Saturday, May 21, 2011

Joe has much, but at least he's got his pride

The long (1 week) awaited (by me) "part 2" of the travails of Joe the exactly $250,000 before taxes income recipient/earner has now been published. You may recall part one (here), and my critique (here). In part 1, "Joe" talked about how hard he worked to get his $250,000. In part 2, he talks about where he spends it. It is short and easy to read, so I won't summarize it. Still, here are a few thoughts on both parts 1 and 2:

First, I'm open to the possibility that Enrico, the author, may have intended these columns as a parody. I have read nothing else he has written. But some of the statements--especially in the second essay, when he says that if he lived in the "very expensive city" in which he works, he would have to live "in a high-rise apartment with a doorperson, because otherwise, I would need to carry an Uzi when taking the garbage down the hall to the incinerator"--likely is not meant to arouse any sympathy from people who actually live in that city.

Second, it is very unclear to me how "Joe" can claim to earn exactly $250,000 before taxes. In my last post, I wondered whether the tax increase proposed by Obama et al. was based on adjusted gross income or based on some prior income consideration. Is the $250,000 before or after the AGI is figured? More to the point, in part 2, "Joe" mentions how hard it is to put away anything for retirement, which suggests that he puts at least something away. Now, there are various ways to save for retirement, and many ways involve tax-deferred mechanisms, such as 401(k)'s and IRA's.* He probably, therefore, earns at least some money that is not taxable, so the claim he earns "$250,000 before taxes" is probably more an approximation. (I am not certain if there is an income level beyond which one may enjoy tax-deferred contributions, and if there is, perhaps that challenges my point here.) Finally, I assume he has at least 1 interest bearing account--either taxable or non-taxable--and for the interest to add up, plus his other income, to exactly $250,000 is quite a feat, especially if it happens more than one year in a lifetime. [see update below]

Third, I'm sympathetic to the claim, implicit in both of his posts,** that he is a net-taxpayer (i.e., that he pays more in taxes than he receives in services). Yet he receives at least some services and benefits. In one of "Joe's" hypothetical scenarios, his children go to a public school in an "affluent" suburb. In most of his scenarios, "Joe" drives a car on roads that are maintained in part by public funds (yes, I know some of the roads are probably toll roads). Take, also, social security and medicare. It is possible that they are not involved, yet, in the proposed tax increases on "the rich."*** I won't mention the temporary relief given on social security taxes this year (actually, I just did mention it, but I'm not sure if there's an income requirement that would make "Joe" ineligible for the relief). I will even grant that maybe those programs won't be around by the time "Joe" retires. But if he has a parent or parents who depend on social security and / or medicare, it is just possible he is therefore an indirect beneficiary.

Fourth, Joe has more choices. He need not live in an expensive high-rise apartment: he can probably rent out a good room with the owner of a two-flat, like my girlfriend and I do. And I'm sure the landlord would be much happier to have a low-maintenance middle-aged man with a stable income than a slack-jawed (almost middle aged) grad student like myself.

Fifth, it is true that in one of the hypothetical scenarios, "Joe" has a skillset the demand for which is in decline. In other words, if he loses his job, it would be very difficult for him to find a comparable job at the same or similar salary. Indeed, he might even be priced out of less remunerative jobs because, as a former senior level management person, he might be seen as too overqualified for, say, a barrista post at Stardollars (a job that he might find is hard in its own right). I also acknowledge that as someone who is presumably middle-aged, he would probably face the very real prospect of age discrimination on the job market (as someone who is approaching middle age myself, I am becoming much more sensitive to the possibility). But in those cases, he will be earning far less than $250,000 and therefore will no longer be one of the oppressed rich.

As I argued in my last post on the plight of "Joe," I have much sympathy--even empathy--for Enrico's apparent effort (if he's not writing a parody) to challenge the facile assumption that "people who make $250,000 a year have it easy." In some ways ways, they have their own challenges and worries and concerns, and their life might attain a level of stress, ennui, and unhappiness that others who make less might be more in a position to avoid (the key word is "might"....they might very well have other stressors, ennuis, and unhappinesses, too, but I'm not dismissing outright the possibility that "Joe" has it worse than he might if he made, say, only $50,000 a year). But in some important ways, "Joe" has choices, and he appears, largely, to deny it.

Update: 5-21-11: The reason I harp so much on the difficulty of claiming that "Joe" makes exactly $250,000 a year before taxes is because that claim is meant to have a lot of persuasive force. The reader is lead to believe that, but for the arbitrary imposition of a penny (or, more likely, a dollar) in his salary, "Joe" would evade the terrors of the tax increase. The persuasiveness of his claim about the apparent arbitrariness of the line-drawing would not be as strong if "Joe" made, say, $255,000 before taxes. Also, and as an aside, I suspect many people would draw the line at which one becomes rich well-to-do at a point somewhat lower than $250,000, say, at $200,000, or at $100,000. Such people would likely see the arbitrariness as extending in the other direction: too many of "the rich" are getting by without the increase, they might say.

*My understanding of Roth IRA's is that the income invested is taxable, but the interest/earnings on the investment are not, or are at least tax deferred.

**For example, in the first essay, he complains about people raising his taxes for "federal budget deficit I had nothing to do with," and in the second essay, he complains about property taxes raised to support local schools, etc.

***I have heard the claim, the truth of which I don't know, that these programs are actually funded by unique funding streams and are not really included in what is officially counted as the budget deficit....again, I don't know if that is true, but I have heard the claim.

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