
Please Don't Show Us Another “Typical Family Earning $270,000 a Year” - smacktoward
http://www.slate.com/redirect/business/2017/12/why-are-sample-families-in-tax-plan-analyses-so-rich.html
======
esmi
“Rafa Nadal and I have an average of 5 French Open titles.” That is a quote
I'm going to have to remember. Should come in handy often.

~~~
Axsuul
"Bill Gates walks into a bar and the average net worth of everyone there goes
up $1M"

~~~
eesmith
How big is this bar? Time bring out the quadratic equation.

If the average net worth of a US citizen is $100,000 (it's less, but I'll go
with that), and Gates has a net worth of $90 billion, and the average net
worth of those people goes up $1M:

    
    
      average worth = aw = 100000
      n people
      total worth = aw * n
      Bill Gates comes in:
      total worth' = aw * n + 90000000000
      aw' = (aw * n + 90000000000)/(n+1)
      difference = aw' - aw
            = (aw * n + 90000000000)/(n+1) - aw * n = 1000000
            = (100000 * n + 90000000000)/(n+1) - (100000 * n) = 1000000
         => n ≈ 944 people in the bar
    

[https://www.thebalance.com/american-net-worth-by-state-
metro...](https://www.thebalance.com/american-net-worth-by-state-
metropolitan-4135839) says the average net worth is $68,828 in 2011, which
implies about 1,136 people in the bar.

Big bar.

If they were millionaires already, then only 300 people are needed. If they
were billionaires, only about 30.

~~~
cperciva

        > difference = aw' - aw
        >    = (aw * n + 90000000000)/(n+1) - aw * n = 1000000
    

Somehow aw turned into aw * n there, which sent your calculations wildly off.
You want:

    
    
        n * aw + 90 * 10^9 = (n + 1) * (aw + 10^6)
        n * aw + 90 * 10^9 = n * aw + n * 10^6 + aw + 10^6
        90 * 10^9 - (10^6 + aw) = n * 10^6
        n = 89999 - aw / 10^6
    

i.e., almost 90000 people, no matter how wealthy the population of the bar is.

~~~
ithkuil
> no matter how wealthy the population of the bar is.

That doesn't sound right. What if the population of the bar is as wealthy as
Gates? The average net worth should change if you add another value equals to
all the previous ones. Am I reading something wrong?

~~~
cperciva
_What if the population of the bar is as wealthy as Gates?_

My point is that you can't find 90000 people who are as wealthy as Gates. In
fact, you can't find 90000 people whose average wealth comes anywhere close to
Gates -- even the Forbes 400 average out at a paltry $6.7B, and you'd need to
stock the bar with 83300 people with that level of wealth before Gates would
fail to raise the average wealth by $1M.

I think the average wealth among the top 90000 people is around $100M, so
you'd need to have around 89900 of them... plus or minus a few thousand
depending on how the stock market is doing on any particular day.

------
reaperducer
The problem is that the people putting together these scenarios almost
exclusively live on the coasts, where $270k/year can be average more often.

But just watch a TV show like House Hunters, and see how many people in
America are struggling to buy a house that costs about the same as what people
on the coasts spend on a fancy new car. There's your "average" person. There
was one episode a few years ago where a guy in Atlanta had a budget of
$46,000. Yes, just $46k for a condo. It was small, but it was home.

It should also be of no surprise that the politicians view $270k as an
"average" family. They're all completely out of touch. Remember back in the
early 90's when Bill Clinton said that anyone making $200k/year was
technically a millionaire, because there's no reason they couldn't save a
million dollars in five years. Red or blue, they're both clueless.

~~~
k__
How come so many people buy houses in the US, while most of us Germans rent?
Even people considered of average income talk about their "condos" all the
time.

I always think, how can they be average if they own a whole house?!

~~~
phyller
In the United States, paying your mortgage, taxes and insurance is often about
the same price as paying rent (this varies with where you live of course).
When you choose to put your money towards buying a house a portion of the
money you pay each month goes towards paying off the principle of the loan, so
you are "building equity". After 15 or 30 years you pay off the loan, then you
only need to pay taxes, and insurance if you want. It makes retirement much
easier if you own your own home. And in emergencies you can borrow money
against your home or sell it to raise a lot of money.

You also have to pay for upkeep of your house, but an offset to that is that
real estate can often increase in value over time. And the best thing is, it's
_your_ house. Pride of ownership is a real thing, it's nice to be able to do
what you want, have a garden (if you have any land which many houses do),
paint it how you want, add an addition, upgrade the kitchen or bathroom.

People who do not make a lot of money, but have a steady income and good
credit can get a mortgage for a house they can afford, with just 10-20% down
payment. But the poorest or those who do not have good credit must still rent,
and even that is hard because many landlords check credit histories and want a
big deposit up front.

~~~
JBlue42
>it's nice to be able to do what you want, have a garden (if you have any land
which many houses do), paint it how you want, add an addition, upgrade the
kitchen or bathroom.

Let's toss in a YMMV on this since sometimes home ownership in the US is also
coupled with very restrictive HOAs.

Overall, that's a great description of why home ownership in the US can be
beneficial once you've reached a certain income or rental price point that it
makes sense.

------
twotwotwo
Not convinced by the bit at the end arguing that profiling mainly rich
families is right because that's where the money is. If you want to look at
where the money is, charts breaking down the overall changes in revenue--
literally breaking down where the money is--are the right tool, and plenty of
news outlets and think-tanks have been making those. (Like, I don't know,
this: [https://cdn.vox-
cdn.com/thumbor/DxNLXVIK9jjf6JdZlijXboCAnIA=...](https://cdn.vox-
cdn.com/thumbor/DxNLXVIK9jjf6JdZlijXboCAnIA=/800x0/filters:no_upscale\(\)/cdn.vox-
cdn.com/uploads/chorus_asset/file/9910265/CHIP_VS_TAX_CUTS.jpg) \-- also,
interesting URL with the rescaling operations there.)

The point of looking at particular individuals and families is to translate it
into impact on people's lives, and 1) a lot more lives are lived in those
lower income ranges, so there's a greater multiplier to the impact there, and
2) the impact of a given dollar change in take-home pay is larger for someone
less rich.

For an example of the second factor, like a lot of people in the US tech
business, my life probably doesn't change that much if my take-home pay goes
up or down $1K. If someone only has a couple K of discretionary income every
year it's a bigger deal; if someone can barely make rent anywhere in their
city or can't afford to fix the car they take to work when it has mechanical
issues, it's crucial.

~~~
Gibbon1
One of my bugaboos is people using the wrong metrics to try and describe
problems.

In this case relative price level means nothing at all. It's all about job
security, opportunity and margin. You comment about the difference of $1k is
all about margin.

------
NDizzle
This page has some good examples:

[https://taxfoundation.org/final-tax-cuts-and-jobs-act-
taxpay...](https://taxfoundation.org/final-tax-cuts-and-jobs-act-taxpayer-
impacts/)

$30k income, single, no kids. $52k income, single, 2 kids. $75k income,
single, no kids. $85k income, married, 2 kids. $165k income, married, 2 kids.
...

That's the kind of stuff people are looking for, right? The $165k entry is two
earners - all of these are fairly realistic examples.

Those of you that think that something is missing from these examples - what
do you think is missing? I mean, the low income earners even see a break. $30k
income, single, no kids, and living in California goes from a federal tax bill
of $2426 to $1970. (according to
[http://taxplancalculator.com/](http://taxplancalculator.com/) )

~~~
jedberg
Most everyone will get a break. There is a weird crunch for people making
between $200K and $400K in a high tax state like CA or NY who will come out
behind due to the loss of deduction on their property tax and state tax, and
since they live in CA or NY, are probably barely middle class at those wages.

The bigger issue is that, for example, the Walton family _alone_ will get 5%
of the 1.5 trillion dollar tax break. The Trump family will get a huge break
too. It's unlikely that the Walton family or the Trump family will suddenly
start making a ton of economic activity because of their windfalls, but in the
meantime government revenue is down, which means they have to start cutting
services.

So most of the tax breaks for the lower earners will be eaten up over the next
few years in paying for things the government used to subsidize for them.

~~~
betterunix2
I live in NJ, another state where the $200k-$400k will be hurt. Believe me,
that is _solidly_ middle class, even when a 1BR rents for $3k/month.

The real problem with these "tax breaks" is that the most significant breaks
are highly specific and selective. This tax bill basically picks winners and
losers. Worse still, the winners tend to be people with the kind of
investments and lifestyle that Republican lawmakers have (e.g. the Corker
kickback), and the losers tend to be professionals living in Democrat-leaning
states (e.g. tech workers).

The relatively small breaks that the majority will receive are temporary, and
represent a minefield of exceptions that can leave people with no break at all
(e.g. the loss of exemptions). There is a reason Republicans are picking oddly
specific examples of people the bill will benefit -- most people will not see
much, which is not a very compelling story.

~~~
smacktoward
_> I live in NJ, another state where the $200k-$400k will be hurt. Believe me,
that is solidly middle class_

The median household in New Jersey in 2016 had an income of $76,212. (Source:
[https://www.census.gov/data-
tools/demo/saipe/saipe.html?s_ap...](https://www.census.gov/data-
tools/demo/saipe/saipe.html?s_appName=saipe&map_yearSelector=2016&map_geoSelector=mhi_c&s_state=34&s_measures=mhi_snc&menu=grid_proxy))

In _the highest-income county_ in New Jersey, Hunterdon County, the median
household in 2016 had an income of $113,336.

You may wish to adjust your definition of “solidly middle class” a bit.

~~~
betterunix2
I was going by what sort of lifestyle you can live with that income range. You
can rent a nice apartment in a nice part of town and support a family on your
salary. You could also go out to the suburbs and live in a largish house. You
get one or two trips abroad with your kids each year.

We are not talking about country clubs, yachts, or first class airfare here.
It is not the 1%. It is between working class and upper class. What else would
you call it?

~~~
llamataboot
Statistically, quite rich.

~~~
betterunix2
I disagree. The 1% is "quite rich." The 200k-400k income band is not the 1%.
Like I said, the things wealthy people can afford are still out of reach.

There is a group of people who are not living paycheck to paycheck but who
still need to work full time. That group is called the middle class.

~~~
americanjetset
>So your definition of "solidly upper class" is the top 10% of earners? That's
a pretty loose definition IMO.

You stated that above. I'd say your definition here is quite a bit more
"loose."

------
thisisit
> Is the media hopelessly out of touch?

What _income group_ do these media outlets think their readers belong to? If
anything this kind of reporting might show why "bottom half of earners in
America" are turning towards stuff like Breitbart etc.

~~~
daveguy
I'm sure Breitbart is blindly trumpeting the tax cut, just without the
profiles/statistics showing what types of people it helps. There's a reason
these outlets are showing "typical" families making $250k. That's how they can
show that "typical" families benefit significantly.

Most news outlets also stand to benefit significantly because it is primarily
a tax cut for businesses.

~~~
jrochkind1
I think they mostly just haven't been covering it. Definitely not the policy
details, a little bit of the horse-trading.

~~~
gozur88
Taxes are complex enough that media outlets can't cover the details without
having readers lose interest.

------
phamilton
The conversation is repeatedly borked by differences in COL. Touting the
national median income and then claiming someone earning $100k in SF (where
the median income is ~$100k) is "out of touch" is frustrating.

~~~
Eridrus
It's interesting to think about how a progressive tax code is meant to tax
those who can afford it the most, but it ignores COL differences so the taxes
fall disproportionately on those in high COL locations.

~~~
kinkrtyavimoodh
High COL locations typically manage to offer higher salaries too, though.

~~~
Eridrus
Exactly. You get a higher salary, but everything costs more. And the
government takes a larger percentage of your salary.

It's hard to nail down the magnitude of the effect, but it seems like a policy
that basically subsidizes lower COL locations.

~~~
eropple
Salaries versus COL, and the impacts of the perception of both, are not
(usually) linearly correlated, but which side of the line any given locality
falls upon is hard to predict. Salaries in San Jose, for example, are
significantly better relative to COL (in part because of the halo effect from
the rest of the Bay Area) than they would be in Los Angeles, where cost-of-
living is high but a commensurate lifting of salary has not been seen. But
considering this as a general note of unfairness rings pretty hollow to me.
It's a relative scale problem; my yearly net is going to be more actionable
and more usable than that of someone in a low-COL area because _the work
usually isn 't there to begin with_.

As an example, from the numbers I've seen whenever I've talked to companies
out there, I would probably take home between 40% and 50% more money if I
relocated to San Francisco from Boston; I'm very good at what I do and my set
of skills is in high demand. I'd probably pay between 20 and 25% more in
expenses, including taxes. The biggest increase would, of course, be housing
costs--but I would have more disposable income that I could then (because that
kind of money is buy-capital money--unlike, say, a tiny pacifying bribe to
look the other way while the rich monumentally loot us) use to invest and reap
consistent returns in a way that is _functionally unavailable_ to most people
living in, say, the Lakes Region of Maine, where I grew up and where the
average household income is about $41,000.

------
Johnny555
A salient point from the article:

 _So when we look for examples to illustrate the tax code, it makes sense to
use a bunch of pretty wealthy families, because the big pictures is that
nobody else really has very much money._

~~~
matwood
This is a good point. If someone is going to highlight what a federal tax cut
does, they have to go to people actually paying federal taxes. Most people in
lower incomes brackets already pay near 0 in federal tax. This is why tax cuts
do not really help those who need help the most. To help those who really need
help we have to _spend_ money on things like healthcare, education, and jobs
programs[1].

[1] As an aside, people rightfully rip on military spending waste a lot, but
it is still a decently functioning jobs program.

~~~
joshuaheard
On the other hand, a tax cut helps a husband and wife working 60 hour weeks
each, who barely have time for each other, in order to pay for the mortgage,
health insurance, and try and save for retirement, and pay over 60% of their
money to the government (40% fed tax, 14% state tax, 10% sales tax).

~~~
dlp211
If some family is taxed at those rates, they don't need a tax cuts because
they are pulling a 7+ figure income.

For reference, I make close to $200k and my effective federal tax rate
including FICA taxes was 16%.

------
asimpletune
It’s like the family from “Home Alone”. When you think about it, they’re
really rich.

~~~
serf
even when I was young I questioned the cost of putting 15-20 people on an
airplane, the cost of daily breakfast of 15-20 people, let alone the fact they
they appear to be affluent and live in a small mansion. When I got older I
began wondering what the parents did for a living, but I never investigated it
enough to see if it was explained.

Glad to see i'm not the only one that questioned it.

------
poke111
I think this is often a dumb complaint and it shows itself in other contexts
sometimes. There's a natural floor to income, it's $0. But there is no
ceiling. So naturally if you want to give a sampling of scenarios covering
most people, most examples will be high earners (even if there are fewer of
those) because how many meaningfully different scenarios are there between $0
and $50k of income?

EDIT: Another corollary of this explains part of why income inequality
increases over time. As markets become more global, the upside for successful
enterprises goes up - there are a lot more potential customers. So today
someone at the top of their field can have a much higher income than he could
in the past, whereas the income floor at $0 is unchanging.

------
relics443
Jealousy and greed is driving the opposition to the tax plan.

If you look closely, you'll see that most complaints aren't about not getting
a tax break, because 99.99999% of people will get one.

No, the chief complaint is "the rich are getting more."

------
jimmytucson
The author makes a valid complaint about the examples these senators used to
promote the tax bill but he doesn't further my understanding of the bill. In
fact, what little he says about it seems wrong:

> All changes to deductions, for example, only affect people who itemize their
> deductions (almost always high earners)—and within that group, only the
> subset whose deductions topped the new, doubled standard deduction. And this
> means that if your income is in the bottom half, your tax return won’t
> showcase many of the ways the law is changing.

Let's break it down:

> Most people who itemize are high earners.

From what I found[1], 1 in 3 tax filers itemize. Most deductions come from
mortgage interest and state and local taxes. I pay a mortgage and a hefty NJ
state income tax. Am I a high roller?

> The amount you pay in taxes will not change unless your itemized deductions
> top the new standard deduction.

That's exactly wrong, right? If your itemized deductions top the new standard
deduction then you will still itemize, so your deduction won't change. If you
do not itemize (looking at you, non-high rollers) then your deduction will
double. If your itemized deductions are lower than the new standard deduction
(peasants like me), your deduction will increase to the new standard
deduction.

Also, I can't tell if he's saying you won't pay less in taxes, or if he's
saying "your tax return won’t showcase many of the ways the law is changing".
The latter is vague enough to be non-falsifiable. The former is just wrong
because the tax rate is changing for every bracket but the lowest one.

This is a contrived example, but a single filer making $50k who took the
standard deduction last year would have remained in the 3rd tax bracket (25%)
without the bill. With the bill, he'll deduct an additional $6k, which drops
him into the 2nd tax bracket, which is now 10% (down from 12% a year ago).
That's a nice chunk of change for a deadbeat!

1\. [http://www.taxpolicycenter.org/publications/who-itemizes-
ded...](http://www.taxpolicycenter.org/publications/who-itemizes-deductions)

------
vowelless
I've been seeing quite a few slate.com articles on the frontpage lately (the
dockless cycle comes to mind). I hope this is not the new normal...

~~~
rainbowmverse
Can you expand on this for people who don't have an opinion on the site?

------
stmfreak
Complaining that rich benefit disproportionately from tax cuts while ignoring
the negligible taxes paid by those under median income is politics as usual.
It is the opposite side of the "fair share" argument when demanding more hand
outs be paid by those with more money than the writer.

~~~
eropple
In a healthy, civic-conscious society, it is understood that those who _have_
help those who _don 't_ and that this is a moral and ethical good. What we are
seeing now with the profound selfishness of the modern American civic system
(in some social quarters on the left, in most social and economic quarters on
the right) is a breakdown of that mutual understanding and spirit of civic
duty. Which leads to those who have _incomprehensible amounts of money_ being
defended by those with merely _a lot of money_ against those with _no money_
by characterizing the notion of ensuring a basic standard of living for those
with _no money_ as something like "handouts" instead of the mutual cooperation
to keep a working society that people, not just rich people, actually want to
live in.

There is a statement about the need to get over oneself somewhere in there,
but finding it is an exercise for the reader.

~~~
perl4ever
Something you didn't touch on is that there may be a different viewpoint on
whether people are getting "handouts" based on assumed counterfactuals. Say
one person makes $30K and another makes $5M. What is the "fair" amount of tax
and who is getting a handout? The rich person may think "society provides
people with $10K of support per capita, so if I pay more taxes than that, it's
generous and if someone pays less, they're getting a handout". The person
making $30K may reason that "if it wasn't for society catering to the
privileged, _nobody_ would make millions, so nearly all the excess over the
average income is a handout if not paid in taxes". It all depends on where you
anchor your assumption of what is deserved.

~~~
wfo
Recall that for someone "making" $5M per year, the majority of income that
high is inevitiably extractive and exploitative and comes from ownership and
power, not the output of their actual work. One could argue if they deserve
any of it beyond their actual real wages at a fairly evaluated rate, which
might cap out at $1M in a democratic society. FDR proposed a 100% marginal tax
rate on the highest earners, his opponents argued him down to something in the
90s, spawning the most productive period in US history.

~~~
perl4ever
I don't necessarily find it convincing that the benefit from living in society
to an individual is capped, but on the other hand, I don't find it convincing
that the benefit from some individual to society is capped _either_.

We may consider perhaps one can only truly earn $1M. But, what if someone has
an idea that benefits a billion people to the value of a dollar each? You may
not think, for instance, that Facebook in particular qualifies, but the point
is, it seems to me _possible in principle_. Or, what if someone invents
something that saves a million lives? You can't put a dollar amount on that,
maybe, but surely it's worth more than $1M, because courts put that much value
on just one life frequently.

All in all, the existing situation, where taxes are a percentage of what you
make kind of makes sense to me. It is consistent with believing that living in
society is a multiplier.

------
phyller
This has been driving me nuts, I'm glad someone is writing about it. I don't
think this is happening to show how much the tax cuts are giving back to
people, I can't help but think that the reason only high earners are shown as
examples is to paint this legislation as only benefiting high earners. If this
is the case it has been broadly successful. Apparently half the country is
buying into a narrative that their tax bills are going to go up, and I'm not
sure where that idea is coming from. ( [https://www.monmouth.edu/polling-
institute/reports/MonmouthP...](https://www.monmouth.edu/polling-
institute/reports/MonmouthPoll_US_121817/) )

If the low income earners were included two things would be clear. 1) Many low
income earners don't pay federal income taxes at all, many actually get paid
by the IRS instead 2) Low income earners actually still benefit by getting
either lower taxes or higher credits.

The only example I saw of a regular person was in the Bloomberg article that
was mentioned. [https://www.bloomberg.com/news/articles/2017-12-20/how-
the-t...](https://www.bloomberg.com/news/articles/2017-12-20/how-the-tax-bill-
will-affect-eight-american-families) The "renter in Milwaukee" went from
paying $515 to actually being credited $400.

At this point, there is no way of having a reduction in tax bills that doesn't
overwhelming favor the top 50% of earners, because they pay almost all the
federal income taxes. In 2015 the top 50% of those that filed tax returns paid
over 97% of income taxes (the last table cell at the bottom all the way on the
right [https://www.irs.gov/pub/irs-
soi/15in03etr.xls](https://www.irs.gov/pub/irs-soi/15in03etr.xls) )

EDIT: Based on experience on this board I knew this post would be downvoted,
but I'm not exactly sure why. Please help make me a better contributor by
telling me what I did wrong as you downvote, thanks!

~~~
eropple
_> At this point, there is no way of having a reduction in tax bills that
doesn't overwhelming favor the top 50% of earners_

This is completely true.

The reason the top half pay all the taxes is _the top half have all the
goddamned money_. And that, of course, makes sense: the top half have the only
realistic chance at accumulating enough labor-derived money to buy into
capital and they've been doing exactly that for the last fifty years. Capital
is not linear per-hour. Capital is a multiplier. _That 's why they have all
the money._ That they have all the money is the core and the source of the
mess we're dealing with right now.

Which means there is another question to be asked: should taxes be lowered? As
someone very firmly in that top half, I am benefited by having people in the
lower half of the income distribution not starving and dying in the streets,
not dying of easily preventable injuries and illnesses, and not being so
crushed by debt that revolution looks appealing.

So are you. It's not about you, and it's not about me, but it's about _us_. We
need to do better by _us_ , so _we_ can all keep this thing ticking along.

And I gotta say, it's important not to miss that even that Bloomberg article
elides a really, really important question: how much of that net $915 from
that hypothetical renter now goes to (poorly) covering for the cuts in other
services that will be necessitated to avoid budgetary disaster? It's a hard
question, because nobody really _knows_ , but it's a question whose answer
will impact the people at the bottom of the income distribution the most, by
far.

~~~
phyller
_> how much of that net $915 from that hypothetical renter now goes to
(poorly) covering for the cuts in other services that will be necessitated to
avoid budgetary disaster? It's a hard question, because nobody really knows,
but it's a question whose answer will impact the people at the bottom of the
income distribution the most, by far._

Yes, I think that is the main point, and what we should be talking about. I
feel like as a country we have lost the ability to have a discussion at that
level of depth. So instead we dumb down our arguments to the point where we
mislead people just so they will accept our point of view.

~~~
eropple
I agree with that.

I would also note that there is a real and a mendacious reason for why we have
lost that ability.

------
indubitable
The reason the articles focus on families ranging from the median up is
because the vast majority of people below the median income don't pay federal
income taxes. [1] The bottom 40% actually have a negative effective federal
tax rate. So going from 0% to 0% isn't exactly informative. The title of this
submission (originally _Please Don 't Show Us Another “Typical Family Earning
$270,000 a Year”_ in case it is changed) is misleading. The $270k number
references another article [2] that looks at a wide array of different
possible income groups. The lowest it goes is a married couple with one child
earning $40k as their effective rate goes from 1.29% to -1%. Nowhere is it
ever stated or even implied that $270k is a typical family.

[1] - [https://www.marketwatch.com/story/45-of-americans-pay-no-
fed...](https://www.marketwatch.com/story/45-of-americans-pay-no-federal-
income-tax-2016-02-24)

[2] - [https://www.bloomberg.com/news/articles/2017-12-22/trump-
sig...](https://www.bloomberg.com/news/articles/2017-12-22/trump-
signs-1-5-trillion-tax-cut-in-first-major-legislative-win)

