I’m not very sympathetic to the argument that $250,000 doesn’t make you rich if you live somewhere where cost of living expenses are high. Spending your large income on expensive shit doesn’t make you not rich, it makes you someone with the privilege to buy expensive shit and choosing to do so. Living in the most expensive places in the country isn’t some natural expense you’re burdened with like a disability or disease: it’s a choice about how to spend your money.
If someone making $250,000 doesn’t feel rich in Manhattan then they can just move to Queens and feel rich. In fact in most cities there are neighborhoods with really expensive homes less than a mile from neighborhoods with really cheap homes. It would be nonsense for someone living in a $2,000 a month condo they can barely afford and shopping at the expensive local grocery store to say they aren’t rich because their costs are high relative to their $70,000 a year income. They’re simply consuming an expensive neighborhood as an amenity to their home. Note this can be true at the county level as well.
Whether you’re rich or not isn’t a state of mind, nor is it what you spend your money on: it’s a summary statistic. If you make more than 95% of the population you’re rich, even if you don’t feel rich because you’ve spent it all on gold dust to sprinkle on every meal…. Oh, and saying you don’t feel rich when you make $250,000 a year doesn’t just not make you less rich, it also makes you kind of an asshole.
Pictured: £12,000 chocolate cake laced with gold, which is most expensive dessert in the world.

35 comments
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Friday ~ September 10th, 2010 at 6:44 pm
Seth
Well, sort of. Many jobs are only available in one place … that’s how certain places get to be so expensive. And the people holding those jobs often are working long hours to keep them. Not stretching lunches out for a third martini.
Saturday ~ September 11th, 2010 at 5:13 pm
Seth
Let me add that I’m in favor of letting the Bush tax cuts expire (probably all of them, but especially on the over 250k crowd). But if you want to fire up a sustainable critique of the American class system, you won’t get far by telling professional couples from lower middle class backgrounds paying off big student loans that they are simply “Rich”, therefore the “class enemy”. It’s a lot more subtle than that.
“Rich” is an matter of assets, much more than income. People who have $1M in assets are in a different tier from people with $10k in assets. But people with $100M in assets are in YET ANOTHER tier, just as separate from the $1M crowd as the $1M crowd is from the $10k crowd. And the hereditary class interest is highly focused on the upper ranks. That’s why we have a “huge sucking sound” — not so much of jobs being drawn down to Mexico as H Ross Perot predicted, as the sound of all our money being drawn upward into the hands of centimillionaires and billionaires.
Sen. McCain, like many actually RICH rich people, when he spoke vaguely of $5M/yr as “rich”, understood that very large PASSIVE incomes are a dramatically better class qualification than 70hr/wk “earned” incomes (admitting that many large incomes are hard to justify completely as “earned”). If you have to keep working for someone else to keep the money coming in, you don’t really qualify as rich in the sense that matters to political power.
Friday ~ September 10th, 2010 at 7:08 pm
dWj
To somewhat build on Seth’s comment: If I could make $250,000 a year in NYC, but instead take a job making $70,000 a year somewhere else so that I can buy more not-living-in-NYC things, am I rich because I chose a lifestyle that I prefer over one in which I was rich? Is rich purely a pecuniary thing, a money-illusion thing, or is it a welfare thing? A lot of discourse seems to suppose it’s welfare.
Friday ~ September 10th, 2010 at 9:22 pm
Ben Ray
This is a horrible argument that’s mostly based on emotion and not economic realities. What does it matter if the $250K is fairly earned? It doesn’t mean the money should be redistributed to government just so it can be less efficiently and less rapidly redistributed back to the economy. And people who make 250k don’t live crazy extravagant lives spending 12k on a dessert.
Friday ~ September 10th, 2010 at 9:48 pm
Jim
This may be the dumbest thing you have ever written. It is proof you wasted a fortune on an education.
Friday ~ September 10th, 2010 at 10:10 pm
jazzbumpa
Living in the most expensive places in the country isn’t some natural expense you’re burdened with like a disability or disease: it’s a choice about how to spend your money.
Until your choices are foreclosed. And speaking in extremes distorts the issue. Someone making $250K is not going to be living in the MOST expensive place, just a more expensive one. To bring it back to reality, imagine someone with a high paying job who lives in the most expensive domicile he can rationally afford. (A strategy that was impressed on my generation, and actually worked for a few decades.) Then the economy crashes, he loses his job, and suddenly finds himself badly upside down in a mortgage he can no longer service.
Even if he gets a good job offer in Toledo, he won’t be able to sell the place in Queens. He’s just sort of screwed – after rationally doing everything he thought was going to maximize his utility.
Then after he declares bankruptcy, he discovers his $120,000 in student loans are exempt, and has has to keep making those payments. Poor sap.
One of the problems of thinking like an economist is this focus on “choice,” as if it were actually a free array of alternative options, rather than a narrow cluster of devils, deep blue seas, rocks, and hard places; and as if individuals typically had significant power in negotiating with institutions.
BTW – did this post have a point?
Cheers!
JzB
Saturday ~ September 11th, 2010 at 1:49 am
Links 9/11/10 « naked capitalism
[...] $250k isn’t a lot of money if you want to shit gold dust Adam Ozimek [...]
Saturday ~ September 11th, 2010 at 2:04 am
JimB
Nice class warfare bile. Do you grit your teeth as you lie in bed at night, thinking about all those people with more than you?
Saturday ~ September 11th, 2010 at 3:03 am
bob goodwin
Then I am an asshole.
Thursday ~ September 16th, 2010 at 9:51 am
tsg
I’ll second that notion.
Saturday ~ September 11th, 2010 at 3:55 am
Jackson
Excellent post! About time said this so succinctly.
Don’t listen to the naysayers. They’re just assholes who think their shit is more deserving than everyone else’s.
Furthermore, what the hell is everyone fighting about here anyway? A measly additional 3% on their last dollar of earning over $200k/$250k? Phew.
Saturday ~ September 11th, 2010 at 4:55 am
ndg
Wow, I can’t believe some of these comments. (Hey Ben Ray: it doesn’t say anything about redistribution or even taxes, just that someone who earns $250,000 is fucking rich and they should stop fucking denying it.)
The “Manhattan is a really expensive place to live” thing really gets me because my experience with an equivalent, the Sydney CBD, is that 95% of the people who have to go there travel from really fucking far away. I think it’s insane to have a 2.5 hour commute, but they don’t earn $250,000 a year and they can’t afford to live closer.
Saturday ~ September 11th, 2010 at 5:45 am
geaugailluminati
nice rant…90% of us agree..
Saturday ~ September 11th, 2010 at 6:05 am
me
I’m with Jackson, most of the people commenting here have missed the point of the article.
Saturday ~ September 11th, 2010 at 9:48 am
dothax
Actual tax data, from actual returns. [Not theory and musings about tax rates]
Here are the minimum AGI from IRS data to fall into different buckets for 2007
Top 0.1% $2,155,365 minimum
Top 1% $410,096 minimum
Top 5% $160,041 minimum
Top 10% $113,018 minimum
And here are the tax rates ..
Bucket avg rate AGI floor
Top 0.1% 21.46 (2.155 mil +)
Top 1% 22.45 (0.419 mil +
Top 5% 20.53 (0.160 mil +)
Top 10% 18.79 (0.133 mil+)
There is an actual propaganda behind this “250K is rich” and “top 1% should be taxed”. It is that tax rates max out at incomes of ~400K and then fall, if you earn into the millions.
This raising taxes on 250K+ is propaganda pure and simple. It passes on the tax burden mostly to older double income families in high cost of living areas. Sure the isolated taxpayer in Podunk might make 250K and could very well be rich. But in reality, it is the multimillionaire incomes hiding under the skirt of the older workers and professionals
Now add the payroll tax to this 22% , and it is much more regressive. Upto about 212K income (dual income, fica cap). The Top 0.1% pays even less, because of fica cap
So this 250K earner is paying 22.5 + 8(FICA) + 9 (CA State income) = 39%. Add sales tax and property tax and it comes close to 50%.
Show me a millionaire that pays 39% in taxes. Show me one that pays 35%. They won’t because it is all taxed at preferred rates of investment income. They have all ways to skip taxes.
This is more of taxing wages, and letting plutocrats alone. The wage earners – like crabs in a bucket – are fighting tooth and nail while the plutocrats laugh.
Understand that – raising tax rates on 250K does not raise taxes on millionaires. You think it would, but it does not. It disproportionately taxes older workers and professionals.
For some real proposals read this
http://www.newyorker.com/talk/financial/2010/08/16/100816ta_talk_surowiecki
And then wonder why that does not happen.
Saturday ~ September 11th, 2010 at 9:51 am
Dothax
The link for the tax data in the previous post
http://www.irs.gov/pub/irs-soi/07in05tr.xls
Saturday ~ September 11th, 2010 at 10:05 am
Poor Me
I make significantly less than $250k, live in New York, work in NYC, and there’s no doubt my 6 figure income gives me a rich quality of life in the material world. Now if I made $250k, I wouldn’t have a financial problem in the world that I did not choose to make. Life is great now. With 250k, life would be 100x greater. If you earn 250k and don’t believe you are rich, well you probably never knew what it was like to be poor. If you think the tax burden is tuff on 250k, try making 50k and support a family on that, and you’ll know what a tough tax burden is.
Saturday ~ September 11th, 2010 at 3:54 pm
jazzbumpa
Here’s the INCOME tax burden making 50K.
According to calculations by the Joint Committee on Taxation, a congressional committee, tax filers with adjusted gross incomes between $40,000 and $50,000 have an average federal income tax burden of just 1.7%. Those with adjusted gross incomes between $50,000 and $75,000 have an average burden of 4.2%.
http://www.forbes.com/2010/03/18/tea-party-ignorant-taxes-opinions-columnists-bruce-bartlett.html
It’s the payroll tax that is horribly regressive.
Cheers!
JzB
Sunday ~ September 12th, 2010 at 10:40 am
Edmigper
And anyone making $50k in NYC needs every cent of that after tax income to survive. Someone making 5x that will have far more extra income and will get to live a fancier life in a better neighborhood and get to eat out more often.
The only reason someone making $ 50k would be living in the same apartment community as someone making $ 250k is rent control. Lucky, practical rich guy, that.
All this tax burden talk is sophistry to someone hired to sweep up the gold speckled shit.
Saturday ~ September 11th, 2010 at 10:28 am
kelly
Really seem to have touched a nerve here. Good on you!
What a lot of the commenters seem to have overlooked is that in all the buildings where these poor put upon $250K’ers work are secretaries and cleaning people and new hires etc etc who make nowhere near that. And they all get to work, and don’t live in houses that eat up too much of their income.
What Adam says here is spot on. And those who seem to have missed the point or worse yet seem to believe they HAVE to spend like this are a sad example of what this country has sunk to.
Saturday ~ September 11th, 2010 at 10:30 am
Dothax
“If you earn 250k and don’t believe you are rich, well you probably never knew what it was like to be poor.”
Who said that?
Those in the lower brackets are overtaxed. Especially if you add in state and sales taxes. The tax burden needs to shift up.
Just being rhetorical – if 50K is the median, why not start raising taxes at 100K, which is twice the median?
There is certainly a section of the populace paying well below their share. I don’t think that is the families earning in 400K – and I proved that with actual tax data.
What is required is to raise taxes on the millionaires much more – and this policy of raising taxes on 250K is not getting there.
Saturday ~ September 11th, 2010 at 11:11 am
Poor Me
Dothax, you said, “What is required is to raise taxes on the millionaires much more – and this policy of raising taxes on 250K is not getting there.”
Is it really going to break you? My goodness, you probably have the first dollar you earned taped to your wall.
Raise taxes on everyone earning more than a 6 figure income, and make it progressive. Sure it may hurt, but who said patriotism was painless. Ask the troops in Afghanistan and Iraq.
Saturday ~ September 11th, 2010 at 11:04 am
Dothax
“What a lot of the commenters seem to have overlooked is that in all the buildings where these poor put upon $250K’ers work are secretaries and cleaning people and new hires etc etc who make nowhere near that. And they all get to work, and don’t live in houses that eat up too much of their income”
This is idiotic. A secretary in SF bay area earns 50K at least. A family of 2 incomes like that is 100K. Why don’t they move to Podunk and live like kings there? (as per your logic)
What a lot of people – who have simple ideas about how tax rates work- don’t seem to understand is this..
The actual effect of this proposal is this
Raise taxes most on the top 1-5%.
Raise taxes less on the top 1-0.1% alone
Raise taxes even less on the top 0.1%
I understand you have a “tax them all, they are all rich” stance. That is a political stance, and I am not butting political arguments here – that I will do at the election. (read the Surowecki article if you want to know why you will lose that)
I am only contesting the argument that people earning 250K are not paying their fair share.
How would you react if there was a proposal to
raise taxes 5% on those earning upto 100K
raise taxes 2% on those earning 100K- 200K
and raise taxes 1% on those earning above 250K
Now shift those brackets up, and that is what your proposal is.
Saturday ~ September 11th, 2010 at 11:05 am
lambert strether
Let’s soak the rich. They stole the money.* So why let them keep it?
* See under William Black, “Accounting Control Fraud.”
Saturday ~ September 11th, 2010 at 11:43 am
Dothax
A picture is worth a thousand words
http://www.mybudget360.com/wp-content/uploads/2008/12/incomedistribution.png
Saturday ~ September 11th, 2010 at 5:56 pm
StandardsAreSkewed
I’m an NYC native (born in Brooklyn, lived in Manhattan for 10 years.) I make 75k (and there have been times I’ve made only 50k). Here’s how you do it:
Live in a studio or one bedroom apartment.
Do not own a car. Take public transportation or walk.
Don’t buy too much junk you don’t need.
Don’t have any expensive habits: don’t drink, smoke, gamble, or do drugs.
Don’t have children.
Very simple if you’re a decent level above the poverty line. If I was making 250k I’d be living like a king.
Those that feel poor on 250k need to fix their standards. This is not a Liberal/Non-Liberal/anything else position. It’s having standards that make economic sense.
Some of these people have seriously skewed standards.
Thursday ~ September 16th, 2010 at 1:55 pm
llllllllllllllllllxlllllllllllllllll
Your absolutely right. Living in the greatest city in the world on <60K and have never been happier.
Sometimes I really wonder what national and international effects the NYC real estate bubble has.
Most of our media lives here…meaning they are playing keeping up with the Joneses with every other Investment Banker and Ad Salesman in Manhattan.
The NY Echo Chamber is very real, and the fact that our gatekeepers and public policy people are all crying foul over the $250 insinuation, then I think we have a very serious problem (obviously).
Saturday ~ September 11th, 2010 at 9:29 pm
John Foley
“Raise taxes on everyone earning more than a 6 figure income, and make it progressive. Sure it may hurt, but
who said patriotism was painlessit’s not my money, so who cares.”Monday ~ September 13th, 2010 at 10:11 pm
Poor Me
well actually it is my money as it would affect me too. I didn’t advocate something I wasn’t willing to accept for me. But really, i bet you sit around cheering on the unfunded wars while the troops risk their lives and what’s your contribution?
Monday ~ September 13th, 2010 at 5:26 am
nyd
School fees in NYC are up to $50K pa. It’s pretty easy to earn $250K and not feel “rich” if you have two children and you don’t hate them enough to send them to public school.
Monday ~ September 13th, 2010 at 7:56 am
Poor Me
Plenty of families send them on less than half 250k without financial aid. If sending your kid to school on 250k is difficult, try sending them on a 100k salary, and if you think it comes with financial aid, you are wrong. Again the 100k folk do it and they pay taxes. I’d love to be in your shoes and have the opportunity to pay more taxes and help my kids college education even more.
Tuesday ~ September 14th, 2010 at 5:26 am
nyd
also worth noting that the median price of a 1bdrm apt in manhattan is over 1mm, so on 250K you shouldn’t even be able to a mortgage (assuming max 3x income loan) on 1bdrm. but you are rich…rich, i tell you…
Thursday ~ September 16th, 2010 at 1:57 pm
lol
And in exchange, you get to live in Manhattan instead of ****hole, Alabama.
Living in Manhattan (or any other big city) is an amenity that’s built into your housing cost.
Thursday ~ September 16th, 2010 at 10:46 am
bejeez
Taxes on the very rich haven’t been this low in many decades, and yet their wailing is louder than ever, amplified by utterly corrupt mass media. If even a gigantic recession isn’t enough to wake voters up to this reality — and like poor Southerners in the Civil War, fight against their own interests — how is it even possible for markets to behave with confidence? Who’d want to invest long-term if it looks like we’re going to revert to the spend-and-don’t-tax economic policies of the Bush II era?
Thursday ~ September 16th, 2010 at 2:06 pm
Jeffrey
As someone whose family income runs right at that threshold, I would be happy to pay higher taxes — if they were being used to improve public transportation, health care, education, etc. The perception by many — including progressives — is that we have lost our government to special interests, and that our taxes are often wasted or spent on lining the pockets of the wealthy/corporate interests.
Finally, in our current times, most people who actually WORK for their income are concerned that they could be out of a job or lose their small business at any time. There is very little security in making $250,000 in 2010, if one’s prospects over the next five years include long term unemployment or losing business contracts to overseas competitors who use cheap and exploited labor.
Those who complain about taxes carving out such a huge chunk of gross income overlook the following: 1. Most high income earners still get huge tax breaks from mortgage interest, sometimes dubious business expenses (car leases, cell phone and internet expenses, etc.); 2. FICA is a non-factor after the first 106K; 3. Income in the form of capital gains is taxed at a much lower rate than salaried income.