angry at the senior law firm partners who extract surplus value from their associates and their clients, or angry at the financiers, but angry at... Barack Obama, who dares to suggest that the U.S. government's funding gap should be closed partly by taxing him, and angry at the great hordes of the unwashed who will receive the Medicare, Medicaid, and Social Security payments that the government will make over the next several generations.

First, his jab at entrepreneurs who "extract surplus value" is an appeal to the core tenant of Marxism: that all profit is an exploitation and an unfair "extraction of value" from labor. I don't want to have a knee-jerk reaction to his argument just because of that, but it doesn't set a good tone for me.

Second, part of the problem I have with the tax increase is this: who knows what all that money will be used for? It could be used for taking care of the great unwashed masses (disdainful much?), or it could just as easily be used to invade more foreign countries in the name of "freedom", prop up outdated and failing industries, or bail out gamblers on Wall Street. The government of the last twenty years seems to have been shockingly bad at allocating the ridiculous amounts of money they collect from us; why should we give them more?

dbfclark3• 16 years ago

By way of being nitpicky: there is no jab at entrepreneurs here. The two named classes of undeserving rich people are financiers and law firm partners and I put it to you that a less value-creating lot relative to compensation could hardly be found in American society.

Law firm partners, really, are a paradigmatic example of surplus value extraction: law firms get paid by people who produce things to play negative-sum games on their behalf. And while I think it's very wrong to say that all profit is an extraction of value from labor, you could hardly find a purer example of value extraction than a law firm associate being paid <$100/hour and billed out at >$300/hour...

grandalf12• 16 years ago

How is being an entrepreneur different from being a financier? Both are speculative. The financier invests dollars in risky schemes, the entrepreneur invests time and energy in them. If the scheme pans out, both get rich.

jbooth2• 16 years ago

Who knows what the money will be used for? Take current budgets and extrapolate X years into the future -- this is federal income tax we're talking about so approximately 2/3 defense spending and 1/3 federal domestic discretionary spending. That's what it'll be used for.

dbfclark3• 16 years ago

There's a few points where he really gives the game away:

-$60k/year for three children in private school -$50k building home equity -$50k in the 401k

But the real point is in the sections about having bought the house at the top of the market and the equity portfolio having fallen: Mr. Henderson feels poor because his net worth has dropped. He has less savings than he used to, so of course he feels he has to save several average family's annual income to catch up.

Being a high-powered law professor can't help, of course -- that's one of those jobs where your not-so-clever peers are big law firm partners and your half-decent students make your salary two years out of school. Even more so than the average 99%er, law professors have a ginormous amount of keeping-up-with-the-jones' self-pity.

aresant• 16 years ago

From personal observation I find this statement to be true: "[the super rich] put $$$ in the Cayman Islands or use fancy investment vehicles to shelter their income".

It's for this reason that I find the concept of a "flat tax" so compelling.

There are plenty of holes in implementing a flat-tax, but fundamentally everybody putting an equal share of their income into the pool feels right to me.

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

dasil003• 16 years ago

A flat tax is compelling because it's more efficient, easier to deal with, and ostensibly more fair. However I don't see how it helps at all with tax fraud.

dgabriel• 16 years ago

Exactly. If they can't find the money, they can't tax it.

patrickgzill• 16 years ago

Every person I know who makes over $200K per year spends WAY too much time on tax-related paperwork instead of being productive at what they are good at.

Assume a scenario where a simplified tax (your choice of methods such as flat, no-income-but-higher-sales-tax, etc.) exists such that, say, 10 hours of time is enough to prepare a high net worth individuals' return.

Even if the net taxes were a little higher, productivity would go up because this busywork which does nothing for the economy disappears.

And since many CPA firms would be getting less hours, they could go and do something productive as well.

2arrs2ells3• 16 years ago

I agree with you that the tax code is in need of a drastic restructuring.

But realize that when you argue for a simplified tax, you're saying we need to get rid of the many incentives baked into the current code. These run the gamut, including things like:

Investing (lower capital gains rate + ability to deduct losses from gains)

Education (credits/deductions for education spending + student loan interest)

Homeownership (mortgage interest deduction - just imagine home prices without it)

Alternative energy (credits for purchasing solar panels/green cars)

Charitable giving

And so on... I'm not saying that all of these credits/deductions are needed, just that their absence would cause changes to the US far bigger than your "lots of accountants +entrepreneurs would have some more free time" intended effect.

einarvollset• 16 years ago

Wow. Don't think I've ever been as disgusted with anything posted on HN; if you don't think you're rich when you're in the top 1% of earners, then you are an arsehole or stupid. Pure an simple.

kaptain• 16 years ago

"Being rich" is being able to buy something you want or need when you want or need it. I make less than $70K a year and consider myself wealthy: there's nothing that my wife and I have wanted or needed that I couldn't immediately pay for. (Single income, no kids).

Mr. 'Deling' Responds to 'I make 500K/yr and am not rich'

Related Stories