A View From the Top 2%

     Last year my family’s annual income exceeded $250,000. As a result, we will be one of the 2% of American families required to pay for the new spending proposed by our President.

     I am struggling to figure out how I should feel about this.

     My initial thoughts were dark, I’ll admit. If there’s anything I like less than paying taxes, it’s paying more taxes. And if there’s anything I like less than paying more taxes, it’s knowing that 98% of my fellow Americans will not be sharing this burden with me.

     In a democracy, anytime you find yourself in a group of 2% paying for a group of 98%, you’ve got a problem. How do you persuade the 98% to switch from a program in which you pay for their government benefits to one in which they pay for their government benefits? Assuming they hate paying taxes as much as I do, I’m not sure how one does this.

     My income dropped last year, and I expect will drop even more this year. At this rate, someday I will drop out of the top 2%. I suppose that is one solution, but I’m not too excited about it.

     In any event, our fiscal hole is so deep it can’t possibly be filled by the top 2%. The President can tax us up to 100% and he’ll still need more, lots more. So someday my pain will be yours.

     I work hard for the money. Even in the halcyon rich-friendly days of Bush I and II, when I was permitted to keep slightly more than half of what I earned, I often dreamed of working less hard. Too many late nights in the office. Too many lost weekends at the office. Too many interrupted or cancelled vacations. Now that my state and federal governments would like more than half of what I earn, my idle daydreams of quitting the rat race are shifting to active plans.

     But I can’t just quit. While I earn a lot, I don’t have nearly enough to retire. I think of myself as one of the working rich – the minute I stop working is the minute I stop being rich. A few years ago I thought I’d have enough to retire in my fifties. Now with my house value plunging, and my 401(k) awash in red ink, it looks like I’ll be working into my seventies. So stopping work isn’t an option for me.

     Instead I need to be more tax-savvy. In exchange for its burdens, a job offers a bundle of benefits. Some of these benefits are taxed, while others aren’t. Taxable benefits include salary, bonus and stock grants. Tax-free benefits include job security, time off, status and the freedom to do what interests you. As tax rates increase, the value of taxable benefits decreases, and the relative value of tax-free benefits increases. So if I can shift my compensation away from salary and bonus and into free time and freedom to do what interests me, my tax bill will be smaller but my life may be richer.

     A classmate of mine from graduate school is now a professor. Every so often the green-eyed devil possesses him, usually in spring when his best students leave for starting salaries that exceed his. This seems unjust to him, but that is because he is only looking at one benefit to the exclusion of all others. Sure his students make more money than he does, but is that all that matters in comparing their jobs to his? Of course not. Tenure gives him complete job security, while his students are struggling to prove themselves in sink-or-swim environments. He has huge amounts of free time, including three months off each year, while students rejoice when they have a clear weekend. He enjoys the elevated status of a professor at a prestigious university while his students are grunts scrambling to hold on to the lowest rung of the ladder. And, best of all, he has almost complete freedom to pursue whatever interests him, while his students must toil away their youths serving their masters.

     His students may earn more money, but who is richer?

     My friend, whether he realizes it or not, is extremely adroit at tax avoidance. Clearly I have much to learn. And I feel his green-eyed devil possessing me.

Comments

[Exit, pursued by a Bear]

Somehow I can't bring myself to feel sorry for you. Thanks to corporate and individual greed, the jobs and homes of many thousands of hardworking people all around the globe are disappearing - and from the poorest, the food on their table as well. It was a proud claim of the Americans that "Socialism doesn't work", and the free-market econony was trumpeted from the very rooftops. Now we are clearly being shown that capitalism is a poisoned chalice. "From each according to their ability, to each according to their need" is a tenet of the UK's socialist outlook. So perhaps you should get off your whiny ass, stop feeling so sorry for yourself and go out and help those in your community in real need. That might make those blinkers adorned with big dollar signs fall from your eyes. Money is like manure; it only works when you spread it around the roots. Think yourself lucky you still have a home, a job to moan about and food to feed your family with. Many in this world don't.

[R J]

Whining is one thing conspicuously missing from this entry. "Day-dreaming" might be more like it; but, in any case, VX is coolly weighing and considering the possibilities. I'd like to see him start up a small business with the simple goal of doing something useful while employing as many people as possible.

[AQ]

Not one of my favorite posts...only because it lacks your usual depth.

[Brian Clark]

The tax rate on those with higher incomes, except for a small blip, has been falling for decades, and those folks have gotten much wealthier on the whole than those in lower income brackets because they don't have to spend every penny they make just to survive like the vast majority of American families. Go Google the numbers, for Pete's sake. Those with higher incomes can save because they make more money than it requires just for mere survival. They can invest because they have more money than they need, and thus those families continue to become even wealthier.
Why don't the wealthier of our citizens have to pay Social Security tax on income that exceeds $102,000? I bet that when they retire few of them are turning down or donating to charity the SSI checks that they get but they don't really need just to be able to survive. Is it fair that someone working at Burger King has to pay out 6%+ of his measley check for SSI before he even gets it while someone making a million bucks a year has nothing deducted out of $900,000 of his income for SSI?
The fact that you can even begin to complain about your tax burden shows how out of touch you are with most people's financial situations. What you make in one year, after taxes, is enough for a large segment of the population to live off of for the rest of their lives at their current standard of living.
As for your professor friend's lifestyle, I suspect that he puts in many hours of work that you don't notice. I am a public school teacher. I put in a long day, have to do more work after I get home at night, work at least two weekends a month, spend thousands of dollars out of my pocket, and have to commit hundreds of hours of my time during the year (especially during the summer) to pay for classes so that I can move into higher-paying positions on my school district's pay scale. A three month summer vacation? Yeah, right.
BC

[taxesareimmoral]

I love the jealous comments. Where were all you when the people who are making money were working 100 weeks and studying and planning for the future. There are no "fortunate rich" or at least very few. Those who did it did it by good choices, hard work and intelligence and if you didn't want to do this it is a choice you made. Those who bitch about the rich and then vote themselves entitlements will then turn around in confusion and bitch when they are unemployed as they bite the hand that feeds them.