Today I was listening to the radio and I got to thinking about
how easy it is to skew an argument by using percentages instead of actual
information that people can relate to on a personal level. For example, it's easy to make it sound
"unfair" to charge a graduated income tax when you look at it in
terms of percentages.... But should the
average American really be asked to
tighten their belts so that the richest Americans won't have to sell their
third vacation home? Because that's what
would happen if we switched to a flat tax.
(I'm talking to you, country bumpkins who argue passionately in
McDonald's about how you think we should just charge a flat tax...)
I looked up some numbers and I found out that over 80% of Americans make less than
$100,000 a year (according to 2010 census records). I don't know if this comes as a surprise to
anyone else, but I was shocked. The
numbers that we hear thrown around are always huge numbers. $200,000.
$350,000. Millions. Billions.
What's up with that?
Then I got to thinking about it, and I realized that like
most Americans, I don't have any personal experience to understand what's
actually going on at different income levels.
How could I have an informed opinion about this sort of thing when I
only really know what it's like to live at a relatively low income level?
So I did the logical thing.
I spent the afternoon building three different characters to represent
three different "average level" incomes, and then built a true-to-life
budget for each of those characters, using the best information that I could
come up with while searching the internet.
It was quite enlightening! The
most interesting thing is that it was just as hard to balance the richest
budget as it was to balance the poorest.
Now I understand why people with plenty of money get so panic-stricken
when thinking about what to do with it, or when thinking about the possibility
of having even slightly less money to work with. It's still offensive to people with less, but at least it's understandable. There's no income level at which you get to
stop worrying about your budget!
Before I get into what else I learned from this exercise,
here are the three budgets I came up with.
All three live in Texas (to eliminate the complication of state income
tax) and make generally sound financial decisions given the circumstances
they've started with, and also because that's the area where I'm familiar with
the general cost of living and lifestyle.
I chose three different income levels: minimum wage, Texas average
income, and $100,000.
*********************************************************
Peter Poverty
Peter Poverty makes minimum wage working at WalMart, and is
married with one child. Peter takes home
about $15,000 a year, which is about $1250 per month. He pays nothing in taxes because he makes so
little money. He works hard, accepts
whatever overtime he's offered, and is more frugal than 99.9% of his
colleagues. He's too proud to accept
government aid, but sometimes he accepts charity from his local church or
family members, usually on behalf of his son.
His biggest financial worry is that an emergency will come
along and force him into a debt trap.
He's proud that he's never accepted government aid, but right now he's
making it only by the skin of his teeth, and is one catastrophe away from
having to choose between running up a huge credit card bill or becoming
homeless.
Peter's monthly budget:
Rent.......................................... $650
Electricity.................................. $70
Water &
trash........................... $35
Phone bill.................................. $40
Homeowner's
insurance............. $15
Car insurance............................ $40
Food........................................ $250
Gas........................................... $70
Emergency
savings..................... $50
Credit Card
minimum payment... $30
Andrea Average
Andrea Average teaches math and science at the local Middle
School. She's single and loving it. She makes about $40,000 a year, which is the official
average income in Texas. Her annual tax
bill is a little more than $4000. Her
monthly take home pay is about $3000.
Andrea lives in a nice one-bedroom apartment in a great
neighborhood. She'd like to own a house
someday, but she's waiting until she gets married and settles down to do
so. For now, she's quite happy with her
situation.
Her biggest financial worry is that her student loan payment
is eating her retirement savings and preventing her from thinking seriously
about settling down with a family. She's
happy that her job provides great benefits, because her lifestyle would take a
dramatic hit if she had to provide herself with comparable health insurance
coverage.
Andrea's monthly budget:
Rent.................................................. $900
Electricity.......................................... $100
Water and
trash................................. $35
Cable,
TV, and internet package........ $150
Homeowners
insurance...................... $15
Cell Phone......................................... $100
Car insurance..................................... $40
Car payment...................................... $200
Student Loan
payment........................ $300
Food.................................................. $170
Gas.................................................... $100
Retirement
savings.............................. $900
Barney Businessman
Barney Businessman operates a one-man consulting business that
is quite successful. He loves what he
does, and is grateful that he's been fortunate enough to be able to pull himself
up by his bootstraps to build his business from the ground up. He's married and
has one child, and his wife is a homemaker by choice. He makes about $100,000 a year. His annual
tax bill is about $15,500. He takes home
about $7000 each month.
Barney lives in a nice house in an upper middle class neighborhood.
It's a great school district, but property taxes are a bit high because of the
location. Although he might be able to
afford a more expensive house, he decided to stick with something well within
his reach so that he could enjoy more flexibility in his budget.
Barney's biggest financial worries are that the costs of
college tuition will outstrip his ability to save up for it, and that changes
to healthcare or the tax code will upset the fragile balance of the lifestyle
that he has worked so hard to build.
Barney's monthly budget:
Mortgage
payment.............................. $1000
Health
insurance payment.................... $600
Property taxes..................................... $340
Homeowners
insurance........................ $350
Electricity............................................ $300
Water &
trash..................................... $50
Cable,
internet, and phone package..... $200
Cell phones......................................... $150
Groceries............................................ $400
Entertainment...................................... $100
Car savings......................................... $500
Car insurance...................................... $300
Retirement
savings.............................. $2,000
College
savings................................... $1000
Emergency &
general savings.............. $500
*************************************************************
After doing this, I sat for a long while considering some of
the recent public debates that have gone on.
Healthcare, public spending, the federal budget deficit, capital gains
tax, the fiscal cliff... Now, I have
something important to say to all Americans that apply to every single one of these
debates.
If you are in the top
2% of earners:
Hello rich person. Let's
stop being polite for a moment: If you
are in the top 2% of earners (that is, if you make more than $350,000 per year) and you are complaining about having
to return to the pre-Bush era tax levels in order to balance the federal budget,
you are being selfish. I know, it's not considered "okay"
to call you selfish in America today, because your fragile ego might get
damaged. Tough tittie, because there is
no other word for that, so I'm calling it like it is.
Let's look at the facts:
The budget CANNOT be balanced by eliminating discretionary
spending (things like medicare, food stamps, PBS, etc). That would be like Andrea Average up there
trying to come up with another $2000 in her budget by turning off her cell
phone. (Even if you completely eliminated
ALL discretionary spending, it would only be a drop in the bucket.) Sure, military spending should be lower, but the
only way to lower that would be to completely cut off all foreign relations,
and the reality of the world we live in is that we just simply can't do that. In the literary world, this is what we call a
"red herring." So stop it.
Furthermore, the state of capital gains tax in particular is
absolutely appalling, and the fact that you continue to pretend otherwise shows
the state of your morality better than any other thing you say.
Some people will try to alleviate your selfish guilt by
telling you that you pay more than your fair share in terms of
percentages. But let's just be truthful,
shall we? Right now, you have an annual
take-home pay of at least $265,506. Most of you take home much more than that. Here's a reality check: When someone like you claims that raising your
taxes is unfair, what you are saying is that Andrea Average should give up her
retirement savings and Barney Businessman should stop saving for his kid's
college so that you can continue to maintain your second or third vacation
home. How can you say that this is
anything other than greed and selfishness?
The fact that you somehow continue to spin this situation in
your favor, and that you continue to get people like Barney Businessman to buy your ridiculous arguments astounds
me.
In conclusion, stop hysterically crying "UNFAIR"
every time someone suggests raising your taxes to the rate that they should
have been all along. You're making
yourself look like a giant baby throwing a tantrum because your mommy made you
leave some birthday cake for the other kids, and it's beneath you.
However, you aren't the only one that I feel the need to
fuss at. You are, after all, a minority,
and could never accomplish anything without the rest of us going along with it.
If you are one of the
98% of American quibbling over this issue:
Why do you continue to accept this picture that's being
painted of a culture war between Peter Poverty and Barney Businessman? Peter Poverty, Andrea Average, and Barney
Businessman are ALL in a fight for their livelihoods against Marty Millionaire... It's only the details of what's at stake that
are different for each of you.
At the risk of sounding like a crazy Wall Street
protester.... As long as we continue to
let the Marty Millionaires of this world pit us against each other by spinning
this debate in the most stupid ways imaginable, we will continue to see an
increasingly divided nation and an increasingly unstable economy, all while the
Marty Millionaires continue to get even
richer by manipulating the situation to grow their fortunes (as they've
already been doing for some time now, if you'd pay attention to the fact that this
section of the population continued to get richer even through the worst
financial crisis our country has seen since the Great Depression).
We can bicker about the details once we've eliminated the
root of our biggest problems. For now, it's
time for us to stand together.
(Having said all of
this, feel free to provide a counter-argument, please provide sources for any
information you provide. Baseless claims
will be deleted from the comments without hesitation or remorse, because they spread
misinformation and lower the quality of the debate.)