Friday, December 7, 2012

Stop it, America

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.

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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

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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.)