I made $470K in 2008. In 2009, the hedge fund folded. Fvck that sh1t. I enjoy hard physical work and I'll never run out of beater Gen IIs, Insights, and Civic Hybrids to fix around here.
Poor people cannot understand the stresses of having money. Rich people cannot understand the stresses of not having money. I'm not exorbitantly rich, and I've never been destitute. But for most of my life I've just barely gotten by, and now I'm quite comfortable, with enough to have some really nice toys and take some cool trips. So I can say from personal experience and personal authority that I'd rather be rich than poor. Yes, rich people have stresses, like, having trouble making payments on the 35 million dollar mansion when the economy tanks and your income drops from three-quarters of a million a year to a third of a million a year. But the stresses of having too little money to pay rent on the cheapest slum apartment available while still having something to eat are a lot worse. The rich person can get into trouble by spending beyond his means. But it was his own choice. He could have chosen to avoid debt and just spend what he has, and adjust when times are bad. The poor person has no choice.
It is sad when people don't understand the "other side", even a little. If you are making $350k a year, closer to $200k after taxes, then $100k of that goes to a charity, another $50k goes to schooling for your kids, it is really not all that lavish. When you are used to something as a baseline, no matter what that baseline is, it hurts when you have to cut back. It may not be life and death, but it still matters.
Someone making $350k a year in the US and paying $150k in taxes should seriously be spending more money on a competent tax planner.
For one thing, unwillingness aside, a rich man can decide to become poor and do so instantly at any time of his choosing. Not so the other way around. I don't think of myself as rich, others might (it's all relative), but one of my psychological crutches is to know that if it all goes bad, I can give it all up and become a bar tender in Key West. I'm never going to do it, but it's comforting to know that it's an option. Tom
At $350K/year you're probably paying 1/4 to 1/3 in taxes. Say maybe $90K to $115K in taxes. Not many people give half their after-tax income to charity, though. Toaster's scenario above is too high ($150K) on the tax estimate and probably 5 to 10 times too high on the charitable contributions estimate for most people. I'd say $90K taxes, $10K charity, $250K after taxes and charity. $50K for schooling (I have no idea there) still leaves $200K to play with. Not bad at all. Now, if you've chosen to spend every last disposable dollar on a mortgage and then your income drops, you've got problems. Some folks cannot imagine that the good times will ever end, so they assume they'll always have their present income or more.
$350K a year puts you in the 33% Federal Tax level. In NY (since we are talking Wall Street) you get 7.85% state tax as well. So just in personal income tax you are paying $350K * (0.33 + 0.0785) = $142,975 in taxes. You would need deductions to bring the amount down to $178k for 28% federal level, and $200K for 6.85% at the state level. So if you get your deductions to make your income $178, then you save 6%. Now this is assuming this is actually "income" and not one of the hundreds of ways to get you paid without it being income. The article was referencing a charity his wife started that he gives $100K a year to. A decent private school in NYC is close to $40K per year, per student. Agreed. It is no argument that many of their complaints are considered luxuries. But when you are used to something, it hurts to change it no matter what it is.
Cry me a frickin river. If those parasites spent 1/10 the effort realistically managing their personal finances as they did skimming money off of other people's wealth they would be doing OK. I'm far more concerned about the damage the jerks in various parts of the financial community have done to others than I am about their sob stories.
He wouldn't be paying near 33% fed tax on his income. He would only be paying 33% on the taxable amount over $217,450k assuming joint filing. After you deduct has NY state taxes, 401k contributions, $100k charitable contributions, personal deductions and whatever other deductions he has he is easily under 200k Federal taxable income. Let's assume it's $200k. Tax Bracket Married Filing Jointly Incremental Tax 10% Bracket $0 – $17,400 $174 15% Bracket $17,400 – $70,700 $7,995 25% Bracket $70,700 – $142,700 $18,000 28% Bracket $142,700 – $200,00 $20,930 Total IRS Tax $47,099 His NY state tax would have higher a taxable basis since it isn't deductible from itself, but still, he wouldn't be taxed at his NY incremental rate on his entire NY taxable income.
Of course it hurts if your income drops from 500k to 350k. But they are not going to starve. A cut from 50k to 35k with increasing cost of living for a family with 2 kids might become a dangerous postion and may lead to loss of roof above theirs heads, because they can't afford the rent anymore. So off they go to low income housing areas with their crime infected schools they go just so they can afford food. I hardly believe that someone who "only" has 350k left to play with has to consider the option of going to the projects to somehow stay alive. I had to take a 25k pay cut two years ago, and yes, it hurt. But I made it without much trouble, because: 1.) My mortgage payment was proportioned to be 1/4 of my net income. 2.) I enjoy good food, good beer and good wine. So we cut down on expensive restaurant visits and my lavish lifestyle of buying 10$ per bottle beer and other tasty, expensive food items. It worked, we were able to make it and did not have to starve at all. But that's only because I made enough money before my pay cut so we never had to live from paycheck to paycheck. Families with 45k income don't have that option.
I don't buy it. First, as xs650 points out, 33% is the marginal rate, not the rate on the whole amount; next, at least some of that $100K to charity is tax-deductible; and lastly because some of his income is going to be from municipal bonds, which are tax-free even under the AMT. And, as xs650 also points out, if he's got that kind of income and no municipal bonds in his portfolio, he needs a better financial planner. If he's paying more than 30% of his total income in state plus federal tax, it's because he supports government so much that he intentionally structures his finances so as to pay as much as he possibly can. OTOH, if the $350K is only the taxable portion of his income, and we're not talking about the 1/4 to 1/3 of his real income that a well-planned portfolio gets in tax-free income, then that's another matter, but in that case he has that tax-free income to spend, on top of the $50K that your analysis leaves him. Hey, I'd like to have half a million a year to spend on hookers. I suffer because I can't afford a mansion full of hookers. But I don't ask working folks to feel sorry for me because I can't have my hookers. And nobody should expect working folks to feel sorry for a guy with $350K a year because he can't manage his finances well enough to get by on that. So let's say he gets $350K, and $50K of that is from muni bonds, and he gives $100K to charity, That's $200K taxable, on which he probably pays 25% federal tax, and I don't know how NY works, so I'll say 5% (assuming that's also graduated with a top marginal rate that you cited). So he pays $60K in taxes, leaving him with $190K to spend. Private school for his kids is a discretionary choice, since normal people use public school. $190K per year is not in the super-rich category, but it is extraordinarily comfortable. No private jet for him, and if he has a boat, it's not one of the huge yachts you see parked in the canals of Ft. Lauderdale. But he's got nothing to complain about where money is concerned.
It's all about managing your finances and prioritizing things. DH and I make very little money, but we took 6 vacations last year and we are never in debt. We don't have TVs and rarely eat out, so we compromise certain things so we can manage to live a very comfortable life.
I get that cutting back from what one is used to sucks, whether at 350k or whether you take a household hit in income from 100k to 60k (which is still above average). I do get that, but on the other hand being in the top 1% and complaining about money is really so sad. No amount of money will ever be enough for people like this. Rich or poor most will always have something to worry about. But rich is better, it does make people happier--though once you're comfortably middle class there is very little positive correlation between more money and happiness. Based on a very simple knowledge of AMT I don't think this guy is paying near $150k/year in taxes, either. Biggie Smalls said, however, that mo money mo problems and these people are proof of that wisdom
