Matthew Yglesias: $250,000 is a Lot of Money

[babylonsister]

http://yglesias.thinkprogress.org/2010/09/250000-is-a-lot-of-money/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+matthewyglesias+%28Matthew+Yglesias%29&utm_content=Google+Reader

$250,000 is a Lot of Money
Matthew Yglesias



One of the craziest notions to take hold in American politics is the idea that in some high-income geographical areas represented by Democrats in Congress, households earning over $250,000 a year aren’t “really” rich.

Jim Himes of Connecticut, for example, claims that this amount of money “does not make you really rich” which Annie Lowrey explains as driven by the fact that “Fairfield County, which Himes represents <...> is one of America’s wealthiest counties.” And so it is. But even in the very richest county in the United States of America a household earning $250,000 per year is 226% of the county’s median income. The median household in Himes’ congressional district earns $66,598. In Manhattan it’s similar—$66,525.

In a separate item earlier this week Lowrey made the case for more tax brackets which I think would do a good job of capturing the intuition that there’s a difference between earning $300,000 a year and earning $30 million. But there’s no getting around the fact that people making “only” a couple hundred grand are, in fact, making much more money than most people.

Related:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=433x437298
Democrats Against Tax Increases because $250,000 a year “does not make you really rich.”

[REACTIVATED IN CT]

1. Thanks for posting this

I heard Himes on NPR this am and have been steaming ever since.


http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=143x5194

[ProSense]

2. Anyone who claims $250,000 isn't rich is out of his/her mind.

That is more than the salary of every member of Congress.

If you make $250,000 per year and take home only 60 percent of that, you're taking home $12,500 per month.

A 30-year mortgage (5 percent interest) on a $1 million home with no down payment is about $5,300.

I'm sure upkeep of the home, food and a good life is difficult on the remaining income: $7,200.


Conversely, if you make $100,000 per year and take home 60 percent of that, you're taking home $5,000 per month.

A 30-year mortgage (5 percent interest) on a $500,000 home with no down payment is about $2,700.

Upkeep of the home, food and dealing with life has to be accomplished on is difficult on the remaining income: $2,300.

Now, 50 percent of the country takes home less than $2,300 per year.

Trying to claim that $250,000 (the top 3 percent of income earners in the country) is not rich is a disingenuous.

[GSLevel9]

9. Then WHAT IS rich?

250k is NOT rich.

Rich is the ability to do basically whatever you want... like movie stars, rock stars, athletes and hedge fund managers.

Here's a VERY real example:

You're a lawyer in Santa Monica, CA and you make about $250K per year. Your spouse doesn't work and you have 3 kids. A 4 bedroom house within driving distance of the office is 1 million dollars.

Siphon off FIT, you're at 12,500 per month

So let's make a monthly budget.

Mortgage/HOI $5000
Property Taxes $800
Gardener $400
Utilities (Electricity, Gas, Cable, Phone, Trash) $900
Cell Phone bill (Husband, Wife and 2/3 kids) $200


2 car lease payments, a toyota Camry and a Cadillac Escalade $1200
Car Insurance $150
Fuel $600

Health Insurance $650
Groceries $1200
Eat out expenses ($150 once per week for 4 people) $600



Just so far... that's $11,700 per month.

So that leaves $800 a month for:

Retirement Savings
Sending 3 kids to College
Vacations
Clothing
Shoes
Braces
Prom and Homecoming
Unexpected Expenses
Hobbies
??

So basically, 250K a year is NOWHERE near rich. 250k a year is solid middle class in some parts of the country and in Des Moines, Iowa 250K a year for a childless couple may be quite comfortable. But still not rich...

[jillan]

11. I disagree with you on so many levels that I have to wonder if you forgot your sarcasm smiley.

MOST American families need two incomes just to get by, so if a family has the luxury of having mom home with the kids - they are doing quite well.

A gardener????? Seriously???? How lazy can you get? Not only is that an unnecessary luxury - mowing the lawn, trimming trees is a great workout...but then again, you probably belong to a spa.

MOST American families do NOT live in a home that has a 5K/mo mortgage - even if that means a longer commute to work.

$150 a month to eat out ONCE a week? Seriously?? That is what MOST Americans spend in one month.

A Cadillac Escalade? How about a Kia? A Matrix? A Chevy? Lease???? Why waste your money?

Sending 3 kids to college???? MOST Americans are unable to save and that's why there are Student Loans.

Clothing??? That's why places like TJ Maxx and Ross have more customers than Saks.



You are obviously out of touch with the middle class...or what's left of it.

[GSLevel9]

12. I'm sorry, but you COMPLETELY missed the point.

This whole thread is about the definition of RICH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


Making 250k per year is absolutely high income!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

But it is NOT RICH as defined. PLEASE re-read my post.

[ProSense]

15. It's rich to someone earning $30,000

or a family of four living on $80,000.

In fact, it's rich to 84 percent of the population, who look at $250,000 as 250 percent of their current income.

[MikeW]

24. anything above 30K is rich to someone making 30K

so whats your point

[ProSense]

26. Let me repeat:

It's rich to 84 percent of the population, who look at $250,000 as at least 250 percent of their current income.

See:

$100,000 (250 percent)

$80,000 (310 percent)

$60,000 (415 percent)

What do you think it would feel like to those earning $60,000 to $100,000 per year if their salary increased to $250,000? How do you think someone would feel if their salary increased by $12,000 to $15,000 per month?

Get the point: It's rich to 84 percent of the population.

[MikeW]

27. sorry.

Increasing from 60 - 100000 per year would make you vastly rich out west

In NYC ... not so much

In DC ... 30K wont make a dent

12 to 15 K per month ...

In NYC you'd move from a sidewalk in the Bronks to a sidewalk in another burrow but not Manhattan

In DC you'd go from having 6 roommates to maybe 4.

In the West you'd move up to a double wide trailer.

As I said ... depends on where you live. If your living in Montana, Nevada and making 250K your well off.

Comparing across the country or with the national average isn't realistic there are no adjustments for what is costs

where people live.

[ProSense]

29. "In NYC you'd move from a sidewalk in the Bronks to a sidewalk in another burrow but not Manhattan"

Why on earth would someone move from the Bronx to Manhattan just because their pay went up?

"In DC you'd go from having 6 roommates to maybe 4."

Because paying $4,500 for a million dollar home when you have $12,000 is unthinkable? Or are you saying that rentals in DC are minimum $18,000?

There are no families living in DC, only people with roommates?

Where do families who only have $5,000 live?

[Lucky Luciano]

47. Well, $30K is a fortune to someone from Namibia. nt

[jtuck004]

37. $250K would absolutely be wealthy

if you were looking at it from here...

I guarantee the single parent trying to live on this would think $250K a year is rich beyond their wildest dreams...

But I think what you are asking is not definable in absolute terms - somewhat like asking what "good" is, or what "poverty" is - both definitions could change drastically depending on your geographic or cultural perspective. It might even change in the same location depending on what the economy does.

[Arkana]

13. Yeah, wonderful. 250K is middle-class in Orange County.

But it's not in any other state and we're not going to shed tears for someone who takes home a quarter-million a year.

[ProSense]

14. I don't buy that in the slightest

"You're a lawyer in Santa Monica, CA and you make about $250K per year. Your spouse doesn't work and you have 3 kids. A 4 bedroom house within driving distance of the office is 1 million dollars. "

I know families exactly like that, a spouse who doesn't work and three or four kids, who earn $100,000 less, own near or actual million dollar homes and are living quite comfortably.

So there is no way in hell that you can convince me that a family earning $100,000 more isn't living quite well.

Siphon off FIT, you're at 12,500 per month

So let's make a monthly budget.

Mortgage/HOI $5000
Property Taxes $800
Gardener $400
Utilities (Electricity, Gas, Cable, Phone, Trash) $900
Cell Phone bill (Husband, Wife and 2/3 kids) $200


2 car lease payments, a toyota Camry and a Cadillac Escalade $1200
Car Insurance $150
Fuel $600

Health Insurance $650
Groceries $1200
Eat out expenses ($150 once per week for 4 people) $600


Just so far... that's $11,700 per month.

So that leaves $800 a month for:

Retirement Savings
Sending 3 kids to College
Vacations
Clothing
Shoes
Braces
Prom and Homecoming
Unexpected Expenses
Hobbies

Are you kidding me?

Let's siphon $5,000 (take home on $100,000)

Monthly budget.

Mortgage/HOI $2700
Property Taxes $600
Gardener $400
Utilities (Electricity, Gas, Cable, Phone, Trash) $900
Cell Phone bill (Husband, Wife and 2/3 kids) $200


1 car lease payments, a toyota Camry and a Cadillac Escalade $600
Car Insurance $100
Fuel $300

Health Insurance $650
Groceries $1200
Eat out expenses ($100 once per week for 4 people) $400

That's already $7,650 per month.

-$2,650 for

Retirement Savings
Sending 3 kids to College
Vacations
Clothing
Shoes
Braces
Prom and Homecoming
Unexpected Expenses
Hobbies

Using a model of your calculations (halving some expenses), a family earning $100,000 per year and living a decent life doesn't exist.

The fact is that most people earning $250,000 (or even $150,000 as I described above) do not buy $1 million homes without a down payment. A 10 percent or 20 percent down payment would reduce the mortgage by $500 or $1,000, respectively.



edited extra words, clarity.

[ProSense]

20. I missed this.

The 40 percent subtracted from gross income accounts for both health care and retirement. In fact, it accounts for everything including taxes.


Monthly gross on $250,000 is about $20,800. After 40 percent, it's about $12,500.

The $8,300 per month includes Medicare, FICA, health insurance, retirement, and federal and state taxes, which would look something like this:

Medical $650
Retirement $850
Medicare $300
FICA $1,300
State taxes $1,000
Federal tax 4,400
Other $300

It's a little higher and than 40 percent ($8,300), about 42 percent ($8,800), but it includes retirement and health care. The rest is $12,000.

[Cha]

16. Yeah, $250, 000 a year is a lot of money and they

get to pay their share of taxes.

[Name removed]

50. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Beaverhausen]

23. Jobs like this come with a "car allowance," plus why would their health insuance be that high?

My boss makes over $250K- it's amazing how much free stuff she gets.

[frazzled]

30. I'd say fire the gardener

and mow the lawn yourself. Also, turn some lights out and reduce your premium cable channels. Those bills are way too high.

[handmade34]

32. I always figured

thats what the kids are for (gardening)... :)

[boppers]

40. That's definitely rich.

Gardener? 4 Cell phones? 2 cars (one of which is a luxury/show car)? Only one spouse working? 37 dollar meals?Blowing 600 a month on Auto Fuel? $1,200 on groceries? (etc.)

Jesus. The example *is* living like a rock star, athlete, or a hedge fund manager, and oblivious to their fairly obscene levels of wealth. $250,000 and over is in the top 1.5 percent of the *entire country*.

http://en.wikipedia.org/wiki/Household_income_in_the_United_States

[quakerboy]

42. Your math is off

I can easily find places "within driving distance" for under 1 million. But take it for what it is, and they chose a 1 million dollar 4 bedroom place(I looked. Those are some pretty nice places). Your monthly payment is closer to 3k, no more than 4k even if you have no down payment.

Your fuel expense is generous. That's 3400 miles of driving a month. Over a hundred miles a day, every day. The food number also seems a bit generous, but I will go with you and assume that they are all on Atkins and can only eat meat. And they are picking a nice restaurant to go out to, at that price.

So assume that they were responsible and brought 20% down, and I will accept all your other numbers. That leaves them with 2800/month for the rest of it. Significantly more than most people I know(myself included) get, total, before taxes. This hypothetical families disposable income is greater than many families ENTIRE income. And If they cannot make it on that, they can literally hire a person Full time for 12 bucks an hour to teach them how, and still have your "measly" 800 left to play with.

250,000 is not solid middle class. Its at least a couple steps above that, reaching into damn wealthy. Its may not be "beyond the reach of the law, I can shoot Dick Cheney and get an apology from him" rich, but it is rich.

[backwoodsbob]

45. those numbers are insane

why do you need a million dollar house?Please don't say nothing else available...that's bs

Why do you need a new caddy?If you didn't drive a POS escalade your gas bill would go down too.

Gardener?Do it yourself.Does anyone in a mcmansion REALLY need a gardener?

900 a month for utilities?Turn the air down and quit using the smart phone so much.And drop a few premium channels

300 a week for groceries?our family of three eats well on less than half that.

600 a month eating out?quit eating out so much.Most working class people are happy to eat out once or maybe twice a month

[Lucky Luciano]

46. Nobody and I mean NOBODY in Santa Monica/LA Proper mows their own lawn. nt

[quaker bill]

51. Anyone who can afford on any level

to live in a million dollar house, is rich.

[cherokeeprogressive]

18. "50 percent of the country takes home less than $2,300 per year"

That's $44.25 per week. Are you sure that FIFTY PERCENT of the country takes home only $44 per week?

[ProSense]

21. I meant per month. n/t

[Orsino]

28. Well, it's not the kind of rich that buys much political power...

...so I think the distinction is significant.

It'll buy quite a lot of comfort, though.

[joeglow3]

38. I am upset that it is not $400,000.

Why ado two people who live together and have kids, but don't get married get to make $400,000 before being considered rich, but the same couple who gets married is suddenly rich with $250,000?

[boppers]

41. Doesn't work that way.

There *ARE* different numbers proposed for singles and households, it's just that this one is getting all the attention.

[joeglow3]

43. I am a tax CPA. I am pretty sure I know what I am talking about

If my wife and I never got married, we would both file returns with a "single" status (well, one of us would file "Head of Household") and neither of us would be subjected to an increase in taxes until we crossed $200,000. However, once we get married and file a joint return, this number decreases from $400,000 to $250,000. Do some research on "marriage penalty."

[ProSense]

44. Here's what you're complaining about:

whether or not people in the top 2 percent or top 1 percent of income earners should be considered rich.

When you got married and if you instantly have two kids, how does this scenario change?

What does life look like for two people each making between $125,000 and $150,000 who get married and now have a household income of $250,000 to $300,000?

What does it look like for two people making between $150,000 and $200,000 who get married and now have a household income of $300,000 to $400,000?

What does it look like to the 84 percent of Americans earning $100,000 or less?

Your complaint rings the same as CEOs complaining about corporations being taxed. They never mention the perks, the tax breaks, the ability for their top managers to live extremely comfortable lives.

"Do some research on 'marriage penalty.'"

OK.

Getting Married

[boppers]

49. Nice links. :)

I'm getting married next month, and I'm still learning about all the changes I'll have to deal with.

[LiberalFighter]

3. I would agree there should be more brackets that better reflect wealth.

And I would agree that it is a crazy notion that those earning over $250k aren't really rich.

ANYONE that earns 250k a year and squanders their income without investing properly deserves to pay the taxes they pay provided they aren't cheating and not paying enough. 250k would easily buy a decent home and allow a family to go on vacation.

If I was earning $250k my lifestyle would be a bit better than now. Not much but still better because I don't need that much more than I already have. $250k would represent about 625% increase in my retirement.

[geek tragedy]

4. $250K may not make a person 'rich'--rich is a measurement of wealth

instead of income--but it does make them extremly fortunate/well-off/able to shoulder a bigger burden.

And, it's plenty of money in a place like NYC or SF, regardless of what some say.

[REACTIVATED IN CT]

5. Exactly how much would taxes go up for a household that

earns over $250,000 ? Does someone have a link to that info ??? TIA

[REACTIVATED IN CT]

7. I found a chart on Crooks & Liars

If it is accurate, a family of 4 earning $300,000 would have to pay an additional $4,000 in taxes.

http://crooksandliars.com/jon-perr/10-republican-lies-about-bush-tax-cuts

[ProSense]

10. Earning $300,000

and paying an additional $4,000 is $335 per month on family that will likely still have an income of more than $180,000 per year or $15,000 per month.

What's their mortgage, about a third of that? What's it like trying to live on $10,000 per month after taxes and mortgage payments?

[handmade34]

33. makes it sound not so bad

[prolesunited]

6. Compared to living on unemployment

it sure does! Especially when you run out of unemployment and have to carve out some sort of life out of multiple jobs paying minimum wage.

[ProSense]

8. Even in New York City, $250,000 is rich

Even in New York City, $250,000 is rich

Arguments over income taxes tend to get bogged down in arguments about who is really "rich." And what you hear then is that rich in Ohio and rich in New York City are different. But how different?

According to the Census Bureau, only 6.3 percent of New York City's households pulled in more than $200,000. So if you're a household making $250,000 or more, you're easily in the top 5 percent -- even in New York City.

Now, it's true that those people might not "feel" rich. There's lots of stuff to buy in New York City. It's pretty easy to construct a lifestyle where you spend $250,000 a year. In Columbus, Ohio, only 1.3 percent of households make more than $200,000, so there's less stuff for them to buy and fewer rich people for them to try to keep up with. But what you buy and whether you try to keep up with the people in the penthouse is a personal decision, not an objective economic necessity. The fact of the matter is that a household making $250,000 in New York City is making more than pretty much anyone else in the city. Being rich is more than just a feeling.

[Jennicut]

19. In Maryland, New Jersey and Connecticut it is a lot of money too,

and those are the top three of the richest states in the United States.

The medium household income in the top wealthiest states:

Maryland $65,144
New Jersey $64,470
Connecticut $63,422

[Lucky Luciano]

48. ok...by NYC we mean Manhattan south of 96th street..

Also, consideration has to be given to people that move to NYC when they start working. Their rent is sky high compared to the MANY people who have held apartments since the 1970's, 1980's, even 1990's etc and have affordable rent. Now one bedrooms in a decent clean new building run about $3K and two bedrooms about $4K - that is a big discount from a couple years ago though.

Here is an interesting example. If you make $100K in Wheeling, WV, it is roughly equivalent to make $250K in NYC! Some cost of living by zip code adjustments would be fair.

See the following website for a calculator based on moving from one city to another - I think by moving it must be taking into account the cost of renting a new apartment as opposed to the avergae rent paid which contains a lot of rent controlled apartments not accesible to a newby in NYC:

http://www.cityrating.com/costofliving.asp

came from this thread:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9110945

[MrScorpio]

17. I can live on $250,000 quite comfortably for the next five years

Anyone who thinks that that amount of money for ONE year is NOT a lot is an idiot

[MikeW]

22. i say it depends on where you live

Making $30,000 per year living in Montana isnt the same as making $30,000 and trying to live in the DC suburbs or another metro area suburb.

Its all relative to where you live.

[ProSense]

25. No, it doesn't depend on where you live

Let's use the Santa Monica, CA example and the clarification here.

Itemized spending based on $12,000 per month ($250,000 after Medicare, FICA, health insurance, retirement, and federal and state taxes):

Mortgage/HOI 4500 (after 10 percent down on a $1 million home)
Property Taxes 500
Gardener 400
Utilities (Electricity, Gas, Cable, Phone, Trash) 900
Cell Phone bill (Husband, Wife and 2/3 kids) 200


2 car lease payments, a toyota Camry and a Cadillac Escalade 1200
Car Insurance 150
Fuel 600

Groceries 1200
Eat out expenses ($150 once per week for 4 people) 600

That's $10,250 per month, including $1,800 per month on food, $400 for a gardener and two car payments at a constant.

That leaves 1,750 a month or $21,000 per year for other expenses.

If the mortgage is $4,000 (after a 20 percent down payment on a $1 million home), the remainder would be $2,250 or $27,000 per year.

About 85 percent of Americans (those grossing between $0 and $8,300 a month*) would be hard pressed to find $300 to $500 per month after taking care of the above needs. They also wouldn't be spending anywhere near $1,800 per month on food, have two new car payments at a constant or own a million dollar home.

*For $250,000 per year, the gross monthly income is $20,830.

[comtec]

31. As a lawyer making 250K you are valuable enough to get that car paid for

in your contract.

Figure a Lexus, or Mercedes, PAID by the company (monthly $0)
Also figure your insurance for at least one of those cars is paid for.

Your monthly insurance cost for that one remaining car is going to be pretty low because in all likelihood you live in a good neighborhood (yes ZIP code matters) and white, which means a LOW insurance premium.

ALSO as a lawyer, you can bet that you arranged a very sweet deal for your insurance to be paid up front for the year at a significant discount!

So, lets erase that silly 1200, because it won't exist for someone like that, at all!

Your taxes (gross at the end of the year) will also be lower.
Mortgage interest is tax deductible (some of it) as well as interest on your car (lets drop 33% of those costs from the taxes paid)
also remember that FICA stops at ... what is it $80k?

Look point is, you are being FAR too "kind" to assume that a lawyer making 250k is paying anywhere near that much a month.

Reality is that they are saving a hell of alot more than that. Even when you subtract charity donations, THAT is also deducted from taxes, thus lowering taxes still. What a deducted item does is lower you taxable income, not subtract from taxes paid. This can actually lower your paid taxes by a significant amount. Also ANY expenses at home (internet, telephone, cable) at that level can and WILL be claimed at business deductions.

His phone, internet, and probably his wife's (perhaps kids? but unlikely) will be paid for by the company.

That Ipad? company paid, Iphone? company, Laptop, T-1 line, all company paid.


You are seriously fooling yourself (and trying to fool us?) by suggesting that anyone making even 100k+ is actually living a lifestyle where the company isn't picking up a great deal of their life as part of their contract!!!

You are trying to use "little person" rules and apply them to these people, but the reality is they are on a whole different level from us!!!

The difference between what they pay (percentage) vs US is astronomical. Even just scaling up what I make/pay, at 250k, I grantee you that I would have a metric fuckton of money left over every month. I would rapidly become a millionaire in a few years, then I would invest it in property, and the process would accelerate! THIS is what the rich do!

There is a point where money is just a thing, and they are about power!

To try to compare OUR monthly expenses to their's is complete farce!

And finally.... Lawyers don't have 4 kids.... they barely have 2 because they are gone so much, and/or banging their mistresses.

But you get an A for effort.

[handmade34]

34. so true

"You are trying to use "little person" rules and apply them to these people(making over $250,000)"

I have been around enough to see that the more money one has, the greater the benefits that come his way, perks here, favors there, things to make sure he keeps coming back...

We musn't forget also that the $250,000 is after deducations (plenty of those for the people who can afford a really good accountant)

[ProSense]

36. LOL!

"Look point is, you are being FAR too 'kind' to assume that a lawyer making 250k is paying anywhere near that much a month."

Oh, I wasn't being kind. It was simply to show even at those numbers a person is still living quite well.

And you're right, there are people earning $100,000 per year and up who benefit from company perks, including cars, phones, bonuses, stock options and tuition reimbursement, that make life a lot more comfortable.

[handmade34]

35. it all really is a moot point

until we have criteria to judge things by...

I spent about 40 years living on less than $10,000/year. $30,000 seems rich to someone in that boat and $250,000 is only a wild fantasy. I have learned considerably more about money since then and still believe that $250,000 is a good point to create an increase in tax.

[killbotfactory]

39. But, but, but... Trendy drug habits are expensive!

All those drugs ain't gonna ingest themselves, damnit!