Mythical people and their taxes

by: Paul Rosenberg

Thu Oct 07, 2010 at 12:00


In the GOP's big push to repeal the estate tax, there was a great deal of wailing and gnashing of teeth over the loss of family farms, due to the cruelty of having to visit the tax collector and the undertaker on the same week.  Just one problem, though: they never could produce even a single family farm that had been lost this way.  It's not that the Reaganized GOP ever did anything at all to help real family farmers. Otherwise, Jesse Jackson could never have drawn such crowds of Iowa farmers in the 1984 primary.  But they sure cared deeply about imaginary ones!

Fast forward to the current debate over letting the high-end Bush tax cuts expire, and we find a slightly more amorphous echo of that same lie bouncing around all over the place.  For example, last week, Matt Yglesias quoted a recent NY Times article:

But in some expensive sections of the country, many families with income levels near the $250,000 cutoff insist that they have more in common with middle-class Americans than millionaires or billionaires.

"You take a couple in Westchester County, a police officer with a lot of overtime and a principal at a public school," said Vincent R. Cervone, a certified public accountant in New York City. "They're grateful to be working. They aren't in danger of eviction or starving. But the cost of the average house is $500,000 - five times the national average. Taxes are higher than the rest of the country. If they have a couple of children in college, can you call them rich? Not by any common-sense standard."

Meet the mythical Westchester couple, the new non-existent family farm.

Mythical?  Non-existent?  

You betcha!

Here's the relevant median income data for Westchester County and the US, from the 2006-2008 American Community Survey 3-Year Estimates for Westchester County:

Westchester:Nationwide:
Median household income: $80,297$52,175
Median family income: $102,529$63,211

Now, I'm not saying that there are no Westchester couples like the one imagined in the NY Times op-ed.  The family farmers of a decade ago were non-existent, such suburban couples, merely a "mythical echo," meaning that there may well be plenty such folks in a nation of 300,000,000, just not a whole lot of them compared to everyone else--and certainly not enough to dominate our thinking about tax policy.

In Westchester County, for example, such a couple would be making well over twice the average family income.  The locale is meant to make it seem like "Of course they're making $250K+. It's Westchaester!"  That's what makes it mythical. It creates this false picture where ordinary middle class people who just happen to live certain places are socked with the millionaries' tax! But the census figures show that that's simply not so.  Anyone making that sort of money in Westchester is doing very well indeed.  And if money is tight for them, then they need help from a money manager, or anyone living on a normal salary.  They don't need help from the pocketbooks of average Americans.

Still, it might seem plausible that they have more in common with middle-class Americans than millionaires or billionaires."  And so it is.  And so are their taxes.  After all, the higher tax rate is a marginal tax rate. It only applies to their income over $250K.  And that's after deductions--including deductions for their home mortgage.

This was the point made by Jonathan Chait:

The main problem with the article is that it presupposes that individuals making $200,000, or couples earning $250,000, will pay higher taxes. They won't. The tax hike only applies to income over that threshold. When you go from $250,000 to $250,001, you only pay a higher tax rate on that one extra dollar. Your taxes will go up by a few cents. If you earn $300,000, you will pay a slightly higher tax rate on the last $50,000 of your income -- less than a couple thousand dollars.

Even people making half a million dollars a year won't be "taxed at rates similar to those who make $5 million," because only half their income will be taxes at the top rate.

I disagree with Chait, since I think the main problem is that such people are primarily mythical in the first place, relatively rare when they do exist, and shouldn't be the basis for reasoning about tax policy for a nation of 300,000,000 real people. But reasonable people can disagree here.

Either way, we're talking reality vs. pure hooey.

Paul Rosenberg :: Mythical people and their taxes

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Mythical people and their taxes | 22 comments
Its like a hostage situation, where the bank robbers grab a teller (4.00 / 1)
and say, "if we aren't allowed to leave with the cash, she gets it in the head."

Only there is no teller, they have no hostage.

So the NYTIMES paints one in, photoshops a mythical "poor little Tarrytown girl" who "accidentally makes $300,000" a year "through no fault of her own" so we feel all sorry for the rich people that bad bad taxers want to kill. (Death by contributing to the war on Iraqis and Afghanis that they support but refuse to pay for.)

The NY times can sink and be cover3ed in pond scum. I sure they move to a pay wall soon so their bs will only fed to the people who love this effing cover my ass propaganda.

Small businesses: KKR, Koch, Bechtel, Price Waterhouse (4.00 / 1)
via MSNBC:

Rather than paying corporate taxes, the firms operate as S Corporations, sole proprietorships or partnerships, including limited liability companies that put LLC instead of Inc. at the end of their names.

  • Kohlberg Kravis Roberts & Co., a Wall Street firm with $445 million in revenue in 2009.
  • Price Waterhouse Coopers, an accounting firm with $26 billion in revenue in 2009.
  • Koch Industries, a conglomerate of partnerships with 70,000 employees.


But it's 'Hooey That Works' (0.00 / 0)
To almost quote dear old Frank Luntz.

Of course, they don't believe it, any more than Mitch believed his 'cutting taxes increases revenue' boner.

But they have shedloads of chutzpah and they're building on 30 years of accreted guano (possibly, Mitch's gag was partly a shoutout to Reagan's 'voodoo economics' plan of 1980), and widespread public expectation of partisan shtick, in which GOP crazy lines are bold, down-to-earth, uncomplicated by book-learning, just-folks; and Dem responses are tricky, egghead, condescending, untrustworthy.

Among a chunk of humanity, the GOP manage to secure a partial suspension of disbelief for their notions - said chunk can doubt the GOP line, but at the same time feel that Dem responses are 'confusing them with the truth'. And of course any attempt at the truth is liable to be confusing.  

Here's the problem (4.00 / 4)
The vast majority of people are completely clueless about the actual income and wealth distributions in this country. They imagine them to be far more equal than they actually are- and think theyshould be even more equal than their wildly inaccurate estimates. Fascinating stuff: http://www.people.hbs.edu/mnor...

Of course, it's also a problem that so few people understand the concept of marginal tax rates.

I heard that story on NPR on the way to work this morning (0.00 / 0)
It helped me to understand one of the reasons why I have such a difficult time discussing tax issues with my more conservative family members. I understand where I fit into the true income spectrum.

On the radio, the reporter asked which countries (if any) in the world actually met the expectations of the Americans polled. Only one came close: Sweden. However, even Sweden failed to meet the criteria these Americans set for how they would like the income in this nation to be spread.

It is not a lack of aspiration, eh? However, I suspect that if and when more Americans become aware of just how badly they judged the divide, they will redjust their calculations of the optimal goal.


"It sounds wrong...
     ...but its right."

[ Parent ]
This Is The Report I Referred To In My Monkey/Equality Diary (4.00 / 2)
Sorry I've been delayed in my followup post.  Won't happen till tomorrow, I'm afraid. But I will have something more to say about it.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3
[ Parent ]
I bet American tax politics as we know it would be radically different (4.00 / 3)
if people just understood the concept of marginal tax rates.
[ Parent ]
re: marginal (4.00 / 1)
if people just understood the concept of marginal tax rates.

or if someone explained it to them

if the dems are really against these obscene tax cuts, then maybe they should change their message from 'tax cuts for those making over $250,000 should expire' to 'tax cuts for income above the first $250,000 should expire'

[ Parent ]
Ideally, yes (0.00 / 0)
but will people even understand that?  I tend to underestimate the intelligence of the typical American voter so maybe I'm not giving them enough credit.
[ Parent ]
yes, I agree it could be a bit more difficult to understand (0.00 / 0)
but will people even understand that?

isn't it better than 'tax cuts for those making more than $250,000 should expire' though?

when you hear 'tax cuts for those making more than $250,000 should expire' don't you understand 'no tax cut for you, if you make $250,001'?

[ Parent ]
I think Americans would have to understand (0.00 / 0)
that the government taxes each dollar that you make, rather than your income as a whole.

If they don't understand the concept of marginal taxes, they're not going to understand the phrasing "tax cuts for income above the first $250,000 should expire".  They're gonna be like, "huh? either you make over $250,000 or you don't!"

[ Parent ]
and we should start explaining it in simple terms (0.00 / 0)
If they don't understand the concept of marginal taxes, they're not going to understand the phrasing "tax cuts for income above the first $250,000 should expire".  They're gonna be like, "huh? either you make over $250,000 or you don't!"

if you say 'tax cuts for those making over $250,000 should expire' and 1,000,000 people hear you what's the breakdown of what they understand? I say 990,000 understand 'no tax cut at all for you, if you make $250,001' and 10,000 understand 'tax cut for the first $250,000 and no tax cut for the $1, if you make $250,001'

now, if you say 'tax cuts for income above the first $250,000 should expire' and 1,000,000 people hear you what's the breakdown of what they understand? I say 750,000 understand 'no tax cut at all for you, if you make $250,001' and 250,000 understand 'tax cut for the first $250,000 and no tax cut for the $1, if you make $250,001'

isn't it better? maybe my figure (250,000) is too high. maybe it's too low. but I'm pretty sure is higher than the figure you get using the 'tax cuts for those making over $250,000 should expire' message. and if you keep pounding the message home, the number will get better.

I'm not saying the 'tax cuts for income above the first $250,000 should expire' message is the best. not at all. but better than the current if we want to get the marginal message out. no?

[ Parent ]
I agree it's better (0.00 / 0)
Don't know if you could get 250 000 people to understand, but I hope you're right.
[ Parent ]
thanks (0.00 / 0)
and as I said I don't claim this message is the best way to achieve our objective

another thought I had: it may be a bad idea to drop the 'for those making over $250,000' part of the message. it will probably confuse people and make them think 'no tax cut for me.'

so, change

'tax cuts for income above the first $250,000 should expire'

to

'for those making over $250,000, tax cuts for income above the first $250,000 should expire'

and better

'for those making over $250,000, tax cuts for income after the first $250,000 should expire'

another idea I like: create a tax bracket for income above 1 million

[ Parent ]
Hmm (4.00 / 1)
Well, this is sort of a strange article for me to read in that my parents and family are said mythical couple in Westchester almost to the tee.

Here's the thing though; my family, and said mythical family, doesn't come from money.  There's no institutional wealth.  They've made it through their own work and through the educational opportunities they received from a better era (i.e. free public higher education from the older CUNY system).  If, for example, my dad was to lose his job, then my parents would have a major shortcoming.  Like a lot of middle class families, they'd start eating through their savings pretty fast.  And they'd find it pretty damn hard to support the educational bills of their children, which would require private loans to cover the costs and create even larger debts than are already being taken out.

And the real killer in Westchester is that the property taxes are insane, which means that if an earner loses their job, then the property tax rate is still going to take the same bite every year.  Of course the reason for the ridiculous property taxes is white privilege and white flight, where people in tiny villages like Bronxville and Irvington and other places insulate themselves from minority communities and mixed schools by isolating their children from minority communities in Yonkers and Mt. Vernon.

The upper middle class is still middle class because they can't afford to lose their jobs.  The real wealthy 1% have so many resources accrued through family ties, property ownership, offshore accounts, etc that they can afford to take the hit and they'll be fine in the long run.  The upper middle class is still living on a paycheck-by-paycheck way in that their standard of living will plummet quite quickly if they lose their income.  So while I would never, ever deny that my parents are in the upper echelons of earning throughout this country, I would also still consider them part of the broad middle class (albeit the upper middle class) because of the potential harm that unemployment would quickly reek upon them.

"Never be afraid to stand with the minority when the minority is right, for the minority which is right will one day be the majority." -William Jennings Bryan

Oh, and just to make it clear (4.00 / 1)
My parents, and their friends that are at similar levels of income and expenses, all vote for Democrats consistently.  Because they know that the GOP stands for people ABOVE their income and that the Bush tax cuts and the estate tax and so forth are not benefiting them.  So on that point, you are entirely right, and the Times is using my parents as a strawman to support an economic policy that doesn't even benefit them.

"Never be afraid to stand with the minority when the minority is right, for the minority which is right will one day be the majority." -William Jennings Bryan
[ Parent ]
Your mother is a teacher? (0.00 / 0)
your father a cop?

and they make nearly $300,000.00

Really?

[ Parent ]
No (0.00 / 0)
And I think part of the b.s. of the Times article is that they try to connect the two.  My mom is a professor and my dad is a health care consultant.  But the point remains that there is a way in which a couple making 250,000 is still "middle class", in that my definition of middle class is a family where the loss of one of the earners income for a short-term or long-term basis represents a substantial and stark reduction in quality of life.  In other words, while I concur that those who are making 250,000 a year are well-off compared to the rest of the country, I wouldn't automatically call them the upper class unless they have such institutional resources that they are immune to the economic stress of a downturn or a layoff.

"Never be afraid to stand with the minority when the minority is right, for the minority which is right will one day be the majority." -William Jennings Bryan
[ Parent ]
No. (0.00 / 0)
Sorry, they are upper middle class. Most of us would be in a  hell of a lot more immediate trouble than they would if we got laid off.

I'm glad that they're on the right side politically, but acknowledging that shouldn't require obfuscating the realities of class in this country. They are way above the median.

[ Parent ]
Still, they are closer to you than they are to these folks (0.00 / 0)
Small businesses: KKR, Koch, Bechtel, Price Waterhouse (0.00 / 0)
via MSNBC:

Rather than paying corporate taxes, the firms operate as S Corporations, sole proprietorships or partnerships, including limited liability companies that put LLC instead of Inc. at the end of their names.

Kohlberg Kravis Roberts & Co., a Wall Street firm with $445 million in revenue in 2009.
Price Waterhouse Coopers, an accounting firm with $26 billion in revenue in 2009.
Koch Industries, a conglomerate of partnerships with 70,000 employees.

And, unlike most of the people contributing to the study you cited above, circlesnshadows parents seem to realize the truth of the situation and have chosen political sides in accordance with that reality. (at least among the viable choices provided by our current political system).

They  

"It sounds wrong...
     ...but its right."

[ Parent ]
I don't disagree with you (4.00 / 3)
That they're doing better than the median across the country.  But again, my point is simply that they're not part of the upper class because they can't afford to lose their incomes and simply get by on accrued resources.  My parents need to work to live.  That keeps them more connected with the rest of the middle class and disconnected with the upper class.  

But again, the real class warfare here is the use of people like my parents as a justification for cutting the estate tax or extending tax breaks to the upper middle class.  As it is, my parents were more hit by increases in state and local taxes as a result of falling federal revenue and unfunded Bush federal mandates than they were helped by the Bush tax cuts.  They know, and we should recognize, that in the class warfare, it's the upper class, the top 1%, who are fighting a class war against everyone else.  

"Never be afraid to stand with the minority when the minority is right, for the minority which is right will one day be the majority." -William Jennings Bryan

[ Parent ]
I am sure that you are right, that unfunded actions and spending are hurting your parents (0.00 / 0)
by making the payments come at different non-federal levels, and that some of the things spent on were not their wish, the Iraq war is probably a good example.

But the Iraq war has to paid for. A trillion dollars. The bailout to the banks through the fed, not the few billions, the hundreds of billions, but the trillions in buying bad debt, the increase in the money supply avail;able to banks to draw on, these need paying for, the draw on Social security needs paying for.

Just like the mortgage. This isnt a system of we'd didn't vote for that war, this isnt a system of I didnt approve the bailout spending. This a system were government action is done in the name of the democracy, and the contract is binding, and we need to pay for the roof, the war, the roads, the college fund, the car, the bailout.

It should be paid by anyone who can, and mostly by the people who can. And by the people who got filthy disgusting rich urging the war on, helping to elect the "decider" the ones lavished with unaffordable tax reductions at the top end.

Are you suggesting a cut off of $255,000 a year for the increased rates? $276,000.00.

I don't think so.

I'd like to see better numbers than the dishonest hack job the NYT did on this. It was partisan, it was stopping the plan, i.ut wasn't an analysis it was class warfare, trying to use a teacher as a shield, holding up a cop to deflect righteous anger, and remedial action.

[ Parent ]
Mythical people and their taxes | 22 comments




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