Friday, March 25, 2011

Scraping By On $250,000 Per Year

A friend at work sent me a link to this MSN article on life on $250,000 a year.  It opens:
In the ongoing debate over whether to use tax policy to help resolve the nation's massive deficit, a single number has emerged from the crossfire: $250,000. It's the annual income that President Barack Obama and others have used to define what it means to be "rich" in America today. And while the Bush-era tax cuts were temporarily extended to 2012, when their deadline comes around for the second time, $250,000 will be etched in the minds of policymakers and pundits as the number that separates the middle class from the wealthy.
It's an interesting article, but I'm sure its message won't be that new or shocking to this readership: $250,000 just isn't "rich" any more.  With two working adults and a couple of kids, especially if those adults are working for corporations, they have less disposable income than you might think.  They're probably just squeaking by.  

They may not have much money when the month runs out, but at least they don't have much month when the money runs out.  Most such couples would probably do just as well if one of them stayed home with the kids, they sold off the second car and got rid of all the other expenses associated with that parent working.  In the mid '90s, it was pretty widely stated that in that sort of dual income house, if both parents were making virtually the same pay, instead of household income doubling, it increased by 25 to 30%.

In truth, these are the kind of folks "The Bernank" and "Turbo Tax Timmy" have crosshairs on.  Savers, people playing by the rules, doing their best, are the ones to be drained of blood until there's nothing left.  If you've read Tom Baugh's "Fully Taxated" articles these concepts are familiar to you.  Tom is, of course, selling a book he firmly believes in - nothing wrong with that - called "Starving the Monkeys".  He's not alone in saying these things, either.  Tyler Durden at Zerohedge pointed out In Entitlement America "a one-parent family of three making $14,500 a year (minimum wage) has more disposable income than a family making $60,000 a year.  And if that wasn't enough, here is one that will blow your mind:
"If the family provider works only one week a month at minimum wage, he or she makes 92 percent as much as a provider grossing $60,000 a year."

This underscores the most serious problem with reforming welfare laws.  Note that more than doubling pretax income from $14,500 to $30,000 results in a loss of 28% of their net income.  It would take an exceptionally rare person to go through a drastic drop in quality of life for the possibility of getting really high income and better standard of life some day way in the future. 

It also points out that Tom's main point, that the tax system is set up to milk people like our $60,000 family above, the $250,000 family we started out with, and, to be honest, folks like me.  And many of you. 

If you look up "unsustainable" in the dictionary, you should find the US financial situation.  US Finances Are Near the Worst In the World.  Things that can't go on won't. 

2 comments:

Anonymous said...

We have around 300,000 people on London's streets today ... protesting the "right" to continue lapping up those benefits. The obverse, of course, is that they are keen to use the State's violence to extract the funds which they want.

Graybeard said...

That made our news over here. It looked like a nasty, unruly mob, typical of the left wing protests we see pretty much any time they protest. I believe we're likely to see that on our shores, too, based on the public union protests in some of our states.