

Mr. 'Deling' Responds to 'I make 500K/yr and am not rich' - georgecmu
http://delong.typepad.com/sdj/2010/09/in-which-mr-deling-responds-to-someone-who-might-be-professor-todd-henderson.html

======
_delirium
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.

~~~
Locke1689
My parents (both physicians) both readily admit they are rich. They also
believe the highest tax bracket (their tax bracket) should be raised
considerably.

~~~
grandalf
How's 80%?

~~~
Locke1689
I don't know, but that seems like the kind of snarky one-liner that doesn't
add anything to the discussion. Because davidw said it so well, I'll just
inline quote him here:

 _This is exactly the kind of comment that I feared we would see when articles
like this start gaining traction. It's a cheese puff comment: it's got some
taste, but it's empty. It has nothing to back it up, no content, no reasoning,
no well crafted argument. It's just an empty "rah rah" type of slogan of the
type that politicians regularly regurgitate. There is nothing new or clever
about the comment, it's the sort of thing that's made the rounds elsewhere
100's of times. Being such a cheap, throwaway comment, it mostly/usually
doesn't lead to particularly interesting discussions, as we can see here,
despite a few good comments, but more zingers, one liners and similar "go home
team!" cheering for one political side._

~~~
grandalf
I think you misinterpreted my comment. It was intended to be pithy, not
snarky. So your parents think that their current tax rate is too low, so I
named a higher rate. Why is 80% outlandish?

My point was simply that it's a bit silly to bemoan the low rate of taxes
today unless you name a rate that you think _is_ reasonable. Clearly you think
80% is unreasonable. If one only thinks a 1-2% increase is reasonable, then
stipulate that, rather than making the grandiose claim that taxes should
raised _considerably_. Isn't an 80% rate a considerable increase?

The fact is, most people think that 80% is grossly unreasonable. Why? At least
there should be a principled argument, not just a rich person bragging (via a
complaint) that he/she could afford higher taxes.

~~~
Locke1689
_Clearly you think 80% is unreasonable_

I never said that. I said that, as given, your comment had no argument or
reasoning. This is the comment you should have originally posted, not your two
word question which vaguely implied your real argument.

~~~
grandalf
That aside, do you have a response? How about 90%?

~~~
vannevar
90% superficially sounds unreasonable, because we have a tendency to think
that wealth is distributed on a bell curve. But wealth is not distributed that
way, it is distributed according to a power law, which means that a
significant number of people make in excess of $100M per year while others
make less than $1000. If wealth were distributed according to skill and
ability, the ratio between the highest and lowest would be much lower and
billionaires would be as rare as 100 ft tall people.

The idea that a person could personally contribute the equivalent of $100M of
value in a year per their efforts and skills (which ARE distributed on a bell
curve) is absurd. It is this mismatch between the distribution of ability and
the distribution of wealth that the rich exploit. So for someone making
$100M/year, a 90% tax rate is not unreasonable at all.

------
SamAtt
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
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
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.

------
hugh3
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!"

~~~
vaksel

       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%

~~~
hugh3
_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.

~~~
wheaties
You do realize that 48% of all Americans pay $0 dollars in Federal Income tax.
The top 10% pay 40% of the pie. I'm for the tax cuts expiring but I do also
agree with the whole "equality" argument. I'm of the generation where I'll
probably never see any Social Security but I do know that I'm paying for it.

~~~
2arrs2ells
This is a wildly misleading figure.

First, the primary driver of this "inequality" is the widening gap between the
rich and the poor in the US. The top 10% of earners in the US take home nearly
50% of the country's total income. Under a "flat tax" system (i.e. everyone
pays 20%), they would still pay nearly 50% of the country's total income tax.
Under our system they actually pay 70% of all taxes. Do you think it's
"unequal" for people who take home more income to pay proportionally more
income taxes?

Second, even people paying zero __income tax __pay ~15% of taxes on income for
social security + medicare, as well as a disproportionate share of their
income on regressive taxes, like sales tax and gas tax.

~~~
wheaties
Nope, I don't think it's unfair that the people who earn more pay more. In
fact, I'm for it. However, what I'm against is even a small group not paying
for it. This "small" group right now is nearly half of the population.

The argument for regressive taxes is also poor. Come to New Hampshire where
there is no sales tax or W-2 income tax. The air is clean, the mountains well
hiked and the people friendly. Take a look at the state's finances too. The
regressive taxes there are on inheritance, dividends, investment income and a
few things else I can't remember. That hits the rich far more than the poor.

------
dbfclark
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.

------
patrickgzill
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.

~~~
2arrs2ells
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.

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

------
kaptain
"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).

------
einarvollset
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.

------
temphn
> 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
_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?

~~~
dbfclark
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...

~~~
grandalf
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.

~~~
just_a_someone
Astute, but I think they are very significantly different: An entrepreneur is
risking _his own_ time and energy. Financiers are putting millions of other
people's money at risk.

Edit: Seriously, markdown doesn't work?

~~~
grandalf
Well, I'd argue that the financier is an employee of people who are
voluntarily risking their capital. Similarly, a startup CEO is the employee of
people who are voluntarily risking their capital.

~~~
dbfclark
The point really is that "risking your capital" is not in and of itself a
productive activity -- making stuff is. I work as an investment analyst myself
which is good in both the "fun" and "profit" departments, but I'm not about to
pretend that I'm creating value for the world in any but the most indirect of
ways.

~~~
grandalf
Well, by matching investors with investments you are helping the market supply
capital where it's needed.

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

