

Why Not Feeling Rich is Not Being Poor, and Other Things Financial - scdlbx
http://whatever.scalzi.com/2010/09/21/why-not-feeling-rich-is-not-being-poor-and-other-things-financial/

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yummyfajitas
This is an interesting comment. But let me point to Tyler Cowen, who I found
more insightful. He takes the same sentiment expressed by Scalzi, pushes it to
it's logical conclusion and finds it lacking:

"Let's say you live in a country which has some rich people, some people in
the lower middle class, and some very very poor people...In such societies, do
the "lower middle class but not very poor people" have cause to complain?
After all, some large group of others has it much, much tougher. ...At what
percentile of wealth does your claim to complain go away or diminish? ...
Can't a rich person point out that he has a higher MU of money than a non-rich
person might think? Or must that necessarily offend others? What kind of
genuflections must he package along with that information, so as to avoid
being considered offensive? ... Beware of moral arguments which do not address
"At which margin?" _I see a lot of attempts to lower the status of Todd
Henderson, but not much real moral engagement._ "

I recommend reading the whole thing.

[http://www.marginalrevolution.com/marginalrevolution/2010/09...](http://www.marginalrevolution.com/marginalrevolution/2010/09/does-
the-law-professor-have-a-right-to-complain.html)

~~~
teyc
Todd's lamentation is basically "but I'm not rich, if you have a look at my
peers". After all, Todd's on a fixed salary, and there is little thrill left
in his work if he's tenured, there's little bluesky left in his investments.

Sounds like he's going through a bit of a personal crisis.

Leave him alone. When he gets over this episode, he'll be fine.

~~~
yummyfajitas
"I see a lot of attempts to lower the status of Todd Henderson, but not much
real moral engagement."

------
CWuestefeld
Mr. Scalzi is a fine writer, but may not be a great reader. He completely
overlooks the point of the article to which he referred.

To be sure, some of the criticisms he makes may be true. But to focus entirely
on them, rather than the main point of the original article, is doing a
disservice to those who really are more concerned with this issue than with
financial envy.

So for the record, having followed the links to the original post, let me
reiterate the intent. The "little guy" will be affected if the "rich" need to
cut back. Luxury expenses (yes this is the point: it's a luxury to have a
gardener or housekeeper) will be cut back, so anyone whose income relies on
those expenditures will be hurt. In many cases, such as the immigrant
gardener, forcing the rich to cut back causes a much more serious change to
"downstream" incomes.

Of course, the number of rich people who really will react by cutting back,
and the number of gardeners and the like who are affected by those cuts, is a
matter of some debate. It may well be that in the balance, the harm is less
severe.

But Mr. Scalzi doesn't even acknowledge that there is any debate. In this way,
he's playing chicken with the rich, but the stakes will be paid by those who
may be affected profoundly.

~~~
kscaldef
I would say, after reading the original post, that even this is unclear. Note
that he says "Our combined income exceeds the $250,000 threshold for the super
rich (but not by that much)" and also "At the end of all this, we have less
than a few hundred dollars per month of discretionary income". I get the
familiar feeling that Todd Henderson does not actually understand the concept
of marginal tax rates. It seems like he's got enough buffer in his budget to
handle a couple extra percent on the "not that much" he makes over $250k.

~~~
gnaritas
I've found most people don't understand marginal tax rates. Many seem to think
that jumping up into the next tax bracket by even one dollar will make them
make less money than they made in the lower bracket on less pay.

I was stunned one day when I heard my boss, a small business owner, say
something to this effect over lunch, as well as another co-worker. I told them
they didn't know what they were talking about and that's not how taxes work
and he cited his years running a business as a reference and claimed I was
naive and clearly wrong.

I bet him he was wrong and he took me up on it; after lunch I took him to our
accountant and had him explain it, then pointed him at Wikipedia. Amazing that
one can be an entrepreneur for 15 years and not know this.

Part of the problem is how we talk about taxes, we say things like _tax cut
for people making less than 50k_ rather than the more correct _tax cut for the
first 50k of your income_. The former seems to be talking about someone else
while the latter clearly means _you too_ , while avoiding the us vs them
mentality that seems to turn off most people's brains. I've made it a point to
make sure everyone I know understands marginal taxes now.

~~~
jacobolus
It seems to me (as a biased observer) that a big part of the
language/understanding deficiency here has just been that the GOP and its very
effective messaging apparatus deliberately uses language that increases that
confusion, and the Democratic Party is incompetently happy to adopt the same
language, despite the clear harm to their platform.

------
zweiterlinde
One key element that is missing from much of this discussion is an
understanding of comparative advantage and its importance to society.

If someone has the skill and ambition to succeed in a demanding professional
career,isn't it better that they do so rather than doing their own gardening
for fear of being judged? In general, it seems obviously good for society for
a married couple to both work and outsource some of their domestic
responsibilities that others can perform more cheaply. But our current (and
even more, our future) tax code discriminates against this heavily.

~~~
dasil003
_But our current tax code discriminates against this heavily_

Why? You can always make more money. A higher marginal tax rate is at most a
minor disincentive since you still end up with more overall. Everyone likes to
complain about taxes, but I think it's pretty much bullshit if anyone says
they turned down an opportunity for more money because of the marginal tax
rate.

A better argument is that the rich spend money more wisely than the
government, which is at least debatable.

~~~
CWuestefeld
_A higher marginal tax rate is at most a minor disincentive since you still
end up with more overall_

That's not necessarily true. As I point out elsewhere, there's much more going
on than just ones top marginal rate. I pointed out the discontinuity when one
hits AMT.

But also, more topical to this aspect of the argument, is the other expenses
involved in employment. It may be that I'm still making 60% of my labor after
tax. But in so doing, I also have to forgo the work that I'd been doing
myself, and pay someone else to do it.

Most relevant is childcare, since it's something that one can't readily avoid
if both spouses are to be employed, and is extremely costly. It's quite
possible that the loss to taxes plus the expense of childcare together exceed
the potential income of the second spouse. Indeed, I'd guess that is a leading
reason for single-income families.

~~~
zweiterlinde
Yes, you've hit the nail on the head. Especially in the case of dual-income
homes, there is a discrete hurdle you must overcome that makes the marginal
tax rate misleading. In this context, you have to make $40-50k just to break
even. Ouch. And working hard enough to justify a $100k salary to bring home
$30k? That's a disincentive, in my book.

Even further, consider the impact that this tax structure has on people
deciding to take on debt for higher education (ok, so that's frequently a bad
idea anyway, but there have been other discussions about that). A smart single
person might well decide to take on $100k (or perhaps even $250k as the law
professor seemed to imply) to raise their lifetime earning potential. But then
two smart single people get married. They would like to have kids, but what
was originally a reasonable investment is now quite a handicap because of the
fixed cost + marginal tax cost related to the second income.

------
masterponomo
The guy making over $250K can easily wind up just as bankrupt as Scalzi's sad
sack who stumbles around dropping his mac 'n' cheese on the floor (grip the
bowl firmly, people). Saying the higher income folks just have a money
management problem is just plain wrong, unless you want to also admit that the
sad sack guy has a population management problem because he's gone and had
kids he can't afford to feed/clothe/educate properly. Both have made choices
they can't support, and I think both are entitled to bitch about the end
result (briefly; and then go do something about it).

