‘We are the Super Rich’

[Note:  Items tagged ‘no endorsement here’ are provided for the convenience of readers and do not represent the opinion of RR. ]

Posted by Todd Henderson on September 15, 2010

The rhetoric in Washington about taxes is about millionaires and the super rich, but the relevant dividing line between millionaires and the middle class is pegged at family income of $250,000. (I’m not a math professor, but last time I checked $250,000 is less than $1 million.) That makes me super rich and subject to a big tax hike if the president has his way.

I’m the president’s neighbor in Chicago, but we’ve never met. I wish we could, because I would introduce him to my family and our lifestyle, one he believes is capable of financing the vast expansion of government he is planning. A quick look at our family budget, which I will happily share with the White House, will show him that like many Americans, we are just getting by despite seeming to be rich. We aren’t.

I, like the president before me, am a law professor at the University of Chicago Law School, and my wife, like the first lady before her, works at the University of Chicago Hospitals, where she is a doctor who treats children with cancer. Our combined income exceeds the $250,000 threshold for the super rich (but not by that much), and the president plans on raising my taxes. After all, we can afford it, and the world we are now living in has that familiar Marxian tone of those who need take and those who can afford it pay. The problem is, we can’t afford it. Here is why.

The biggest expense for us is financing government. Last year, my wife and I paid nearly $100,000 in federal and state taxes, not even including sales and other taxes. This amount is so high because we can’t afford fancy accountants and lawyers to help us evade taxes and we are penalized by the tax code because we choose to be married and we both work outside the home. (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.)

Our next biggest expense, like most people, is our mortgage. Homes near our work in Chicago aren’t cheap and we do not have friends who were willing to help us finance the deal. We chose to invest in the University community and renovate and old property, but we did so at an inopportune time.

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. My wife has school loans of nearly $250,000 and I do too, although becoming a lawyer is significantly cheaper. We try to invest in our retirement by putting some money in the stock market, something that these days sounds like a patriotic act. Our account isn’t worth much, and is worth a lot less than it used to be.

Like most working Americans, insurance, doctors’ bills, utilities, two cars, daycare, groceries, gasoline, cell phones, and cable TV (no movie channels) round out our monthly expenses. We also have someone who cuts our grass, cleans our house, and watches our new baby so we can both work outside the home. At the end of all this, we have less than a few hundred dollars per month of discretionary income. We occasionally eat out but with a baby sitter, these nights take a toll on our budget. Life in America is wonderful, but expensive.

If our taxes rise significantly, as they seem likely to, we can cut back on some things. The (legal) immigrant from Mexico who owns the lawn service we employ will suffer, as will the (legal) immigrant from Poland who cleans our house a few times a month. We can cancel our cell phones and some cable channels, as well as take our daughter from her art class at the community art center, but these are only a few hundred dollars per month in total. But more importantly, what is the theory under which collecting this money in taxes and deciding in Washington how to spend it is superior to our decisions? Ask the entrepreneurs we employ and the new arrivals they employ in turn whether they prefer to work for us or get a government handout.

If these cuts don’t work, we will sell our house – into an already spiraling market of declining asset values – and our cars, assuming someone will buy them. The irony here, of course, is that the government is working to save both of these industries despite the impact that increasing taxes will have.

The problem with the president’s plan is that the super rich don’t pay taxes – they hide in the Cayman Islands or use fancy investment vehicles to shelter their income. We aren’t rich enough to afford this – I use Turbo Tax. But we are rich enough to be hurt by the president’s plan. The next time the president comes home to Chicago, he has a standing invitation to come to my house (two blocks from his) and judge for himself whether the Hendersons are as rich as he thinks.

15 thoughts on “‘We are the Super Rich’

  1. I am sorry, but this author of this post has lost touch with reality. You can afford to have someone else clean your house. You can afford to have someone else take care of your lawn. An income of $250,000 or more puts you in the top 1.5% in the US. Increased taxes for you may result in you having to give up some luxuries in life (cable TV, housekeeping, and lawn maintenance staff are luxuries). While you resist giving up those luxuries the 25% if us that are making less than $25,000 a year are being forced to forgo trips to the doctor, the gas pump, or even the grocery store. I think it is time to get some perspective.

  2. Oh, for Pete’s sake. He’s counting retirement investments as expenses? That’s money he gets back later, unless he invests unwisely.* I think of expenses as being things like rent or food– necessary, but unlike savings, retirement plans, or home equity, not payments to your future self. He’s purely and simply living beyond his (significant) means, and he’s so busy noticing and emulating the handful of people who have it easier than he does that he ignores the 98% of us who have it substantially harder.

    *Any financial mistake he can make is going to hit him less hard than it would hit those of us with smaller margins.

  3. hey resistance!

    for some reason i thought this was one of your ‘translation’ articles…here am i, busily shaking my head in wonder at your skills (as always) the whole way down. then i went over to google cache to read the original, only to find out i already had! bha!

  4. Barf. I’d like to ask the “entrepreneurs [he] employ[s] and the new arrivals they employ in turn whether they prefer to work for [him]” or someone who isn’t an obnoxious asshole.

  5. There’s this concept that those of us who aren’t “super rich” have to learn early, learn well and live out every day: live within your means. Yes, you’ll have to cut back to where you were five years ago before Bush cut your taxes in the first place. Remember five years ago? You were suffering badly then, I’m sure. I guess you’ll have to suffer again.

    I’ll shed a tear or two for you.

    Right after I get done crying for the people who don’t have insurance because they can’t afford it (but earn too much for medicaid). And who don’t have retirement savings, and no real expectation of ever being able to retire. And don’t have any cars, let alone two, don’t have cable TV (maybe don’t own a TV set that works anymore because of the digital changeover) and don’t have to pay property taxes, but only because they do not and never will own a home, let alone a “historic” property in a coveted urban center. The people whose children are cared for by grandparents and aunts and uncles because daycare is too expensive, and who will just have to make do with their public school education — public schools that might be better if the people with the education and the power didn’t white flight their kids to the nearest private school and refuse to engage.

    You might have to move to the suburbs with all the other yuppies. You’ll have a longer commute, but you have two (I bet quite nice) cars to make them in. You won’t have to pay for private schools. I can’t help with the nanny problem, maybe you, like lower income families, should’ve practiced some birth control. Life’s hard like that.

    Meanwhile, stop your whining.

  6. “we have less than a few hundred dollars per month of discretionary income. We occasionally eat out but with a baby sitter, these nights take a toll on our budget. Life in America is wonderful, but expensive.”

    Me, too. I have Less than a few hundred dollars less per month of discretionary income. About $270 less than a few hundred.

  7. The author is a University of Chicago law professor and he pulled it out of his ass. The group blog is called “Truth on the Market: Academic commentary on law, business, economics and more.”

    As I noted in the other post, I think there is significant number fudging going on here. In addition, this post displays an amazing lack of knowledge about the tax proposal. Despite this, the poster writes with an authority given to him by virtue of his race, gender, position and institution.

    Before he deleted this post, he noted that he pays his housekeeper and lawn guy about $300 total per month. He also said that he pays the lawn guy $20 per week.

  8. Ed said:

    … his point about the upper middle being forced to pay more taxes? Hell yeah, he is right about that.

    It is time for us to rebuild the middle class, not make those us that succeed carry the weight for everyone else.

    Am I privileged? Sure. And I earned every penny of it the hard way.

    I’d suggest many (most?) people who work “earned every penny.” But in any event, this couple and their student loans have benefited from the government. Undoubtedly he also expects police protection, government response, infrastructure, etc. My experience is that there is much less of that in poor areas.

  9. who is Ed? (ref’d above)

    cuz this quote: “Am I privileged? Sure. And I earned every penny of it the hard way” – doesn’t make any sense.

    I thought the point of recognizing privilege is the fact that you understand it cannot be earned.

  10. I just now saw this after these last few years.

    “I thought the point of recognizing privilege is the fact that you understand it cannot be earned.”

    Is that the case? I ask because the traits of my life that you would most certainly consider privilege I have because of long hard struggle and sacrifice in order to achieve what I have. So who gave me this privilege? Parents? No, I was a foster child. School? I never studied what I do. The people I work for? Yes, you could say that. Everything I have is because of them.

    But still, I do not believe I understand.

  11. Ed –

    Hard work does not ensure success.
    Privilege allows some people’s hard work to be recognized over others’.
    Privilege lets you believe that anyone could do what you did, if they just put in the same amount of work.

  12. I understand that, but that isn’t the case in what I do. Or how I did it. If anyone did the same amount and quality of the work I have, they would be exactly where I am.

    I know the system is still gamed in many ways. But I had no inherent privileges in accomplishing what I did. I had plenty of economic disadvantages, actually, and I overcame them the same way everyone else has to.

    You consider me someone that doesn’t know how easy I had it when the truth is far from that. Everybody bleeds. Everybody has pain. It’s why I am here listening to you. Because I related to the pain. It isn’t the same pain caused by the same things, but it’s pain. And effort. And the will to overcome those what stand in your way.

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