Trying to Live on 500K in New York City

http://www.nytimes.com/2009/02/08/fashion/08halfmill.html?_r=1&ref=business

by transburgh • 17 years ago

45 72 17 years ago

gaius• 17 years ago

Looking at those numbers, Obama has done NYC out of an awful lot of taxes. I wonder how much schadenfreude will be left once that trickles down to services that ordinary people take for granted - or who will make up the shortfall.

captainobvious• 17 years ago

The 500k limit is only on executives of banks that receive future extraordinary assistance from the government--the execs are free to find jobs elsewhere if they don't want the restrictions. The banks are free to not take the assistance if they can maintain a healthy capital level without it. With fractional-reserve banking that is the condition they implicitly agreed to in exchange for the ability to conjure money from the (almost) ether.

tptacek3• 17 years ago

It also only applies to the top N executives at those firms, where last I checked N was 5.

natrius• 17 years ago

You say that as if the right to operate a fractional reserve bank is granted by the government. Without a government, fractional reserve banking would still happen, and people would put their money in banks that had good reputations.

I find the aversion to fractional reserve banking that is frequently displayed on the internet quite odd.

jonknee• 17 years ago

If that were a real concern it would be far more efficient for the Feds to make up the lost taxes than to continue having these clowns take home tens of millions of dollars in tax payer money.

sounddust• 17 years ago

None of these people are leaving NYC. Of course they're going to complain because they want people to think that it's inhumane to limit their salary. But if things get tough, they have millions of dollars in savings accounts, assets, vacation homes that they can sell off to keep up their lavish lifestyle long enough for the economy to recover.

Besides, considering that most of these people should have been going to jail, I don't mind if we end up making them to move to New Jersey :)

LogicHoleFlaw• 17 years ago

New Jersey?

I mean, we do have laws against cruel and unusual punishment...

critic• 17 years ago

Columbia and NYU grad students make about 25K/year.

jballanc• 17 years ago

...and live like shit! I should know, I'm a grad student just across the river, and I work a second job and live in Harlem just to make ends meet.

Anyone who hasn't lived in NYC will have a hard time understanding. Living in the city definitely has its perks, and even having to work the second job, I wouldn't trade it for the world...

...that said, I don't have a PS3, or an Xbox, or a Wii, or a Plasma/LCD, or a stereo, or a car less than 7 years old, or more than 7 changes of clothes, and I only just got cable last year. Life in the city is about trade-offs.

If you're coming from the suburbs, and expect the same sort of lifestyle in the city, don't take a job that pays less than $80k/yr!

froo2• 17 years ago

As I was going through the list I still don't feel any sympathy for these bankers.

The whole idea of budgeting for the majority of people is to make do with seemingly limited resources. It's what everyone does to manage their own money.

Why can't someone who is supposed to manage everyones money practice a little self restraint?

tptacek3• 17 years ago

I don't think the article was trying to make you feel sympathy; I think it was playing with subtext.

angstrom• 17 years ago

Either way, are we really supposed to believe these bankers don't know their way around taxes? It's not like they're squeezing paycheck to paycheck.

sethg2• 17 years ago

It's hard to tell, because I've seen a lot of "lifestyle" articles in the Times that seem pitched to appeal to people with seven-figure incomes.

E.g., there was a cover story in the NYT Magazine a few months back about surrogate motherhood, by a woman who was married to an investment banker, and not only dropped $25K to have another woman gestate her baby but hired a nanny--excuse me, a "baby nurse"--to care for the kid. Not that there's anything wrong with either one, but I'd be embarrassed to have my face in the foreground of this picture:

http://graphics8.nytimes.com/images/2008/11/30/magazine/30su...

Spyckie• 17 years ago

I think this article is supposed to be a joke... or, to clarify, its supposed to make bankers feel good about themselves while ridiculing them.

froo2• 17 years ago

I understood the hyperbole.

I was just suggesting that even taking the obvious exaggeration as literal fact, I still don't feel sympathy for these bankers...

JimEngland• 17 years ago

I love how two vacations a year, at a total of $16,000, is considered a "living expense."

gamble• 17 years ago

> Nanny: $45,000 a year.

Of course, no banker would dream of paying his nanny less than $500,000 a year, considering the difficulty of surviving on such a salary in NYC.

patio113• 17 years ago

Amen. Every time I hear the "waily waily waily you can't live for less than $90k in California" I think "for God's sake you've interacted with several people today who are doing it -- think back to the last ten times you physically handed money to anyone, they're not making $90k".

This problem is not unique to California or Manhattan. I get the same from people who choose to live in Nagoya apartments which cost about my monthly salary, then whine how impossible it is to get ahead in this city. Hey, I work five minutes from where you work yet my rent is $450... considered a lifestyle change, maybe?

jfarmer• 17 years ago

I lived on $50k/year in SF with no problem. Do people really complain about making less than $90k?

kingkongrevenge• 17 years ago

How about a $500K salary cap for presidents of universities that accept federal grants and loan subsidies? Heh heh.

jacobolus• 17 years ago

Very few make much more than that. Here's an article about university president pay from 2006: http://www.thecrimson.com/article.aspx?ref=515933

Apparently the Harvard president has made ~$500-600k for the last many years.

homme• 17 years ago

Cripe, more than the US president less all the attendant duties. A functionary making that much...obligatory greenspun (nsfw) http://philip.greenspun.com/school/tuition-free-mit.html

maximilian• 17 years ago

Its actually football coaches at big universities that make all the money. Median salary is over a million dollars last I saw. The academic salaries are much more reasonable. Mostly in the 100-200K range for upper level profs and administrators.

ecuzzillo• 17 years ago

If you want to win at football, you most definitely need a good football coach, and the markets for pro football coaches and college football coaches are hardly separate. So you have to pay college football coaches somewhere in the ballpark of pro football coaches.

What has never been properly explained to me is the utility of winning football teams to universities. I really would like to hear about that.

kragen• 17 years ago

We aren't bailing out failing universities that have destroyed trillions of dollars in wealth by virtue of martingale mismanagement. We provide state support to universities because they aren't supposed to try to internalize their positive externalities.

ryanwaggoner2• 17 years ago

If a person is married with two children, the weekly deductions on a $500,000 salary are: federal taxes, $2,645; Social Security, $596; Medicare, $139; state taxes, $682; and city, $372, bringing the weekly take-home to $5,180, or about $269,000 a year, said Martin Cohen, a Manhattan accountant.

Martin needs to check his figures. Social security, for example, is 6.2% for the first 106k of income, which is a weekly deduction of about $127, not $596. This is a difference of almost $25k / year.

It's also highly unlikely that a person in this scenario wouldn't have a range of tax mitigation strategies, from retirement investments to real estate.

EDIT: Here's another one:

The total costs here...are $790,750, which would require about a $1.6-million salary to compensate for taxes.

By and large, people making millions of dollars per year in income do not end up paying effective tax rates of greater than 50%. The highest marginal tax rate is currently 35%, so even once you account for SS/Medicare, city, and state taxes, you're still not above 50%, especially once all deductions are taken into account. Additionally, many of these folks are probably subject to AMT, which is a flat rate of 26-28%.

mattmaroon4• 17 years ago

And you're not even factoring in that most of their income comes in the form of grants or options that pay the capital gains tax rate.

ryanwaggoner2• 17 years ago

Agreed, though the article specifically said "salary", so I gave them the benefit of the doubt there ;)

fortes• 17 years ago

I assume they're counting New York city and State taxes, which add up to a little over 10%, iirc. However, you're right that, with the help of a decent accountant, they can get out of paying the full tax rate normal people pay.

patio113• 17 years ago

The total costs here... are $790,750, which would require about a $1.6-million salary to compensate for taxes.

Wait a second, 50% taxes? Not the marginal rate, the effective total rate? That is truly gobsmacking if it is accurate.

I did a little math, too, and it doesn't seem impossible, particularly if you're actually spending most of that money (and thus hitting the 8%+ NYC consumption tax). 35% federal bracket, 7% state bracket, 3% city bracket, plus property and consumption taxes, and you'd be paying more than fifty cents out of every dollar in taxes. And since your total tax rate approaches your marginal rate as your income increases, their total tax rate may well be in excess of 50 cents on the dollar.

Glad I don't live there. I don't make anywhere NEAR $1.6 million a year but if I ever do, I will live somewhere that values having me around.

Retric2• 17 years ago

Only stupid people making that much money pay anywhere near that much in taxes. Get an interest only mortgage and suddenly your rent is "tax free". Also options can be counted as capital gains which is 15% etc. There are a lot of tricks you can play with that level of income. Consumption taxes only apply to a smaller subset of spending because so much of your money is spent on services and out of state.

PS: The worst income bracket is single and making ~100k because they are in a high tax bracket and need to pay 15% in SS taxes on all of it.

anamax• 17 years ago

> Get an interest only mortgage and suddenly your rent is "tax free".

The mortgage interest deduction only applies to the first $1M of the loan.

And, the mortgage interest deduction goes away under AMT.

jackowayed• 17 years ago

wait! so in a time when many are without jobs and struggling to survive, the bankers whose salaries are coming largely from taxpayer money might have to keep wearing their old $1k suits, cut back to 1 $8k vacation per year, take public transit, take their children out of elementary schools that cost more than instate college without even giving room and board, and have their personal trainer come only once a week?!

Those poor, suffering souls. I'm sure that someone will form a charity where ordinary people donate small things they don't need anymore, like their old $15k dresses, so that the bankers don't have to risk being starved of their luxuries.

nazgulnarsil• 17 years ago

and the costs being prohibitively high have nothing to do with the fact that there are so many people receiving these ridiculous salaries and driving up the costs of services? give me a fucking break. hello supply, meet demand. when salaries go down these ridiculously inflated prices will come down or these houses will be empty and these services going bankrupt.

mynameishere• 17 years ago

There's nothing special about New York City. There are huge financial firms in Omaha, and Goldman Sachs et al can simply move there or other places. Problem solved.

wallflower• 17 years ago

I feel silly reposting a very recent comment but it's relevant:

Tom Wolfe's "Bonfire of the Vanities" (Going broke on a million a year), p.137

"One breath of scandal, and not only would the Giscard scheme collapse but his very career would be finished! And what would he do then? I’m already going broke on a million a year!

The appalling figures came popping up into his brain. Last year his income had been $980,000. But he had to pay out $21,000 a month for the $1.8 million loan he had to take out to buy the apartment…

Of the $560,000 remaining of his income last year, $44,400 was required for the apartment’s monthly maintenance fee… $18,000 for heat, utilities, insurance and repairs, $6,000 for lawn and hedge cutting, $8,000 for taxes. Entertaining at home and in restaurants had come to $37,000. This was a modest sum compared to what other people spent."

Also UrbanBaby: UrbanBaby is an anonymous message board frequented by some typical New York UES/UWS mothers. Here they talk about not being afford private school on $400k/yr (DC = dear child, DH = dear husband) http://www.urbanbaby.com/talk/posts/50368448

mattmaroon4• 17 years ago

They should just do what Steve Jobs does. Get a wardrobe of nothing but jeans and black turtle necks, and subsist on cancer-fighting carrots and peas.

callmeed• 17 years ago

What is a co-op maintenance fee and why does it equal the mortgage payment?

(sorry, I'm from Oregon, never heard of a 96k co-op)

astrec2• 17 years ago

A co-op is (usually) a non-profit that owns an operates a building. When you buy a co-op apartment you effectively buy a share(s) in the co-op which entitles you to occupy a particular apartment. As a shareholder in the co-op you are required to pay maintenance to cover your share of the operating costs of the building: energy and utilities, maintenance, doorman etc. Some co-ops also generate revenue from flip taxes.

Maintenance doesn't have to equal the mortgage payment - our Brooklyn co-op costs around $650pcm in mortgage, and $800 in maintenance.

mcdowall• 17 years ago

Even that is insane!!

I have a share in the freehold of my flat in the UK, my maintenance comes in at £480 per annum, this includes buildings insurance, cleaning, heating and general building maintenance.

Thats pretty damn steep over there!

Keyframe3• 17 years ago

> co-op maintenance fee of $8,000 a month

seriously, how on earth can co-op maintenance for apartment amount to 8k a month unless you are building it from scratch?

gravitycop2• 17 years ago

For one thing, taxes are high in New York City, which makes everything expensive. The "maintenance fees" can include more than what might normally be considered "maintenance": salaries for doormen and superintendants, utilities, building mortgage, and real-estate taxes. http://www.wallfly.com/review/manhattan_ny/faqs/faqs_co-ops....

Keyframe3• 17 years ago

ah yes, I forgot about property taxes. We don't have them here where I live, taxation is mostly through income and consumption taxes. Property taxation always seemed stupid and somewhat evil to me. What if you happen to lost your income source for awhile or something along that line? You would loose your property you own because you cannot pay legal racketeering on something that is yours.

awt• 17 years ago

All they have to do is get jobs at profitable companies.

jcl• 17 years ago

Or get by without the bailout money.

noonespecial• 17 years ago

I really like it. What would be a reward to most of us is a bitter punishment to them. They've created a life as artificial as their balance sheets and then bid it up to an absurd level.

This is a perfect punishment for the epic fail they have foisted on the world. Make them live like the merely rich. The sardonic nature of it all makes me damn near gleeful.

sethg2• 17 years ago

I'm sure there are Indian or Chinese bankers who would be happy to take over the reins at these companies for $400K or even $250K. Viva globalization!

jyothi• 17 years ago

Oh give me $100K and I would build a whole business out of India. $100K is enough gas for at least 2 years for most startups out of here and hopefully start making profit by then.

edit: people as much as it applies to businesses need to learn to live lean, at least when necessary.

Trying to Live on 500K in New York City

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